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For almost 20 years now, we have been
generating an estimate of $122 billion a year in benefits from avoided death, illnesses,
and healthier lakes and forests. How you may ask? It’s all in a system called
Cap and Trade, which is also known as emissions trading. “Cap and trade is
simply a solution to clean up the environment by letting people buy and sell
the right to pollute. The government does not interfere or tell the polluters
how to clean up their act. It simply imposes a cap on emissions. “Each company
starts the year with a certain number of tons allowed—a so-called right to
pollute. The company decides how to use its allowance; it might restrict
output, or switch to a cleaner fuel, or buy a scrubber to cut emissions. If it
doesn’t use up its allowance, it might then sell what it no longer needs. Then
again, it might have to buy extra allowances on the open market. Each year, the
cap ratchets down, and the shrinking pool of allowances gets costlier. As in a
game of musical chairs, polluters must scramble to match allowances to

There were many arguments regarding
Cap and Trade. Environmentalists were very skeptical and saw the system as a
scheme for polluters to buy their way out of fixing the problem. The Clean Air Coalition
tried to censure the EDF for what they call “the twofold sin of having talked
to the Republican White House and having advanced this heretical idea”.
Misunderstanding over the cap even lead its way toward the White House. John
Sununu the chief staff was furious and said that the cap “was going to shut the
economy down.”

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Another approach for the pollution
control that most environmentalists were pushing was the “Command and Control”
concept. Federal officials required utilities to install scrubbers capable of
removing the sulfur dioxide from power plant exhausts. But to do that the cost
of that procedure would literally send them back to the Dark Ages.
Environmental Defense Fund (EDF) had its own approach to diminishing the
pollution. They had noticed that human nature didn’t like to be told what to
do. So, they proposed an idea to give the people a chance to turn a profit by
being smarter than the next person. They thought they would achieve things that
no command and control bureaucrat would ever suggest. Cecil Pigou had argued
that the transactions would have effects that don’t show up in a product which
would lead to careless manufacturers not having to pay for their faults.

People were trying to control power
plant pollutants that caused acid rain. Power plants were sending up clouds of
sulfur dioxide, which was falling back on earth damaging lakes, forests and
buildings across eastern Canada and the United states. The first agency to buy
allowances was the Tennessee Valley Authority (TVA). It ended up costing a lot
less than expected, costing $3 billion annually than the initial $25 billion.
The cap and trade was considered a booming success after everything went on

Initially there was a lot of
frustration which lead Canadian prime minister to bleakly joke about declaring
war on the United States, because United States factories were the ones to
blame for the pollution. So why would Canada have to pay/suffer for it? That
was the big deal with Canada. The article was very interesting to me and it
helped explain the ideas covered in the book. I think the same solution could
be used on greenhouse gases to prevent climate change, but the people in charge
must take a lead with their actions.

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