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What is the "safety valve"
2011-05-04
In a cap-and-trade program, companies can choose either to lower emissions below the cap, or buy extra allowances. Some worry that if many companies need to buy extra allowances, demand will drive up the price, placing an undue burden on businesses.
The "safety valve" or "escape hatch" is meant to address this. It specifies that when prices reach a predetermined dollar value, businesses no longer have to rely on the established supply of allowances available in the market. Instead, the federal government makes new allowances available for sale at a specified price
