The Obama administration has decided to tackle carbon emissions using cap and trade.

Cap and Trade is a system where, in essence, you issue pollution vouchers to businesses, then businesses can trade these vouchers to meet their needs. Those that pollute more buy vouchers from those that pollute less. The idea being that the price of carbon lets businesses perform a cost benefit analysis to reducing emissions.

Simply issuing these vouchers to business creates political interference, industry lobbies will encourage politicians to give their industry to get a bigger share. This is on top of the political choice to set the total number of vouchers. Instead the vouchers will have to be auctioned each year to raise government revenue.

Although in computer simulations cap and trade has been shown to be the most efficient method of controlling emissions, people are not computers. Large businesses and speculators will be able to use their financial power to corner the market and disadvantage competitors.

A better solution is to tax the fossil fuels, these are a lot easier to measure then emissions. By increasing energy costs it encourages businesses and consumers to be more energy efficient and find alternative energy sources. In Europe, for example, carbon footprints are smaller than the USA despite a similar standard of living.