The basic premise of Cap and Trade, is the government does not tell polluters how to clean their act up. Instead, they will impose a cap on emissions. The way they do this is each company starts off the year with a certain number of tons allowed, or in other words, rights to pollute. The company will then decide how to use its allowance, by switching to a cleaner fuel, or figuring out a way to cut emissions. Then if they do not use up their allowance, they can sell what they no longer need. However, every year, the Cap goes down, and the pool of allowances gets costlier, and polluters must quickly come up with a way to match allowances to emissions. The opportunity for Cap and Trade came along with the 1998 presidential election of George H.W Bush. The president of EDF called Bush's White House counsel, Boyden Gray, suggesting that the best way for Bush to become the "environmental president" was to fix the acid rain problem, and to do that, by using the new tool of emissions trading. Gray liked this idea so much that he put EDF staffers to work drafting legislation to make it happen, before Reagan's administration expired. This was also around the time that global warming was starting to become a huge problem, but EDF and the Bush White House both felt that emissions trading, or Cap and Trade would be the best way to address this challenge. Many staffers from the Environmental Protection Agency, or EPA, did not trust the methods the EDF was coming up with. They were worried that proponents were less interested in cleaning up pollution, rather than doing it cheaply.
Not only was the EPA skeptical about this, but so were environmentalists, who saw emissions trading as a scheme for polluters to buy their way out of fixing the problem. These misunderstandings extended to the White House itself. When Bush's administration was first proposed, EDF and EPA staffers were shocked to see the white house did not include a Cap.