Cap-and-Trade and the Climate Security Act

One of the main features of the Climate Security Act (S. 3036) is that it will set up a “cap-and-trade” system for pollution allowances (very similar to the system set up under the Clean Air Act).

Under this Act, the Environmental Protection Agency will launch a new “pollution currency” for large emitters, where one pollution allowance equals one ton of pollution.

Every year, the EPA will have a set number of pollution permits to put into the marketplace.

How does the EPA figure out to “cap” the allowances they sell?

In 2012, when this new way of banking takes effect, the EPA will create enough pollution allowances to match the number of tons of pollution emitted in 2006. The number of available allowances will be steadily reduced by about 2% every year, forcing emissions lower and lower.

Throughout each year, big polluters will buy these allowances to cover their pollution. At the end of each year, every big polluter will have to hand enough allowances back into the EPA to cover every ton they polluted.

Polluters will have to decide, is it cheaper to buy one of these limited allowances, or is it cheaper to simply cut their pollution? This cap-and-trade system guarantees the pollution reduction goals will be met, while giving industry the flexibility to find the cheapest solutions. The result will be millions of new “green collar” manufacturing jobs.

The allowances from the cap-and-trade system will be worth a large amount of money, which will be invested into a number of things under the Act, including:

  • Protecting America’s natural resources, fish and wildlife.
  • Helping consumers with energy bills.
  • Creating a worker training program to provide everyone access to the new energy economy.
  • Investing in low pollution energy technologies in the next two decades that would be 10 times as large as current levels of energy research and development funding.
  • Protecting states that pass their own, tougher laws.
  • Creating incentives for projects to store carbon in forests and soils.
  • Providing resources for states and tribes to assist with local global warming efforts.
  • Engaging all nations in global efforts to reduce emissions and help the most vulnerable nations deal with global warming impacts.