What is the purpose of a cap and trade program?
While a cap and trade system reduces compliance costs, the cap it sets out to meet is a firm limit set to achieve environmental or human health goals. Trading creates incentives to reduce emissions below allowable levels. In some cases this might spur technological innovation or energy efficiency improvements depending on market forces, not mandated technologies. In the 1990s under the Acid Rain Program, scrubber costs dropped by 40 percent, and the sulfur removal efficiencies of scrubbers improved from 90 to 95 percent. Additionally, the cap provides environmental certainty, which is absent in other regulatory programs.
