Carbon Cap and Trade

What is Carbon Dioxide Cap and Trade?

A cap and trade system sets a limit on the amount of carbon dioxide (or other greenhouse gases) that can be emitted. Individual companies are then required to reduce their company's emissions to the new emissions cap (limit) or purchase credits from companies whose emissions are below the limit. Perhaps the first implementation of a cap and trade program was the 1990 amendments to the Clean Air Act which created an environmental trading program to combat acid rain. The bill received overwhelming bi-partisan support and was signed into law by President George H.W. Bush. The 1990 amendments to the Clean Air Act have overwhelmingly been hailed as a successful program which curbed the emissions of pollutants that cause acid rain.

Another significant devolvement in cap and trade was the 1997 Kyoto Protocol, which called on nations to reduce their emissions of CO2. In order to fulfill their obligations to the protocol, nations have formed an international trading system to buy and sell credits from one another.

Why Focus on Residential Emissions?

Traditionally, environmental regulation has been aimed at "tailpipes and smokestacks." In other words, when most people think of pollution and global warming they link it to the emissions caused by automobiles and factories. Energy use from residential and commercial buildings, however, accounts for nearly 40% of CO2 emissions. Residential energy use accounts for 21% of CO2 emissions. Because of the amount of CO2 homes emit and the economic attractiveness of energy efficiency, improved building energy performance should play an important in any climate change action plan.

Source: U.S. Energy Information Agency

What is Happening in United States

Currently there is a voluntary market for trading carbon dioxide emissions. Some companies are participating for both environmental concerns and for their company to become more competitive in international markets. State and regional mandatory cap and trade programs are being launched and a national program will likely be adopted in the near future. As of now, there are at least eight bills in Congress proposing a national cap and trade system for carbon dioxide emissions.

A More Business Friendly Way to Decrease Emissions

Cap and trade avoids rigid "emission taxes" on businesses and allows for marketplace flexibility to help solve climate change. A growing number of corporations and organizations have voiced support for a national CO2 cap and trade law, including GE, Duke Energy, General Motors, and the AFL-CIO.

How Does Building Performance Fit into Carbon Trading?

Energy efficiency trading offers a new market for raters, but will not require them to learn a new skill or set of standards. By applying the existing RESNET standards for energy efficiency to cap and trade, America would be able to cut its carbon dioxide emissions. The modeling and inspection procedures developed by RESNET can be used to document efficiency in a carbon cap and trade system. There is no need for additional inspections nor software modeling.

What Raters Should Do

Carbon cap and trade system seems almost certain to be passed by states and the federal government in the upcoming years. It is uncertain, though, whether or not commercial and residential buildings will be included in the program. It is vital that raters advocate that residential and commercial buildings are included in cap and trade programs. Raters can begin by forming partnerships with industry, consumer and environmental advocacy groups, and sitting on local regulatory meetings.

Advocacy on the local, state, and regional level will be an important step in ensuring that buildings are included in a national cap and trade programs. Raters should also educate decision makers about home energy ratings as a cost effective to calculate and verify emission savings in buildings.