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Can China Pressure the U.S. Into Cap And Trade?

Cap and trade shouldn’t be the political football it’s become today. It’s a conservative idea with market based incentives that would make it more economical to build clean energy where such energy is cheap and cheaper to burn fossil fuels where that’s the cheapest form of energy. But the concept has become politicized and politicians have taken an easy out by suggesting that the U.S. can’t fight climate change on it’s own (i.e., without China) so why try?

In the last few weeks, China may have changed both the political and economic realities of climate change at cap and trade by announcing it will begin charging for emissions of CO2. The impact on the U.S. could be tremendous and something like cap and trade could now be around the corner.

Cap and trade could be a boon or a curse
At its core, cap and trade puts a cap on carbon emissions and allows industry participants to trade emissions rights with each other. In theory, a solar plant in Arizona could trade its clean credits with a coal plant in Maine, compensating the solar plant for being clean and costing the coal plant for being dirty. This should make clean energy more economical and also promote its development where the economics make sense and not just based on state mandates.

The devil is in the details though. How are credits allocated? Who is covered? How are carbon credits traded? What time frame do credits cover?

These are just a few of the questions cap and trade proponents have to answer, and until recently there hasn’t been much political will behind the system. But that may change now that China says it will begin a cap and trade structure in its own economy.

Right now, China says that a cap and trade system would cover most of its economy, but there are precious few details to prove that’s true. If China does implement cap and trade, though, reducing emissions in the process, what would the U.S. excuse be not to?

Pressure on the U.S.
China’s announcement puts more pressure on the U.S. to do something about its own emissions. President Obama and President Xi of China have agreed to work together on emissions and climate change and this was a salvo from China’s side.

Read full story at The Motley Fool