Understanding the Terms Cap and Trade

The terms cap and trade has been discussed in the political landscape and depending upon who you listen to you may get a different perspective. The terms cap and trade involves the release of emissions from businesses and sometimes individuals into the air. The discussions around this issue require that the terms be understood before a position can be made for us as individuals.

The environment in Congress indicates that this issue will not be resolved before the mid-term elections in November. Current status of legislation involving these terms is not clear other than it appears that not enough support exist in Congress to push legislation forward. The issue involved with the legislation as it is written today is complex to say the least. To discuss the terms cap and trade we must first understand what they mean and what they represent. In researching these terms I found some interesting things about this issue.

First there are several definitions which can be found on the Internet concerning these terms. The most reasonable or easily understood definition is the following: “a flexible environmental regulation mechanism that sets an overall limit on the emission of a certain pollutant, but allows companies that can easily reduce emissions to sell credits to other companies for which such reduction would be difficult”. This definition was taken by searching for a definition of the term cap and trade.

Currently the prospect of a cap and trade system being introduced into legislation is not good but it is something we must understand. Currently there is an alternative energy legislation involving requiring states to establish alternative energy portfolios. This would mean that it would be required that utilities provide a specific percentage of their power from low-pollution sources. The details of this legislation are not clearly defined except for the purpose. The purpose is to require some use of alternative sources of energy such as wind turbines, solar panels and other sources that pollute less than plants fueled with oil, coal and natural gas.

I have no problem with increasing the use of alternative sources of energy as I feel we must do this to survive in the future. The increasing need for energy in the future is undeniable and it is how this need will be satisfied is the question. There is no question we have abundant resources of energy in this country that is underutilized. This must change. In the past we have been comfortable with the resources we used but today they are becoming more expensive. A large percentage of energy sources we use are furnished from outside our country. This dependency must change.

Previously I mentioned the prospect of utilizing energy sources that pollute less is a great objective. While a cap and trade system may achieve the goal of increasing the use of alternative sources of energy the principle would involve reducing the use of energy resources that are vital to some state economies. One example is the coal industry. The use of alternative sources of energy should reduce cost not increase them. Allowing businesses to purchase credits from another increases the cost of doing business and that cost will be seen in the price of the products or services those businesses provide. Energy legislation is needed. The current legislation in the development stage has an objective of establishing a renewable energy standard. Standards are great but they must be carefully created to achieve the desired results. Both the positive and negative impact must be examined to ensure the positive outweighs the negative. The final energy legislation should be one that addresses this aspect if some sort of cap and trade is included.

The EPA is tasked with the responsibility of protecting human health and the natural environment of air, water and land. If energy legislation is not enacted in this legislative session this agency may be limited in what it can do. Actions taken to address reduction of pollutants should be within the current laws on the books and within the authority granted to it by Congress. Energy independence is important and this agency is an important aspect to achieve this objective. Congress needs to complete energy legislation that has a positive impact on business and offers opportunities for job creation in reaching desired objectives.