What is Cap and Trade?

A cap-and-trade system is one of a variety of policy tools that exists to reduce the greenhouse gas emissions responsible for climate change. A cap-and-trade program sets a clear limit on greenhouse gas emissions and minimizes the costs of achieving this target. By creating a market, and a price, for emission reductions, cap and trade offers an environmentally effective and economically efficient response to climate change.

Ultimately, cap-and-trade programs offer opportunities for the most cost-effective emissions reductions. Many challenging issues must be addressed before initiating the program. Once established though, a well-designed cap-and-trade market is relatively easy to implement, can achieve emissions reductions goals in a cost-effective manner, and drives low-greenhouse gas innovation.

Resources accessible on this page help explain what cap and trade is and how it works to address the climate change challenge:

• Climate Change 101 Series: Cap and Trade [1] explains how a cap-and-trade program sets a clear limit on greenhouse gas emissions and minimizes the costs of achieving this target.
• Cap and Trade vs. Carbon Tax [2]
• Congressional Policy Brief Series [3]
• Climate Policy Memo Series [4]
• Capitol Hill Briefings [5]
• Paper: Offsets in Cap & Trade [6]
• Brief: Policy Options to Reduce GHG Emissions from Transportation Fuels [7]
• Poll: Americans Favor a Carbon Cap [8]
• Op-Ed: Handling Climate Change [9]