Cap and Trade? What the Hell is That?!?!?!?

Cap and trade, at first when you hear this I'm sure you are doing the same thing I was when I heard it, scratching your head. However I learned what this was not in a business or economics class, rather in my English class when we were discussing topics to write about. Cap and Trade has been established in almost every other industrialized nation around the world. What it is is when the government puts a cap on the total amount of pollution that a factory or industry can produce within a year. How can this help an economy and the environment at the same time? Easy. The trade part. Companies will be given something like bonds or stocks saying they are permitted to produce X amount of pollution into the air, for this example I will say 10 companies given each 1000 bonds to 1 pound of pollution per bond. Say company 1 produces only 800 pounds per year, they can sell 200 bonds to another company that might produce 1200 pounds per year. This will help out both companies. This will also invite other companies to find better ways to produce their product for the environment. Say a company finds a better way to environmentally produce their product and only produce 200 pounds of pollution when before they were producing 800 pounds, now they can sell 800 bonds to other companies that do not find these ways or produce way over their limit, giving the 200 pound pollution company part of it's money back for the research and development of the better process. The main target of pollution would probably be carbon dioxide, as when it goes into the atmosphere it stays there for years.

I hope this helps you understand Cap and Trade a little better.