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Cap and Trade – What is it?
Know the Issues: |
| Wouldn’t you have done that anyway? |
ADDITIONALITY |
What if the company next door pollutes more to compensate for a decrease in production? |
LEAKAGE |
Will sequestered carbon stay sequestered? |
PERMANANCE |
How will we know its working? |
MEASUREMENT |
Agriculture has a lot to contribute to America’s healthy soils, clean water, and clean air. Through implementing environmental conservation practices on farms, agricultural producers are providing something valuable to society. Sequestering carbon and reducing greenhouse gas emissions are some of many ways that farmers can contribute to the fight against climate change. We need solutions to climate change that support agriculture’s role in combating climate change. One such solution is cap-and-trade systems.
Cap and Trade is a market-based system that is designed to limit harmful air pollutants by providing market incentives rather than just imposing regulations or a carbon tax. In order to combat climate change, a cap and trade system would be implemented to curb greenhouse gas emissions on a nationwide level.
A cap and trade system can be simplified into three easy steps:
- A cap, or maximum amount of emissions, is set for the entire market through legislation. In the case of climate change, this will be a maximum amount of greenhouse gases allowed to be emitted by ALL US industries.
- Greenhouse gas emitters within the cap and trade program will receive individual emission allowances that permit them to release a determined amount of greenhouse gas; the total of these individual allowances will equal the original nationwide cap set by legislation.
- Individual emission sources will create their own plan to comply with the established pollution limits. If they can reduce emissions below their cap, they are able to sell credits to emitters who exceed the caps – hence, the ‘cap’ and ‘trade.’
In short, a cap and trade carbon market is a tool to control emissions by providing emission sources the ability to offset their own discharges by purchasing credits from those who emit less. As a result, there exists an incentive to reduce emissions in order to sell credits to those who cannot.
Agriculture has a significant role to play within a cap and trade market.
 Go to Next Step: Learn about Agriculture's role in Cap and Trade
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