How do we know sources are reducing their emissions in a cap and trade program?
All allowance trading occurs under the cap, which represents a reduction in total emissions. For example, the Acid Rain Program requires a 50 percent reduction in total U.S. SO2 emissions compared to 1980 SO2 levels—larger than any reduction previously required by the federal government. And under the NOx cap and trade program that began in 1999, NOx emissions in the Northeast have decreased relative to state-based caps or “budgets.” The flexibility under a cap and trade system isn’t about whether to reduce emissions. Rather, it is about how to reduce them at the lowest possible cost. Sources may buy and sell allowances, but trading is generally only one small component of an overall strategy for meeting emission limits. In fact, the largest polluters have chosen to significantly reduce their emissions before buying allowances from other sources. Further, cap and trade programs provide unprecedented accountability. The coupling of stringent monitoring and reporting requirements and the
