Friday, September 26, 2008

Cap and Trade

I am still getting acquainted with the economic science of this, but one question I'd like to pose back to Mike or anybody who has expertise here: How do you rate "effective?" other than the 10% overall goal. The overall emission reduction is based on a current baseline carbon emission, and if run properly, a company or state could only buy a who bundle of credits if they are sold by another, therefor ideally if they are bought or sold for $4 or $40 wouldn't change the overall emissions, only the profit and expenses of the entities buying and selling them. The price per credit will be solely a product of how difficult it is for the market as a whole to reduce emissions. If 10% is overly ambitious, the credits will sell for much higher. Does anybody know the penalty for exceeding the 10% reduction after 2018, is it just the cost of the allowances needed to satisfy the limit? Could allowance credits be sold by the govt if we (market as a whole) are already at the carbon emission limit?

The cap-and-trade program is something both presidential candidates supposedly support. As far as I can tell, the only major difference between the tho is McCain favors certain free allowances for specific entities as to not drastically disrupt certain key markets, and Obama only favors allowances to be purchased, regardless of how 'delicate' the market is. I will hold off on comments regarding their stances in hopes that this will be revealed more during the debate tonight, if it even happens.

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