The cap and trade system provides for the allocation of certain carbon emission quotas for different companies and allowing them to buy and sell their permits on a platform of the stock market.
It is assumed that the cost of buying additional permits to continue polluting the atmosphere at a time so prohibitive that most companies prefer to reduce their release of CO2 and invest in cleaner fuel technologies.
There are still some issues to make this system work properly or at all.
First, the world remains heavily dependent on carbon-based fuels. Eighty percent of world production is based on technologies that release carbon into the atmosphere. So even if carbon credits are bought and sold like crazy in an open market, unless more funds are channeled to alternative technologies and clean, will consumers end up paying more for everything they buy. A carbon cap in the output ceiling is a limit to consumer prices.
This brings me to the second question is built - the political problem. I do not know of too many politicians who can win an election to reveal the hidden costs of limiting carbon footprint. " Would be that voters are willing to face high prices for consumers or brownouts and blackouts? The truth in politics as a scarce commodity in itself, would be even harder to pay for most politicians. I'm joking of course, but ... politicians might begin to "buy and sell" certificates of truth "in the parallel market.
Third issue is how the covers themselves are defined. For example, numerical cap same direction for a public utility company coal and nuclear energy? At the time of voting on a fixed percentage of CO2 released, which would put the coal-utility at a distinct disadvantage. One could argue that this is precisely the idea - to squeeze and guidance to the worst offenders to clean technologies. But when these alternative technologies do not yet exist, the decision amounts to a death sentence for some very strong concerns and know that will not go quietly into the night without a fight. So we'll see many politicians jostling in the coming years on this issue.