Ram Mohan answered on
May 28 2020
Running Head: Policy Proposals
June 7, 2018
What type of ca
on emissions trading systems, if any, is adopted in the U.S. to control greenhouse gas pollution?
Description of the Question
The policy question is about the type of emissions trading systems that must be adopted in the United States to mitigate the impact of such emissions on the environment. With increasing focus on ca
on footprints and emissions causing global warming, policymakers worldwide, and in the United States have been grappling with the problem.
Policy Alternative #1: Cap and Trade Solution
“In a cap-and-trade system, an upper limit on emissions is fixed, and emission permits are either auctioned out or distributed for free according specific criteria” (OCC, 2015, 1). The auction of the trading permits or the emission permits is believed to be of immense help in combating pollution and global warming using free market and capitalist principles. Indeed, the attractiveness of the cap and trade system lies in incentivizing firms to pollute and emit less thereby earning the right to trade in the permits that accrue once the firm’s emissions fall below the permissible limit (Roper, 2014). This happens by way of rewarding the firms who pollute less by giving them the option of trading the savings that they have done and selling them to other firms who might need such permits.
On the other hand, the cap and trade system also penalizes the polluters who emit more by making them pay for their polluting activities. It is believed that by this method, polluters would have less incentive and more penalties to pollute. Indeed, the cap and trade system ensures that the polluters cannot wish away the problems associated with their business operations as “externalities” which do not have any impact on their bottom lines (Suzuki, 2015). Externalities in this context mean that businesses cannot resort to saying that the pollution caused by them is external to their operations and hence, they are not liable for any side effects that manifest from such pollution.
Policy Alternative #2: Baseline and Credit Systems
“Under a baseline-and-credit system, there is no fixed limit on emissions, but polluters that reduce their emissions more than they otherwise are obliged to can earn ‘credits’ that they sell to others who need them in order to comply with regulations they are subject to” (OCC, 2015, 2). The baseline and credit system is considered to be a more realistic and practicable solution since firms do not need to drastically alter their production processes and at the same time, can contribute to alleviating the problems caused by their business activities.
Having said that, this system has also been criticized for its apparent nonchalance with which it allows polluters to resist caps on their emissions which in turn can be of benefit to big businesses who can buy as many permits as possible. Indeed, this solution is often a back door entry for such firms that have the resources to sidestep and circumvent the prevailing rules on pollution emissions (Ca
on-Trust, 2015). For instance, in this system, polluters can simply continue to pollute more by buying permits on the open market which means that they are under no pressure to comply with environmental norms.
Evaluation and Selection of a Policy Position
The criterion that is being used to evaluate the two solutions consists of how many incentives as well as how well they can work or be abused to ensure the success of the policy from a longer term perspective. In addition, the other point of evaluation is the relative ease or the difficulty of big businesses getting away with their polluting activities. The last criteria are...