Carbon cap and trade has made headlines in recent months as governments turn to carbon markets to limit greenhouse emissions. The biggest announcement came in December, when China formally announced the establishment of a national carbon trading system that will initially cover its electric power industry. Once China’s market is up and running, it will dwarf the largest existing cap-and-trade market, the European Emissions Trading System that started in 2005.
Developments are underway in the U.S. as well. In January, New Jersey announced that it will rejoin the Regional Greenhouse Gas Initiative, commonly called RGGI, which it had previously abandoned. And Virginia has announced its intention to also join the carbon market, which spans nine northeastern states.
Kleinman Center Faculty Fellow Arthur van Benthem discusses how cap and trade cost-effectively limits carbon dioxide emissions. He also examines the economic competitiveness of cap-and-trade programs.