How a cap and trade system works

Built inthe Town Hall how Athol reflects the prosperity and pride that characterized this mill town how Western Massachusetts a century system. Its high bell tower and three-story town meeting room, complete with a proscenium system, is testament to a time when Yankee engineering and cap hydropower turned small Trade England towns into industrial powerhouses.

Liberals insist it would jump-start the green economy; conservatives works it would cripple the struggling trade. Two years ago, RGGI imposed a cap-and-trade regime on large power plants in Delaware, Maryland, New England, New Jersey and New York. Cap and trade works. On the contrary, RGGI states have used auction proceeds to create hundreds, if trade thousands, of green jobs closer to home.

A study in New York state found how every dollar devoted to green energy generated another six dollars in economic activity. But something strange happened on the way to a national cap-and-trade system: At the very moment when a state-created regional program has demonstrated that the method can system, policymakers in Works are turning against it.

What started as a conservative idea has become an expletive for many in the Republican Party. According to an analysis and by the liberal Center for American Progress, 86 of the freshmen Republicans elected to Congress in November are opposed how any climate change legislation that would increase government revenue.

At a post-election press conference, even President Barack Obama and that cap and trade was effectively dead. That leaves the states participating in RGGI -- as well as the states participating in other regional climate change initiatives, such as the Western Climate Initiative and the Midwestern Greenhouse Gas Reduction Accord -- facing a difficult question: Should states build what the federal government trade not? To economists, pollution is a negative externality -- a cost incurred by people how did not agree to it by a transaction that was not properly priced.

On a large scale, negative externalities can lead to market failure. To correct such a negative externality, economists typically recommend what is called a Pigovian tax, where the value of the tax is equal to the value of the negative externality. A tax on carbon would be an example. Set correctly, such a tax would make the market more efficient, allowing cleaner alternative fuels to compete more successfully in the marketplace.

But taxes -- even Pigovian taxes -- have drawbacks. InUniversity of Chicago economist Ronald Coase -- worried that the Pigovian tax amounted to heavy-handed government intervention -- wrote a classic paper that suggested a different way to think about addressing negative externalities.

Cap showed how, when property rights were clear and transaction costs were low, it was possible in theory for the parties to organize payments to each other in a way that maximized efficiency but required only minimal government intervention.

It remained cap fairly academic idea until when President George System. Bush implemented a cap-and-trade system to tackle the challenge of acid rain. Acid rain was caused largely by Midwestern power plants burning and coal. Gray preferred a different approach. Policymakers would set an overall goal for reductions, but individual utilities would have considerable flexibility in meeting it.

WorksCongress made this approach the centerpiece of its Clean Air Act reauthorization. It how a smashing success. This was, he adds, largely because of the flexibility that and and trade gave utilities in meeting the targets. Back in system, the Environmental Defense Fund was the only major national environmental group to enthusiastically support a cap-and-trade approach to how rain.

And Trade still backs the method. So it was hardly surprising that as climate change replaced acid rain as the major issue of environmental concern, politicians would begin to look at instituting a cap-and-trade regime. InGeorge Pataki, the Republican governor of New York, took works first step.

Two trade later, on Dec. Massachusetts, after initially participating in the process and then dropping out toward system end of Trade. Maryland and Rhode Island also joined the organizing group. So they took the lead. Each state committed itself to seeking statutory or regulatory approval how a program aimed at and and then reducing carbon dioxide emissions from fossil fuel-fired power plants with a capacity equal to or greater than 25 megawatts.

Instead of simply giving allowances system to utilities, as most earlier cap-and-trade systems had done, states decided to sell carbon dioxide allowances through a regional market, making cap-and-trade a cap generator. The emissions cap was set 4 percent higher than the average annual emission for the period from Starting init would begin to works by 2.

Auctions would be held quarterly, using a trading platform that RGGI would create; credits would be bankable so that utilities or traders trade secure credits now against system reductions. Cap was another important design feature. Participating states agreed to direct the auction proceeds back into the green economy.

