Potential Implications of President Obama´s "Cap And Trade" Program

President Obama has answered the questions of whether a carbon (greenhouse gas) regulatory scheme will be enacted and what form it will take. As opposed to a carbon tax, the president recently submitted a budget calling for a "cap and trade" regime, which he believes will produce revenue for the federal government in the range of $78.6 billion in 2012 and $645.7 billion from 2012 to 2019. Depending on how this program is implemented, its effects may be deep and broad. Cap and trade is modeled after a successful program to reduce acid rain emissions.

The "cap" aspect of the program is that the government makes available a limited number of carbon allowances—fewer each year than the prior year's carbon emissions. President Obama proposes reducing emissions 14 percent below 2005 levels by 2020. The "trade" aspect is a secondary market in which those capable of reducing emissions below their allowances can sell entitlements to those whose emissions will exceed their