On October 20, 2011, the California Air Resources Board (CARB) formally adopted a program to limit the amount of greenhouse gas emissions that the electricity, industrial, and transportation sectors in California can release into the atmosphere. The program, called cap-and-trade, is one of several policies the state has enacted to reduce its emissions to 1990 levels by 2020.
It will take effect in 2013 for the electricity and industrial sectors, and 2015 for the transportation sector. I asked UCS climate economist Jasmin Ansar to reflect on this historic action and what it means for Californians:
Cap-and-Trade: Permits for Pollution
“This program is the only multi-sector program in the country that will impose an overall limit on heat-trapping emissions and put a price on carbon pollution.
Here’s how it works: each emission gets a ‘pollution permit.’ To reduce the number of emissions over time, the number of pollution permits available in the market gradually declines. Each regulated company must present a pollution permit to cover every greenhouse gas emission it releases into the atmosphere.
The trading of pollution permits leads to a price on carbon because companies will have a choice to either buy pollution permits or reduce emissions through suitable investments. This creates new financial incentives for cleaner low-carbon or carbon-free technologies and will motivate innovation and adoption of these technologies.
Innovations + Investments = Jobs
A well-functioning cap-and-trade market will act as a catalyst for green and clean technology innovations and investments, which will lead to jobs in California. But as with all new and innovative programs there are uncertainties and risks which will need to be monitored and addressed as the regulation is implemented and enforced. UCS will work with CARB to evaluate the success of the program going forward and advocate for adjustments and improvements that will inevitably be needed.
Undoubtedly, there will be transitional costs as pollution intensive industries adapt to the new economic reality of paying for their pollution. There will also be many new market players who will incubate, grow and even profit from innovative emission reducing technologies and processes, and these will be the industries of the future. Change inevitably involves a rearrangement of resources and market players, and CARB is attempting to minimize the costs of adjustment by gradually phasing in the cap-and-trade rule over the next few years.
As the 8th largest economy in the world, California is charting new territory. This will, like all good ideas, generate a legacy of knowledge and mitigation strategies that will be beneficial to us all around the world.”
Support from UCS members make work like this possible. Will you join us? Help UCS advance independent science for a healthy environment and a safer world.