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Cap and trade

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<p style=”margin-bottom:0in;margin-bottom:.0001pt;line-height: 200%”>Introduction</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;line-height: 200%”>Climate change is closely related to air pollution. Research on the impacts of air pollution has outlined that air pollutants are the key drivers of climate change. Most of these pollutants are not always visible, and they originate from various sources. With rapid industrialization and technological advancements, the amounts of waste emissions have also increased. In the past 150 years, these human activities have pumped enough pollutants into the atmosphere to raise its levels higher.&nbsp; Most people agree that there an e variety of measures that need to be taken to curb global warming. These actions include taking responsibility on a personal level and on the large scale where the governments will limit emissions of carbon dioxide and other greenhouse gasses.</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>Cap and trade are alone of the techniques that can be used to reduce greenhouse gas emissions that are responsible for climate change. This policy has been regarded as one of the dominant approaches to reducing pollution in our atmosphere. The cap on harmful emissions is a limit backed by science. Industries or companies are made to pay penalties if they exceed the cap, which gets stricter with time. The trade part includes a market where companies buy and sell allowances that permit them to emit only a certain amount of the greenhouse gas emissions. The cap and trade program sets a clear limit on greenhouse gas emission and reduces the costs of achieving these targets&nbsp;(Edward Nell).</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>Ultimately, by creating a market, and price for emission reductions, this program offers an environmentally effective and economically efficient response to climate change. Before initiating and executing the program, the more challenging issue must be addressed first. Typically a well established cap-and-trade market is relatively easy to implement, can reductions in a cost effective manner and drives small greenhouse gas innovation.</p>
<h1>How cap and trade works</h1>
<h2>Limiting harmful emissions</h2>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>The government sets across a given industry or ideally the whole economy. It sets policies and decides the penalties for violations. The greenhouse and related emissions which drive global warming are primary targets of such caps. Other pollutants that contribute to smog can also be capped. When the emissions are locally reduced, they lower the levels around the world&nbsp;(Boyce).</p>
<h2>Companies are allowed to emit set amounts</h2>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>The amount of the cap is split into allowances, each permitting a company to emit one-ton emissions. The concerned regulatory bodies distribute the benefits to the industries. The cap typically declines over time providing a growing incentive to become more and efficient.&nbsp; Companies that reduce their pollution faster can sell allowances to companies that pollute more or reserve them for future use.&nbsp; The trade and cap allow businesses to be flexible. It increases the pool of available capital to make reductions, encourage companies to cut pollution faster and rewards innovation.</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>&nbsp;As firms use established systems to lower emissions, such as adopting energy efficient technology, entrepreneurs see opportunity. The sum of the cap that is allowed for a given company allows emissions from all the include facilities. Each allowance permits them to release a given amount of gas emissions, and this does not depend on the location. Although this is a critical and comprehensive solution to climate change, it needs to reincorporate with other measures required to stabilize the climate&nbsp;(Burtraw).</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>The economic benefit of the cap and trade policy is that it has very few steps in implementation. To cap and trade, first, there is the setting of the cap. This is guided by climate science and overall greenhouse elisions. The government uses this kind of data to set the cap. Secondly, the government allocates permits. Each of these permits will represent a ton of gas emission so that they add up to the set cap. The allowances can be either be distributed to industries for free or auctioned. After this has been done, the next step is to measure the emission and ensure compliance with the cap. Equipment can be installed in the individual firms to monitor and report on these issues.&nbsp;(Quebec) The system is then designed to allow flexibility in how companies can meet their targets. They are required to reduce the emissions or buy more allowances that are banked annually.</p>
<h1>Cap-and-trade and future innovation</h1>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>Traditionally, the command and control reduction had no incentives to go beyond the regulatory standard. The key benefit of cap and trade is the; it offers incentives for constant and progressive innovation in emission reduction. The system allows the market to come with the best feasible solutions to reduce the number of emissions made. Industry can reduce emissions at a lower cost than the allowance price either reduces its compliance cost.&nbsp; This kind of approach drives companies to continually innovate and seek new technologies that the government might not anticipate under the more prescriptive command and control regulations. This has a significant impact on solving the challenge of climate change requires new technologies to achieve deeper emissions cut that is critical&nbsp;(Farber).</p>
<h1>Cap and market design</h1>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>To have a structured market design for the cap trade, there are various decisions which have to be made. The program has to determine emissions should be capped. The point of regulation must also be established at the same time. The entities will be allowed to hold allowances equivalent to emission. Another important aspect is the level of stringency. This determines the level of the emission cap and the cost of containment mechanism. This also includes the program linkage and how the allowances are to be distributed. (EDF) These aspects imply that scope and point of regulation set the basis for deciding which sources are covered and who is to be held responsible for these.</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>&nbsp;Policymakers must ensure that the program is monitored and the issues are addressed efficiently through the regulatory mechanisms. It is argued that in spite of the covered entities, the cap and trade design should include the following; straightforward and consistent rules, accurate monitoring, measuring and reporting tools, free trading of allowances and finally consistent enforcement of penalties to non-compliant industries.</p>
<h1>Cost containment mechanisms.</h1>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>Managing the cost of compliance for covered entities is also a subject of interest in the cap-trade system. For instance, offsets technique allows the covered entities to make theory own purchasing emission reduction credits. This lowers the cost of the program thus making the management of climate change a less complicated process&nbsp;(Hahn).</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;line-height: 200%”>&nbsp;</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;line-height: 200%”>Unlike the tradition regulatory systems, cap and trade constrain emissions and allow the market forces to set the price on the emissions. This helps to minimize the cost of making the substantial reduction in the emission. Instead of mandating a particular technology, the flexibility of the systems facilitates the process of locating areas where emission reduction can be achieved most cost-effectively.</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>&nbsp;It is notable that this system has stimulated the development of new innovative solutions driving towards lower costs in future. Besides this, if the cap and trade programs are designed to cover a variety of emissions, then the emission sources and other sectors will serve as the core for greenhouse gasses reductions.&nbsp;(ieta) This demonstrates that there is a significant impact of cap and trade program in addressing climate change.</p>
<p style=”margin-bottom:0in;margin-bottom:.0001pt;text-indent: .5in;line-height:200%”>Cap and trade combined with other climate change mitigation measures have achieved significant reductions in the levels of emissions.&nbsp; Although cap and trade cannot quickly cover some sources oof emissions, a solution to climate change will require a comprehensive approach, integrating marketing mechanisms with other traditional standards .ultimately, the system has offers the best opportunity for cost-effective emotion reduction.</p>

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