While I understand the basics of Cap and Trade, but I wonder how many others out there understand the basics. During my Sunday afternoon research I found an excellent guide to Cap and Trade, or Cap and Trade 101 if you will. It was just published in September of this year by the Sightline Institute in Seattle.
Cap and Trade programs can all work differently and the Sightline Institute does a great job of explaining how they work and the basic mechanics of it all. To get on a real basic level here, here's how it works:
- The government sets a legal limit on all measurable greenhouse gas emissions they will allow.
- To aid this strategy, there are a number of other programs like investing in transit, higher efficiency standards for motor vehicles manufactured, and other "green" programs.
- Over time the legal limit is diminished and we move into a tighter cap.
- If a company needs to emit more than their permissible limit of greenhouse gases, they use the "trade" part of this solution that will "permit" them to do so. Their pollution will cost them. Read the guide to see more of how this works.