Cap and Trade Comes to California

Eight members of the California Air Resources Board (CARB) unanimously approved the nation’s first state-governed cap-and-trade regulations. The milestone decision, which will create market incentive for California’s polluting industries to reduce their greenhouse gas emissions, came 15 months after a similar plan was denied national recognition in Congress.

“Cap and trade is a new tool that for the first time allows us to reward companies for doing the right thing,” said CARB Chairman Mary Nichols. “We’ve done something important.”

Over 350 California businesses, together representing 600 facilities and accounting for 85% of the state’s greenhouse gas emissions, must register with CARB’s emissions trading market by January 31, 2012. Compliance will be enforced in two phases, beginning January 1, 2013 for electricity-generating businesses and expanding to transportation, natural gas and other fuel distributors in 2015.

Along with renewable energy and clean car mandates, the new cap-and-trade regulations will play an integral role in advancing California’s pioneer Global Warming Solutions Act, also known as Assembly Bill (AB) 32, which requires California’s carbon emissions in 2020 be equivalent to what they were in 1990. All programs developed under AB 32 will deliver an overall 15% reduction in greenhouse gas emissions.

According to CARB, the landmark emissions trading program was “designed to link with similar trading programs in other states and regions” and could instigate further cap-and-trade climate-change legislation across the nation to “drive long-term investment in cleaner fuels and more efficient use of energy.”