Cap and Trade and "The Greenhouse Effect"

Cap and trade is a policy tool that places an upper limit on emissions and establishes a system of permits which firms or individuals may purchase or trade in order to have the right to pollute. The permits are traded in a market according to the laws of supply and demand. According to the United States Environmental Protection Agency, successful cap and trade programs reward innovation, efficiency, and early action (EPA). By this model, firms who increase their efficiency will be able to spend less�or nothing at all�on the right to pollute because the rate of pollution produced per unit manufactured will decrease.

Although cap and trade has the potential to reduce emissions

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Category: Government - C