Cap and What?

Today John McCain unveiled a cap n' trade system that he would implement if elected. Like Kudlow, I'm not quite sure of it.

I can envision issues similar to the current problems with AMT; where the government fails to account for economic growth and we have these fixed units of pollution that eventually penalize the broader economy.

Here's an example, say we start with a 300 million tonne carbon emission system (this is the Cap). Hereafter 'polluters' and greenies trade these 300 million units so that polluters have to pay up to pollute more and greenies make money off of their conservation (the Trade part). If ,for instance, the US economy grows by an average of 5% per annum for 10 years this fixed system would not only create vast new costs for 'polluters' but in effect it would limit future growth because there are only a fixed number of units and so the economy can only grow up to the ceiling.

Certainly, I think there is a way to create a functioning market but its probably one that won't be created by the Federal government.