Bloomberg news reports that European Union carbon permits dropped to their second-lowest close ever, after the bloc canceled an auction of permits for the first time as bids failed to reach a secret reserve price.
The sale was called off because the price would have cleared “significantly” below the prevailing
HR 2454 or the Waxman-Markey bill, named after its two major supporters Henry A. Waxman and Edward J. Markey of the Energy and Commerce Committee, was passed in the US House of Representatives on June 27. Its major mandate is a cap and trade system though it does have other green practices scattered throughout. There has been a lot of talk recently, because of this bill, of the viability of a cap and trade system in the US. To evaluate the government’s ability to implement this new system we have to first understand it.
The basics of a cap and trade are fairly simple. It is a way to limit emissions through a credit system. Every business acquires a certain amount of credits; depending on the type of system these credits are either auctioned off or given away by the government. These credits represent the amount of carbon that businesses can emit. If the business cannot adhere to the limit of emissions their credits allow, they must buy credits from companies who are below their cap. Thus the companies who are responsible and limit their emissions are rewarded and those who are not as environmentally friendly are punished.