"Americans asked to pay for climate change" - from BBC

Can markets save the earth from climate change? That is the question I posed yesterday. Today the answer came back loud and clear from none other than the President of the United States himself.

"To truly transform our economy, to protect our security and save our planet from the ravages of climate change" President Obama told the US Congress yesterday, "we need to ultimately make clean renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America".

Now I'm not for a moment suggesting that the President has been reading my blog (though I don't rule it out) but the cap and trade system that he referred to last night is exactly the kind of market-based carbon pricing mechanism that I was discussing yesterday.

He could not have been more forceful about his commitment. It was top of his list of priorities: "The only way this century will be another American century is if we confront at last the price of our dependence on oil", he said.

It is a truly radical policy. Europe has had a limited cap and trade system for years but what Obama is proposing is an economy-wide system.

The idea is this: the government sets a cap, a limit, on the total amount of carbon dioxide that can be emitted. It then issues permits to emit that carbon dioxide into the atmosphere. The permits can be bought and sold on a market - that's the trade bit - and companies can only emit carbon dioxide if they buy a permit.

The reason President Obama supports cap and trade is because it harnesses carbon reduction to the most powerful motivating force ever developed - the power of capitalism, the power of human ambition.

Businesses won't seek to cut carbon emissions to save the earth they will do it because it will save them money and therefore increase their profits. Cap and trade creates the "carbon price" we were discussing yesterday because it makes emitting carbon just another cost in a business' production process.

Just think how powerful a change that could be. What it does is enforce the principle that the polluter should pay for the damage they create.

Tackling pollution is a subject close to the hearts of many of the residents of Muskegon, the little city in Michigan I have been staying in.