Cap and Trade is a strategy that involves not just government in setting greenhouse gas emissions and getting them down to where we think they ought to be, but also involves the players who produce them. And the way it works is, it sets the cap, which government has to do, and then allows those of us that are industry to demonstrate that we’ve done better, and rewards us when we’re doing better than the limits and creates a marketplace because in this market of selling our offsets to somebody that is still above the cap rewards those who are innovative, that have been movers in the industry, that have gotten below their cap, and it penalizes those who are actually above the limit. It doesn’t force them out of business like a straight regulatory regimen would, but it helps, in fact, finance the transition of those people that have the intellectual whereabouts to do things with less greenhouse gas emissions.
So if you’re in the business of making cement, which is fuel intensity to make that conversion, and let’s say you were the first to put in a solar cement plant, you’d be way below the cap, and those benefits of CO2 emissions that you didn’t produce, you could then sell in this marketplace of cap and trade. And there’s an exchange in Chicago where this occurs. Okay?
So it’s a value. And it might be bought up by your competitor who is still burning coal or by some other industry that’s outside of that. Or, it may be from someone that’s producing a product that’s actually pulling carbon out of the atmosphere, such as a forester. So cap and trade is that combination of government setting limits and then adding an honest and fair marketplace where those people that are solving the problem are rewarded, and those people who are still in the transition can actually finance or pay in order to stay in business, and collectively we bring down the overall level of CO2 emissions.
Now, the real challenge gets back to government, quite frankly, because the politicians have to have the willpower over time to continue to bring the cap down if we’re going to get to where we need to be in order to reduce global warming.