California’s Cap and Trade Program Launching January 1

California’s Cap and Trade Program Launching January 1

The California Air Resources Board (CARB) is in the end stages of assembling a greenhouse gas cap and trade program. The program officially launches on January 1, 2013 and will cover major sources of greenhouse gas emissions in the State.

The goal of this program is to fight climate change and reduce greenhouse gas emissions to 1990 levels by the year 2020 eventually achieving an 80% reduction from the 1990 level s by 2050.

California, the first and only state to have created a cap and trade system, has now been joined by Quebec.

“Linking with Quebec is a significant advance in California’s efforts to fight climate change and steer our economy toward a clean energy future,” stated Mary Nichols, chairwoman of the CARB.

CARB is developing California’s carbon market and is scheduled to vote on rules this month. If approved, the first linked auction for Quebec and California companies will take place in November.

Cap and Trade Explained

Emissions caps are established by collecting emissions data from large industries. Business are then grouped and assigned an average emissions benchmark. Businesses are allowed to emit 90% of the benchmark in the first year and companies that operate below the cap may sell their excess allowance on the ‘market’. Companies with emissions above the benchmark may purchase these credits.

The cap and trade is a great way to reward companies for reducing their greenhouse gas emissions but will hurt those using fossil fuels, especially those using coal – the dirtiest fuel. The ultimate goal of the program is to eliminate the reliance on any fossil fuels for energy and incent renewable energy growth.

Obama proposed a nationwide cap and trade program in 2009 which didn’t pass. West Virginia and Indiana– states using coal for more than 90% of electricity generation – are safe from any adjustments for now.

Assuming a nationwide program is eventually put in place, any region heavily relying on fossil fuels for their electricity needs will absolutely see an increase in their electricity prices. To comply, plants will need to purchase emissions credits – costs which would be passed on to the consumers.

Decommissioning fossil fuel-fired power plants and preventing any new construction may be the best way to reduce the nation’s carbon footprint, but will definitely affect the end users. Picture courtesy of Legal Planet (


/ Energy Buzz, National

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