Answer to Question #159432 in Macroeconomics for Trevor

Question

Cappin trade is the only tool available to regulators to manage high carbon emissions

Answer 1

Solution:

Cap and trade is a system designed to reduce emissions, such as those from power plants, by setting a limit on pollution and creating a market. The cap on greenhouse gas emissions that propels global warming is a strict limit on pollution. The trade part is a market for organizations to buy and sell allowances that allow them to emit a specific amount, as supply and demand determine the price. Trading provides companies a strong incentive to save money by cutting emissions in the most cost-effective ways.

Although Cap and Trade is the most effective tool available to regulators to manage high carbon emissions, there exist other tools that are also used to reduce carbon emissions. Such tools include the following:

·        Informationized Regulatory tool – This consists of methods and application of environmental auditing, authentication, and agreements that put forward recommendations for future development in order to handle and manage energy conservation and emission reduction.

·        Imperative and control tool – This consists of administrative licensing, product standards, technical regulations and standards, emission performance standards, regulations of manufacturing techniques, all of which are used to reduce carbon emissions.

·        Marketized tool – This consists of gas emission taxes, emission right trade, emission reduction subsidies, giving of awards for encouragement, and manufacturer’s responsibilities. They assist in reducing and controlling greenhouse gas emissions.

·        Voluntary approaches (Vas) tool – This consists of unilateral commitments by industry; private agreements between industry and stakeholders; environmental agreements negotiated between industry and government; voluntary programs created by the government that individual firms can join. These voluntary approaches reduce emissions from industry in widespread and have been a major tool to reduce greenhouse gas emissions.