Made In The U.S.A.

What is Cap and Trade?

In Adventures on June 28, 2009 at 12:11 am

After a brief delay I’m back to finish addressing my notes from the steel convention I attended in May.

The term “Cap And Trade” was talked about a lot by these steel producers. I must confess, I don’t know enough about it to know what it means without looking it up. But they mentioned it enough, and clearly hated it (by referring to it derogitorially as “Cap And Tax”) enough that I figured it must be pretty important. So here’s what it is.

A search for Cap And Trade on Wikipedia redirects you to “Emissions Trading.” So right off the bat, I’m starting to get the picture.

It’s “an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.”

The administrators of the programs are governments. They issue credits to the people adhering to the rules–companies that make things and produce polluting emissions.

The “cap” part refers to a restriction in the amount of pollutants a company can emit. The “trade” part refers to the fact that companies can sell, or trade, their credits to other companies. So, for example, a company utilizing coal for energy–a coal-fired steel plant, for instance–would use up a lot more credits. So they’d have to buy those credits from other companies that have excess credits because they use cleaner, greener fuels that produce fewer polluting emissions.

The dirty polluter is punished by having to pay extra for credits for its pollution. The cleaner company is rewarded by being able to sell, and profit, from unused pollution credits.

So if you’re a steel producer, Cap And Trade feels a lot like extra taxes on steel producers who use dirty energy because it’s the best and cheapest way to produce the power they need. And if they used cleaner, more expensive energy, the price of steel would go up and they’d have an even harder time competing with cheaper, government-subsidized steel from other countries–countries that don’t have such strict pollution requirements. Countries that don’t worry about that sort of expensive stuff so much. Countries that make it cheaper and easier to produce steel even without government interference. Or even explicitly without it.

At least that’s how I understand it.

My research, along with my open mind, leads me to believe that sure enough there may be some inherent problems with the plan. But the steel producers did not sway my opinion in their favor when they said that global warming might be based on faulty science and that it really hasn’t been proven. In fact, it seems like it might be cooling!

That kind of made me disregard everything else they said.

They went on to say that sure, environmental regulations have encouraged them to be more environmentally friendly faster than they normally would have been on their own, but that they still would be moving toward environmentally friendly policies. To which, after I finished laughing, I said to myself, “yeah, right.”

Then I immediately thought about the most appropriate quotation ever. It’s from Upton Sinclair.

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: