Is Cap and Trade Headed Your Way?

09/28/2012 |

The carbon trading scheme is set to open in California

The cap and trade program will apply to industrial buildings and utilities first, followed by other power generators who meet the state’s threshold for emissions volume.

A successful trial in September has paved the way for California to roll out its carbon cap and trade program.

Set to launch in November, the carbon trading scheme will allow over 400 eligible companies to trade greenhouse gas emissions permits (each worth 1 ton of carbon dioxide) with each other in quarterly auctions.

In 2013, the state will impose an enforceable cap on the amount of emissions allowed, which will be lowered yearly to encourage companies to green their operations and production processes.

Greenhouse gas emissions are not limited by the program. The regulation requires companies to purchase enough credits to cover their actual emissions, so the annual reduction in the number of credits available provides a financial incentive to reduce emissions.

The cap and trade program is part of a larger climate plan that also includes new standards for renewable electricity, low-carbon fuels, and clean cars. The ultimate goal of this effort is to reduce greenhouse gas emissions from California’s industrial buildings and power plants to their 1990 levels by 2020, roughly 15% lower than what emissions would be that year if nothing was done. By 2050, the state aims to reach an 80% reduction from 1990 levels.

“Cap and trade is another important building block in California’s effort to create a clean and vibrant economy,” says Mary D. Nichols, chair of California’s Air Resources Board (ARB), which is administering the cap and trade program. “It sends the right policy signal to the market and guarantees that California will continue to attract the lion’s share of investment in clean technology.”

The ARB will provide most of the initial permits to industrial facilities and utilities using a calculation that rewards the most efficient companies, with extra allowances available at quarterly auctions or from other participants.

Facilities with on-site power generation or cogeneration are also eligible. This could include universities, large multifamily developments, and other buildings that use fuel cells or other combined heat and power technology depending on their emissions volume, Nichols noted in a response to California Assemblyman Nathan Fletcher.


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