Through these two case studies, four common principles emerge that clearly show why cap and trade works.

Cap and trade sets firm targets.
Whether the goal is reducing air pollution or rebuilding fish stocks, the cap goes to the heart of the challenge. When we identify pollutants that harm the environment or threaten public health, a cap sets a firm and permanent limit, lowering the amount of these pollutants in our world. When we take too many fish out of the sea to ensure good fishing in years to come, the cap decreases the total allowable catch. Caps sets clear limits and quantify the challenge for all participants.

Cap and trade recognizes value where it exists.
When a power plant reduces pollution below an assigned limit, that has value for the environment. Creating a market for surplus allowances recognizes this value. Similarly, halibut swimming in Alaskan coastal waters are a valuable resource. Allocating specific shares of this resource to local fishing fleets - shares which they can buy and sell - establishes a market that also acknowledges value.

Cap and trade lets the marketplace work.
In the US acid rain program, power plants were given clear limits, but plant operators had the freedom to decide how they would reach their goals. This set up competition between plants to develop the most cost-effective pollution reduction system (and also created competition among manufacturers of pollution reducing devices.) A competitive marketplace stimulates innovation, rewards efficiency, and speeds the pace of development.

Cap and trade ensures fair play.
Under the acid rain program, plants must make quarterly reports to the US Environmental Protection Agency (EPA) detailing precise emissions totals. In the interest of full disclosure, the EPA posts this data on the Internet for public access and review. http://www.epa.gov/acidrain