What is Cap and Trade?
Earlier in the session, we sent a constituent survey (if you did not get a copy, contact me and we will send you one). Question number five asked:
"Last year the legislature enacted a nation-leading Global Warming Mitigation Act aimed at significantly reducing greenhouse gas emissions by 15% by 2015, 30% by 2025and 80% by 2050. Given the ambitious goal, do you support using a Carbon cap-and-trade system to reduce greenhouse gasses in Minnesota?"
Constituents overwhelmingly said that they did not know enough about what cap-and-trade was in order to make a confident and educated decision. So, it seemed wise to share basic information on what a cap-and-trade system is, and where Minnesota is going in terms of this idea.
Paraphrased from Wikipedia, a cap-and-trade system, or emissions trading, is an approach used to control pollution by providing economic incentives for reducing the emissions of pollutants. The government sets a limit or cap on the amount of Carbon that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits), which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level.
Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society. The full article can be viewed here: http://en.wikipedia.org/wiki/Cap_and_trade
In regard to this issue, Minnesota is making progress. As the survey question implied, Minnesota's Global Warming Mitigation Act was passed in last year's session. This set impressive goals for Minnesota in reducing greenhouse emissions. Then in November, Governor Pawlenty signed the Midwestern Regional Greenhouse Gas Reduction Accord with Governors from Wisconsin, Illinois, Indiana, Iowa, Michigan, Kansas, Ohio, South Dakota, and Manitoba's Premier. According to the Governor's press release, the Accord will:
• Establish greenhouse gas reduction targets and timeframes
• Develop cap-and-trade mechanism
• Establish a system to enable tracking, management and crediting for entities that reduce greenhouse gas emissions; and
• Develop and implement additional steps, such as a low-carbon fuel standards and regional incentives and funding mechanisms.
The Governor's press release can be viewed here in full: http://www.governor.state.mn.us/mediacenter/pressreleases/2007/PROD008417.html
The legislature supports the governor's work toward a regional cap and trade program and Rep. Knuth has introduced a bill this session (HF 3195) to establish design principles of a cap and trade system that will benefit the public. The bill is currently in committee. The house's research on the bill can be viewed here:
http://www.house.leg.state.mn.us/hrd/bs/85/HF3195.html
I hope this information is useful. I am a co-author on Representative Knuth's bill. I hope that Minnesota will participate in the continued development of environmental policy for the nation. This legislation is an example of Minnesota's strong environmental leadership. Please feel free to contact me regarding your opinion and suggestions. As always, I look forward to hearing from you!
