What is a Cap and Trade System?

July 25, 2016

A Cap and Trade System is a trading system that is aimed at reducing greenhouse gas emissions. In this system, a limit or cap is set on emissions and is then decreased by small amounts at a time. Companies that produce fewer emissions can sell off some of their emissions allowance to other businesses.

During the 1980s, the United States reduced sulphur dioxide and nitrous oxide, the key ingredients in acid rain, by using these programs. Its use in combating carbon emissions can be found in the Japanese city of Tokyo, who aim to reduce their emissions 25 percent by 2020.

The American state of California and the Canadian province of Quebec both implemented their own programs in 2012 and 2013 respectively, eventually leading to a partnership between the two inner-governments to allow all companies to trade between both regions.

Other Sources

David Suzuki Foundation. “Carbon Tax or Cap-and-Trade?” David Suzuki Foundation. http://www.davidsuzuki.org/issues/climate-change/science/climate-solutions/carbon-tax-or-cap-and-trade/. Accessed July 26, 2016.

Kestler-D’Amours, Jillian. “What is Cap and Trade System.” Toronto Star. https://www.thestar.com/news/canada/2015/04/13/what-is-cap-and-trade.html. Accessed July 26, 2016.