Creators of the “Story of Stuff”
released a great video entitled the “Story of Cap and
Trade.” It takes a critical look at this market-based mechanism,
which is incorrectly touted as the solution to climate change.
Cap and trade schemes are based on
setting a limit to pollution. Allowances to pollute are distributed
to industries. At the end of the year, industries must turn in
pollution allowances equivalent to the amount they polluted. Those
that polluted more than the number of allowances they received at the
start of the year can purchase additional allowances from entities
that polluted less (where the trade comes in). It sounds reasonable
enough, but the devil is in the details. The caps are
often set too high due to industry pressure, allowances
are given away rather than auctioned, and they include a major
loophole, offsets. The use of offsets allow polluters to emit above the cap!