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Summary:
- California’s cap and trade system sets an annual cap on emissions and allows trading of allowances to reduce carbon emissions.
- There are myths that the system is overly complicated, the state’s only carbon reduction strategy, and equivalent to a carbon tax.
- The system actually includes aspects of both a tax and an emissions cap, and has not kept coal plants alive.
- The regulations provide free allowances for utilities and generate funds for carbon reduction projects.
- While the system may need modifications to ramp down emissions more quickly, it has generally been effective in reducing carbon emissions in California.
A key part of California’s climate policy has always been its cap and trade system. Because the regulations aren’t very transparent, there have been a lot of misconceptions about the system. I’ve been digging into the rules, the explanatory website set up by the California Air Resources Board (CARB), and secondary sources to try to figure some of these things out.
Despite complexities, the basic idea behind the trading system is simple. The state sets an annual cap on emissions, distributes allowances (permits to emit a ton of carbon), and then allows the recipients to trade those allowances amongst themselves. The idea is to allow the private market to figure out the cheapest way of reducing emissions. An important side-benefit is that allowance auctions have generated $4 billion for the state to spend on carbon reduction projects.
Here are some half-truths and outright myths about the trading system.
Read the full post at Legal Planet.
