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Cap and trade is a regulatory system that sets a government limit on overall emissions of pollutants like the heat-trapping gases scientists have linked to global warming -- the "cap." It then allows utilities, manufacturers and other emitters to "trade" pollution permits, or allowances, among themselves.
The idea is to limit whatever is being capped through market forces -- many economists consider cap and trade the equivalent of a tax -- rather than through direct regulation.
Environmental groups and their foes in industry once joined hands to embrace the approach. President Obama praised it by name in his first budget, and the authors of the House climate and energy bill passed in June 2009 largely built their measure around it.
But Senate legislation languished, and by the spring of 2010, the concept was in wide disrepute, with opponents effectively branding it "cap and tax," and Tea Party followers using it as a symbol of much of what they say is wrong with Washington.
President Obama dropped all mention of cap and trade from his budget, and the sponsors of a Senate climate bill likely to be introduced in April dared not speak its name.
"I don't know what 'cap and trade' means," Senator John F. Kerry, Democrat of Massachusetts, said in 2009. Mr. Kerry's partner in promoting global warming legislation, Senator Lindsey Graham, Republican of South Carolina, pronounced economywide cap and trade dead and began working with Mr. Kerry to try to patch together a bill that satisfies the diverse economic, regional and ideological interests of the Senate.
That plan, still being written, will include a cap on greenhouse gas emissions only for utilities, at least at first, with other industries phased in perhaps years later. It is also said to include a modest tax on gasoline, diesel fuel and aviation fuel, accompanied by new incentives for oil and gas drilling, nuclear power plant construction, carbon capture and storage, and renewable energy sources like wind and solar.
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