5 Things To Know About California’s Cap and Trade Program

If you’re waiting for the Feds to admit polluters are the problem and renewable energy is the answer, don’t hold your breath. (Or maybe you should, since we all know politicians love making us breathe dirty air). The good news is, our unique style of government means states can sometimes decide to take action when Congress refuses.

California recently initiated a comprehensive cap and trade program [PDF] as part of its Global Warming Solutions Act (AB 32). This means that the state has decided to stop begging polluters to clean up their act. Instead, they’re making them pay for it. Of course, if you believe the fossil fuel industry lobbyists, this decision will be disastrous, driving up energy costs for struggling consumers. Yet others argue that the benefits of economy-wide cap-and-trade programs like California’s will far exceed the costs, reigning in pollution and generating much-needed revenue in fairly short order.

Conflicting claims can make it hard to know whether to cheer or boo for the program, which will hold its first auction of greenhouse gas allowances on Nov. 14, 2012. So, here are five of the most important things to know about the program and what it hopes to accomplish. (Note: If you’re more of a visual learner, Mother Jones has a great cap-and-trade infographic).

1. The law applies to all major sources of greenhouse gas emissions in the State such as refineries, power plants, industrial facilities and transportation fuels, but not all at once. Electric utilities and large industrial facilities won’t be included until 2013, and distributors of transportation, natural gas and other fuels will have until 2015.

2. The regulation includes an enforceable GHG cap that will decline over time, meaning that each year, fewer and fewer carbon “allowances” will be available for purchase. The 2013 cap will be at about 2 percent below the emissions level forecast for 2012, decreasing by an additional 2-3 percent each subsequent year.

3. Over the next year, about 150 allowances will be bid on, together worth anywhere from $550 million to $3 billion depending on market forces. In the beginning, some will be given away for free, to help businesses adjust to the added expense. A billion of those dollars are already earmarked for General Fund relief and other existing programs.

4. Rather than being punished, smart businesses will actually benefit from the program. “California’s decision to reduce greenhouse gas emissions has created tremendous opportunities for entrepreneurs, scientists and business strategists to develop technologies and services that will help businesses accomplish their greenhouse gas emission goals,” writes Cynthia Ringo, managing partner of DBL Investors, a California venture capital firm. “Rather than dictating to polluters exactly how they have to clean up their acts, California’s cap-and-trade program will harness the power of the market to control greenhouse-gas emissions. The power companies and other large polluters affected will decide for themselves how to proceed. A company that is especially effective in cleaning up its act can make money on the deal, by selling unneeded pollution allowances to other firms whose operations run dirtier.”

5. The program will help put California on the path to meet its goal of reducing GHG emissions to 1990 levels by the year 2020 and ultimately achieving an 80 percent reduction from 1990 levels by 2050. This puts the state in good position to capture a large portion of a fast-growing global market. Worldwide, investment in renewable energy alone grew by 5 percent last year, to hit a record $260 billion.


Related Reading:

Frackers Win With Obama’s New Greenhouse Gas Rule

Dirty Crude Spells Dirty Air In California

Lawmakers Strive To Derail Western States’ Global Warming Efforts


Image via Thinkstock

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Rex Mias
Rex Mias3 years ago

This has the appearance of an informative article, but the author did not do her research.
Item 3 - "Over the next year about 150 allowance will be bid on..." See section 95841 of the regulation. The 2013 emissions budget is 162.8 million tons. Since a single allowance represents one ton of CO2e, the 150 is obviously wrong. Also, " A billion of those dollars are already earmarked for..." There is nothing in the regulation or two recent assembly bills that specifically state a billion dollars will go to general fund relief. In addition, it is possible that in the first year the auction will not even raise a billion dollars and there are legal questions regarding General Fund use if the projects are not clearly for greenhouse gas reduction.

natalie n.
natalie n.3 years ago

remains to be seen, doesn't it?

James Hager
James Hager3 years ago

very informative, thanks for the article!


Don Cordell
Donald Cordell3 years ago

Using Natural Gas to heat your home, or for cooking emits Carbon Monoxide, so use electricity, which Obama is turning off the generation plants, so the cost of electricity will need to Sky Rocket. Get use to not heating or cooling your home or cooking or driving, or living. NO more Bar B Quing as that polutes, no more exhaling CO2, only inhale. Polution is part of life. I know, lets import Solar Cells from China, and Wind Generators from China, and food from China already in our stores. Half the farms in California have been turned off water to save the little Snail Darter fish in the Sacramento Delta, what I can't figure out is how they get all the snow melt from the mountains in California to flow to the Delta instead of right down to the farms in Central California. Or is that some kind of propaganda from the governor Moonbeam? Our nation is being turned off so we can live in poverty for Social Justice with the world.
Part of the plan for the future of our nation.

Carole Lutness
Carole Lutness3 years ago

The author of this bill, Sen. Fran Pavley (SD 23 CA) is up for reelection. She is in a tough race because redistricting has changed her once solidly Blue District to a Purple District and the oil, tobacco and other big corporate players are pouring money into her opponent's campaign. If you like this bill which is being used as a model for other states all over the country, would you please contribute to her campaign? http://franpavley.com/ Thanks.

Robert O.
Past Member 3 years ago

"Cap and Trade" is a "shell game", 1st concocted by Al Gore and company. The potential for abuse is enormous.

J.L. A.
JL A.3 years ago

the corporations failed with their proposition last year to cancel this law...if it succeeds. many states should follow the lead of CA until Congress stops being ostriches with their heads in the sand and chooses to become proud American eagles with their heads held high as we show the world how it can be done and return to the status of a world leader in this significant issue affecting all future life on earth.

Ron L.
Ron Loynes3 years ago

Won't what ever they (the pollutors) have to pay extra be just transfered to the consumer? It's like closing the front door and opening the back door at the same time. Just set limits and charge fines BUT put controls on raising prices.

John Mansky
John Mansky3 years ago

Thank you for the article...

Marilyn L.
Marilyn L.3 years ago

Good for California.