The Economics of Cap-&-Trade Programs

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The Economics of Cap-&Trade Programs

Presentation Submitted by: Carpe Diem Group 13, Division B, GAPR11

What is Cap & Trade?
• The Goal: Environmental Policy to set an overall limit on the amount of carbon that can be emitted • The Cap: Each company, will have a limit on the amount of greenhouse gas that it can emit.

• The Trade: More efficient companies can sell their extra permits to companies that are not able to make reductions.
Source: Text from “Cap and Trade 101”, Center for American Progress

Emission Permit Market
• Emission permits are traded in market; Creates a new market for ‘Clean Air’(Carbon-less air)

Source: “Review of Forestry Carbon Standards”, Imperial College London

More on Cap & Trade
• The profits: – The program would generate $50 billion per year, but could reach up to $300 billion – The revenue can be used to invest in renewable energy, efficiency, low-carbon transportation technologies, green-collar job training etc

Carbon Reduction Targets

Source: “Review of Forestry Carbon Standards”, Imperial College London

More on Cap & Trade
• The cons:
– Hard to quantify the effects of carbon emissions, hence put a price – Implementing, monitoring is a challenge – Highly political, highly manipulative

Source: Members’ understanding

EU-Emissions Trading Scheme (ETS)
• • •
• • •

Largest multi-national emissions trading scheme in the world. The objective of EU-ETS is reduction of greenhouse gas emissions in a costeffective and economically-efficient manner. It currently limits CO2 emissions from approximately 12,000 facilities in the 27 EU Member States. Operational Mechanism is via the allocation and trade of CO2 emissions allowances. Long term goal - de-carbonization of EU economy Carbon trading was kick started in January 2005

Source:

EU-Emissions Trading Scheme (ETS)

• •

• •

The emission…...

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