Cap and Trade - Musical Chairs?

Joseph Romm at the Center for American Progress likens cap-and-trade to musical chairs.

"Chairs are carbon dioxide pollution, mostly from the combustion of fossil fuels — coal, oil and natural gas," he says.

Only so many chairs are allowed in the room. The government sets the number. That's the "cap" in cap-and-trade. And to reduce emissions over time, the government gradually takes chairs away.

Now, here's the "trade" part: A chair is a permit, which you need if you want to emit carbon dioxide. If you don't have enough permits, you can buy them from someone who has extras.

Say you're an electric utility. The government has given you a bunch of chairs to start with. You can use them, sell them or hang onto them and use them later.

But remember this: Each year, the federal government will be allowing fewer and fewer chairs in the room. Romm says that's how cap-and-trade reduces carbon dioxide pollution, in a predictable way.

"You know exactly how many chairs there are going to be every year, so no one's going to be surprised and they can plan ahead," Romm says. "And the whole point of doing it this way is to allow utilities and other big polluters to have a certainty about what's going to happen so they can make the transition over time to a clean-energy economy."