Here's one thing I wonder about: What happens if/when there are more sellers than buyers? Isn't that possible if you have, say, more consumer participation that corporate participation? And if so wouldn't that undermine their value? What good is an offset if nobody's doing the offsetting part of the deal?

I properly setup cap and trade system creates a diminishing supply of credits where each year there are fewer annual credits available than the previous year. The continually diminishing allocation of credits eventually makes the value of the credits high enough that even the hardest to clean up industries decide it is cheaper to clean up than buy credits.

 

This is very similar in concept as fishing quotas where fishermen can sell their quotas to someone else. The only real difference being if one does not use/sell the credits they use in one year they can roll those over to the next year.

 

What also happens is that just like environmental groups buy up land to turn into preserves, they can also buy up credits and permanently retire them.

 

The thing about a cap and trade system is that it allows for very short term results as the easiest to clean up industries get funding to clean up via the sale of their excess credits while the hardest to clean up industries/processes get the time they need to invent new technologies. Without the cap and trade part of the equation, buying carbon credits really isn't a long term solution, although it does give a short term infusion of investment into alternative energies.