What are some things that could cause cap and trade to fail?



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    If by “cap and trade” you mean national level legislation establishing a comprehensive carbon emissions trading system in the United States, there are a number of potential traps that could cause it to not go through, all of them largely political in nature. In June 2009 the US House of Representatives passed HR 2454, the American Clean Energy and Security Act which would have established a modified cap-and-trade system for the US. Neither this bill nor a similar one has yet been passed in the US Senate, so it’s not law yet. The usual political and economic arguments are rallied about cap-and-trade as with other environmental or global warming legislation: is it effective? How much will it cost? What is the economic impact? What are the international ramifications? With cap-and-trade, however, there’s another set of arguments, such as the resource depletion argument, that if you allow companies to trade carbon credits they will buy up as many “allowances” to emit greenhouse gases as possible, and thus the system will actually encourage the very thing it’s supposed to reduce. There is also a small but vocal minority of politicians, almost all conservatives, who deny that climate change is happening at all (or that it is caused by human activity) and think that it’s all some sort of hoax to justify new taxes. Will the Senate pass a version of cap-and-trade? I think eventually they will, but it may not be for a while. President Obama, who supports a cap-and-trade system, has a lot on his plate politically, especially with health care reform and economic issues. With the difficulty he’s having even in getting 51 Senators to support health care reform, the last thing he wants is a divisive debate on environmental issues that might poison the health care initiative. I think the eventual cap-and-trade system that emerges, whether this year or in the future, will be obtained by the usual political wrangling and horse trading for specific Senators’ votes. What will that system look like? At this point, who knows.

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