California Cap & Trade Program

By 2013, California electrical power generators and utilities, as well as other greenhouse gas emitters, must comply with an emissions cap mandated by the California Air Resources Board’s (CARB’s) adoption of new regulations. California’s Global Warming Solutions Act of 2006 requires a reduction of greenhouse emissions to 1990 levels by 2020.

The law vests considerable power in CARB to adopt policies and regulations.  The act does not mandate a cap-and-trade program, but it requires CARB to consider market-based mechanisms when drafting regulations. After considering the options, including a carbon tax, CARB opted for a cap-and-trade approach that includes a gradually declining emissions cap.

The new regulations cover major emission sources, including power plants, refineries and major factories. These sources will be given emission allowances, which must be surrendered in amounts equal to emissions at the end of specified compliance periods. Businesses can buy and trade allowances. The first allowances auction was Nov. 14. The first compliance period begins in 2013.

A successful assault on CARB’s cap-and-trade regime simply would send CARB back to the drawing table either to modify the existing regulations or to formulate a new approach. The mandate to reduce greenhouse gas emissions significantly will not change.  (Electric Light & Power, Nov/Dec 2012)