Tuesday, July 21, 2009

Smithsonian: The back story of cap and trade

The Smithsonian has some history on cap and trade. The Environmental Defense Fund features prominently in the inception of cap and trade, which is currently used on sulfur dioxide and will be (please, God!!) used to control carbon dioxide emissions.

Environmentalists had previously preferred using regulatory approaches, but these failed due to the political process and the administrative requirements. EDF worked with the Bush (elder) Administration to introduce a market with no loopholes and a hard cap. Previous state experiments were smaller and had too many loopholes for the market to work properly. Basically, one must stick to the cap and not allow additional supply to be introduced into the market.

The SO2 cap and trade experiment has been successful so far and hasn't harmed utilities or consumers. The CO2 cap and trade program could stand a lot of improvement, but I believe it will have to do.

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