Cap and Trade System

Most recently, California has adopted the 'cap and trade system' in an attempt to reduce carbon emissions and encourage investments in reducing emissions.
Below is the link:

http://www.huffingtonpost.com/2012/11/12/california-cap-and-trade_n_2118991.html?utm_hp_ref=green

A cap and trade strategy works to reduce carbon emissions via financial incentives; “caps” establish emissions limits and fines for exceeding those limits, while companies operating below their carbon limits can sell or “trade” their offsets to companies that are operating above the limits. By having to pay to emit carbon into the environment, economists propose that this creates an incentive for research and development.

Is this effective? An analysis by the New Energy Finance research firm estimated that the trading system accounted for about 40 percent of the drop in Europe's greenhouse gas reductions in 2008.
Warren Buffet is strongly against a cap and trade system as he believes it is a regressive tax, which will only be passed on to consumers in the form of higher prices.

With rising energy prices, firms will look for ways to cut their energy usage. In addition, electrical appliances should be made more efficent to also reduce household carbon emissions, hence, reducing overall emissions across the world.