According to the EPA, the total greenhouse gas emissions in the U.S. in 2008 were 6,956.6 million metric tons of CO2e with electric power industry responsible for the highest percentage of emissions (35 percent of total emissions).

In July 2010, the latest climate and energy bill -- the American Power Act sponsored by Senators John Kerry and Joseph Lieberman that would have capped GHG emissions -- failed to pass in U.S Congress. The cap-and-trade bill aimed to cut U.S. GHG 17 percent from their 2005 level by 2020.

Cap and trade is a market-based mechanism that allows for flexible and cost-efficient means of meeting the GHG emissions reductions obligations. The key feature of cap and trade is the possibility for an emitter that has met its cap obligations to sell excess emission permits to other emitters that are failing to meet the assigned goals and need to purchase extra permits to cover their emissions.

One additional flexibility feature of cap and trade is the option allowing entities under compliance to use carbon offsets. Carbon offsets is a term to describe reduction, avoidance, destruction or sequestration of GHG emissions from a specific project that is used to compensate for emissions occurring elsewhere. The offsets can reduce the cost of compliance with emissions caps by allowing regulated entities that find it economically advantageous, to buy or develop carbon offset projects rather than bear the cost of directly reducing their emissions as part of an overall company strategy.

Carbon offsets are not the solution to the bigger problem of reducing the dependence on high-carbon fuels, but are a very cost-effective tool to reduce the economic impact of the cap. They provide temporary cost relief for entities subjected to emission caps during the process of reducing their overall GHG emissions.

Because Congress was not able to pass a comprehensive legislation that would regulate GHG emissions, the U.S. Environmental Protection Agency is mandated by the Supreme Court to take action. On May 13, 2010, EPA released its final "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule" under the Clean Air Act.

The GHG Tailoring Rule specifies that beginning in 2011, entities that will increase GHG emissions substantially will require an air permit. Covered facilities are responsible for nearly 70 percent of the national GHG emissions from stationary sources, and this includes the nation's largest GHG emitters, i.e. power plants, industrial boilers, oil refineries and cement production facilities.