What, in Germany’s view, are the advantages of cap and trade (emissions trading) versus a tax?
Emissions trading has created a carbon market which effectively promotes investments in climate protection at home and abroad and which, at the same time, is profitable. Harmful carbon dioxide, which is released into the environment by power plants and other industrial facilities, will be further reduced in a cost-effective manner through emissions trading. The principle is as follows: The operators of these facilities receive allowances. These entitle the holder to emit a fixed amount of CO2. If the facilities release more emissions, the operator must purchase more allowances. Vice versa, if the operator releases fewer emissions, he may sell the excess allowances and thus make a profit. The idea behind this instrument is quite simple: Instead of committing all operators to the same rigid emission limits, the companies are allowed economic flexibility. What matters when it comes to climate protection is that carbon emissions as a whole are reduced – wherever this happens on an individu
