California adopts cap-and-trade for greenhouse gas emissions

In a first for the US, the state of California plans to put in place a cap-and-trade system to control the emission of greenhouse gases.

Adopted this week by the California Air Resources Board, (ARB) the system is part of the state’s overall program targeting climate change. Other climate-focused efforts include standards for ultra-clean cars, low-carbon fuels and renewable electricity. The program also complements and supports California’s existing efforts to reduce smog-forming and toxic air pollutants and improve energy efficiency in homes and businesses.

Under the cap-and-trade system, affected businesses and industries will be allotted a specific number of allowances covering their annual greenhouse gas emissions. Over time, those allowances will be reduced to place an ever-lower “cap” on emissions. Companies that can’t stay beneath the cap will be able to buy allowances from organizations that have been able to reduce their emissions more than required, so have allowances to spare.

California officials say they expect the state program will eventually become a model for a nationwide cap-and-trade system

“Cap-and-trade is another important building block in California’s effort to create a clean and vibrant economy,” said Mary D. Nichols, chairman of the ARB. “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. When the nation addresses the growing danger of climate change, as I believe it must and will, California’s climate plan will serve as the model for a national program.”

California’s cap-and-trade regulation sets a limit on sources that are responsible for 85 percent of the state’s greenhouse gas emissions. The program will cover 360 businesses and will take effect in two stages. The first phase, starting in 2013, will apply to electricity utilities and all major industrial sources. In 2015, the system will then be expanded to include distributors of transportation fuels, natural gas and other fuels.

Under the program, officials expect the state to bring greenhouse gas emissions down to 1990 levels by 2020.