The coal industry will not do anything that lowers its profits without government intervention. What is being done in most developed countries is to legislate a decrease in carbon emissions by a certain deadline. The Cap and Trade system allows large utilities to meet these standards without a sudden capital expenditure. However, Cap and Trade does not directly lower total CO2 emissions. It works as follows. An emissions cap is legislated for each industry, and this cap is divided into credits, in terms of tons of CO2, that that sector is allowed to emit. Credits are then auctioned off. Heavy emitters, such as a large utility, may find it less expensive to buy credits than to build equipment to reduce emissions, while light emitters, such as a modern, efficient plant, can sell the credits that they do not need. Both utilities would gain financially. To make this work, the government has to establish a fraud-proof monitoring system and assess severe penalties for noncompliance.

Unfortunately, Cap and Trade does not actually decrease carbon emissions because, in the example above, both utilities would emit the same amount of CO2 that they would without trading credits. It actually allows the large utility to delay investing in the equipment for capturing CO2, when it should be forced to do it as soon as possible. New power plants using solar or wind energy can sell their credits to coal plants, but these producers of green power are being built anyway because they are profitable, not because of Cap and Trade. Cap and Trade does not force industries to lower their emissions if they are already taking steps to do this because of societal concerns or because it is profitable publicity-wise. Only additional low-carbon plants should be counted, not those that already exist or are planned.

Loopholes in the scheme allow accounting tricks to get around doing anything constructive. The only advantage of Cap and Trade is to make large polluters aware of what is coming and begin to worry about it.