Are all emissions trading programs basically the same?
There are three basic types of emission trading programs: cap and trade, project-based, and rate-based. All three use trading to provide incentives for companies to lower their emissions. All three also can include provisions that allow companies to save extra allowances or credits for future use. Despite these similarities, they are each best-suited to different situations. Cap and trade is best used when trying to achieve and maintain an absolute emissions goal. A project-based system has higher uncertainty and risk and requires more extensive regulating. A project-based program can work best when applied to a large variety of sectors and source types, but is not an effective stand-alone system because there is not a required net emission reduction. It can work well as a compliment to a command and control program or a cap and trade program. A rate-based program is most effective when applied to a specific sector where facilities have similar emission characteristics. It can effectiv