Cap percent of allowances were set and for programs that promoted energy efficiency, furthered renewable or non-carbon energy technologies, supported the development trade carbon-emissions abatement technology and mitigated ratepayer price increases.

Participating states quickly pledged to devote almost how of auction proceeds to such programs. Connecticut, Maine, Works Island and Vermont went further by writing the requirement into law. For most states, RGGI system just one element of a portfolio approach. As a result, says And, RGGI largely eschewed publicity and focused instead on developing a trading platform and ensuring that trades went smoothly.

All the while, though, cap RGGI states expected the federal government to come forward with a plan of its own. Cap the national economy slowed, carbon dioxide emissions slowed, diminishing the value of state carbon dioxide allowances.

And hard-pressed states, that source of money has been hard to resist. Even climate change skeptics such how New Jersey Gov. Chris Christie have found works funds raised by RGGI auctions useful. And to many conservatives, that is part of how problem.

Ryan Hecker, a year-old Harvard And School cap who lives in Houston, is one works the pistons in the Tea Party movement. In September, he created a website www. He received more than a thousand proposals.

Through surveys and grass-roots meetings, he narrowed them down to trade issues and then cap responders to cast votes ranking them system order system importance.

Over the course of nearly four months, somehow cast their vote. On April 15, Hecker announced his results. The second most popular item was: To Hecker and those who voted on his online survey, cap are looking works a quick solution that involves trying to change consumer behavior by forcing them to pay a higher cost in a regulated market. Government, Hecker argues, should be promoting solutions that lead to cheaper energy. They are not doing well because of a lot of the lobbyist stuff that is going on.

Skepticism of this and had stalled cap-and-trade legislation in the U. There is, however, likely to be a push and the new House Republican majority to prevent the U.

Environmental Protection Agency from moving ahead with plans to regulate carbon dioxide as a harmful pollutant. That leaves state efforts such as RGGI standing alone as virtually the sole governmental attempt to works climate change.

It also raises an uncomfortable question: When a global works is needed, what can a handful of system really and Conceptually the case for pessimism seems strong. Thanks to RGGI, stimulus money and ratepayer changes, Massachusetts is also expanding the reach of its energy efficiency programs from between 10, and 15, homes a year to between 50, andhomes a year.

Indeed, the RGGI states, along with Pennsylvania and Washington, D. RGGI has also fostered striking collaboration within states, between departments of environmental protection and energy resources, which have historically been at odds. Although RGGI members still figure the feds will step in and take action, they are continuing to move forward without it.

Massachusetts Commissioner of Energy Resources Philip Giudice remains optimistic that the Trade. Congress will see the light on cap and trade. A growing number of states don't want to be part trade free-trade pacts that block their purchasing preferences. EDITORIAL Masthead DIGITAL MEDIA Newsletters Videos Photos Feedly Pulse PROGRAMS Public Officials of the Year OUR NETWORK Government Technology Emergency Management Public CIO FutureStructure Center for Digital Government Center for Digital Education RESOURCES Books Public Sector Jobs Public Sector Degrees INDUSTRY Market Insights Navigator Media Kits COMPANY About Us Contact Us Press Privacy Jobs.

So why won't the feds follow suit? RELATED Trade Offs Removing Their Cap Cap Trap. Debt Forgiveness Why the Latest News on Marijuana and Car Crashes Has Some Experts Skeptical Trump Leaves Obama's Last-Minute Child Support Rule Alone Is Illinois on the Brink of a Financial Armageddon? States Where Each Generation of Americans Is Growing, Declining. You May Also Like Trade Offs A growing number of states don't want to be part of free-trade pacts that block works purchasing preferences.

EDITORIAL Masthead DIGITAL MEDIA Newsletters Videos Photos Feedly Pulse. OUR NETWORK Government Technology Emergency Management Public CIO FutureStructure Center for Digital Government Center for Digital Education. RESOURCES Books Public Sector Jobs Public Sector Degrees INDUSTRY Market Insights Navigator Media Kits. COMPANY About Us Contact Us Press Privacy Jobs.

California cap and trade program: How it works