President Obama has clearly stated his intention to “green up” America.  The cap and trade program is one of the ways in which he plans to oversee the greening of America.  The program has received mixed reviews from economic and environmental experts and only time will tell if the initiative will provide meaningful differences in the fight against climate change in an economically feasible manner.  The President has stated that his goal is to reduce U.S. emissions by 14 percent below 2005 levels by 2020 and 83 percent below by 2050.

The Environmental Protection Agency (EPA) states that “Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing emission sources flexibility in how they comply.”  After identifying the target group, a successful cap and trade program must establish a cap, or limit, on the amount of emissions for all sources within that group. The operational concept of the program rests on the assumption that it will be easier for some companies to establish effective mechanisms for limiting their emissions than for others.  Companies that manage to emit less than their cap are able to sell the difference to companies who are struggling to maintain their emissions within the established cap.

This past Friday, the House of Representatives narrowly passed the proposal but not without President Obama’s intense lobbying in its favor.  A recent Wall Street Journal article notes that the win in the House was not an easy one for the President; indeed, he even had to convince many within his own party to support the proposal.  Many business leaders caution that the bill, if passed in the Senate and codified into law, would cost American taxpayers significantly.  The Wall Street Journal quoted a statement of the National Mining Association which warns of the cost of the program:  “’It will affect every aspect of the American economy, harming our ability to compete in the world and provide secure and affordable energy to American consumers and businesses.’” The Congressional Budget Office (CBO) estimates that in 2020, the annual cost to implement the program will be a $175 per household, an estimate that naysayers contend is very low. 

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