In cap-and-trade system, countries can buy and sell
Cap And Trade System
Cap and trade is a government regulatory program meant to curb, or 'cap', the total level of emissions of certain chemicals, especially carbon dioxide, as a consequence of industrial activity. Companies argue that it is a better alternative to carbon tax. Both strategies aim to reduce environmental damage without compromising the economic industry. The cap and trade system aims to slowly decreasing pollution by motivating companies to use clean alternatives (Kenton, 2019). Therefore, in a cap-and-trade system a country will more likely invest in products that have a lower rate of carbon emission than those with a higher one.
Fertilizers emit a lot of carbon through the production process, the emissions from the energy used to transport the fertilizers and the emissions from energy from the machines used to apply fertilizers especially in large-scale farming (Jayasundra, 2015). Fertilizers also contribute to the increased rate of Greenhouse gas (GHG) emissions such as nitrous oxide (N2O), carbon dioxide (CO2), and methane (CH4) which can lead to global warming (Sistani, Baptiste, Lovanh & Cook, 2011). It is very unlikely for companies in cap-and-trade-system to buy and sell fertilizers since they contribute a lot to the pollution of the environment while the cap and trade energy program is intended to gradually reduce pollution.
The government gives a company a certain number of permits (caps) to emit a limited amount of carbon. Usually, a company earns pollution credits by willingly reducing polluting emissions below the restrictions directed by the Environmental Protection Agency (EPA). The company can then sell these credits or keep them for future use (Spear, 2020). Overtime, the government lowers the number of permits therefore, lowering the total emissions cap. This means the permits eventually become expensive making it cheaper to invest in clean technology than buy permits. Therefore, in a cap and trade system, a company is more likely to invest in clean alternatives than buy permits.
Motor vehicles are a significant cause of carbon emissions (Miguel, Kirchstetter & Harley, 1998). An ordinary passenger vehicle can emit up to 4.6 metric tons of carbon dioxide per year. This is a lot of carbon for a country in a cap-and-trade-system. Therefore vehicles are an unlikely product to be traded in a cap-and-trade-system.
A business can be defined as an organization comprising commercial, industrial or professional activities. Businesses can either be for-profit or non-profit (Hayes, 2020). In a for-profit business, an organization could choose to trade in a variety of products such as biofuels or solar energy that are environmental safe and do not cause pollution. Or alternatively, an organization can invest in non-profit business such as charity which have no negative impact on the environment. Therefore, when it comes to the cap-and-trade system, a country is more likely to buy and sell businesses which do not pollute the environment.
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Sistani, K. R., Jn‐Baptiste, M., Lovanh, N., & Cook, K. L. (2011). Atmospheric emissions of nitrous oxide, methane, and carbon dioxide from different nitrogen fertilizers. Journal of environmental quality, 40(6), 1797-1805.
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