As the world economy continues to grow, pressures on our environment increase as well. Although cap and trade is not appropriate for all pollutants, well-designed and enforced programs have the potential to significantly help in addressing several of the major pollution problems we face today.

Reducing Smog
Power plants and automobiles generate nitrogen oxide (NOx) as they burn fossil fuels. As NOx mixes with other gases it creates ground level ozone, a major component of smog. Recognizing this, 13 states have already begun ozone reduction programs featuring the cap and trade mechanism. Since the first year of compliance is 1999, full results are not in thus far, but participants in the program are optimistic that trading NOx emissions will yield the same benefits (more early reductions, lower costs) that we've already seen in the acid rain program.

 

Addressing Climate Change
As carbon dioxide and other "greenhouse gases" collect in our atmosphere, they trap heat and prevent it from radiating back out into space. Since these gases dissipate very slowly, and a steadily increasing flow is being provided by power plants, automobiles, people and many other sources, the Earth has experienced a gradual warming over the past 100 years. (In fact, 13 of the warmest years in the 20th century have occurred since 1980.) Since most scientists agree that a continued warming trend could lead to more extreme weather, droughts, floods and rises in sea level (among other problems), world leaders met in Kyoto, Japan in December 1997 to consider ways to curb greenhouse gas emissions. The current plan, outlined in the Kyoto Protocol and now under evaluation in the US and worldwide, includes a cap and trade mechanism.