Cap and Trade in California

January 31, 2015


In lieu of cake and candles to celebrate the program’s first year and future potential, we’ve published the California Carbon Market Watch: A Comprehensive Analysis of the Golden State’s Cap-and-Trade Program, Year OneThis report is our comprehensive assessment of cap and trade’s inaugural year, and our analyses and interviews with market experts conclude that a strong, healthy, and enduring carbon market has emerged.

We know that California’s program is still young and isn’t the world’s first emission trading program, or even the first in the U.S., so why are we so excited about this milestone? Here are the top four reasons we’re celebrating – and why the global community should, too:

1.      It’s a well-designed program off to a promising start. California has held five allowance auctions to date and they’ve all run smoothly. All emissions allowances usable for compliance in 2013 were sold, auction participation has been strong and allowance prices have remained stable and reasonable. In addition to successful quarterly auctions, a healthy secondary market over the first year suggests that regulated companies are purchasing allowances and thereby incorporating the cost of carbon pollution into their strategic planning. This successful start is due to a commitment to building a solid foundation of principles carried out under the highest of market standards.

2.     With cap and trade in place, the California economy continues to recover. With a price signal now in place for emission reductions, regulated companies can flexibly decide how to reduce their pollution. In addition, clean energy companies and innovators are creating products and services that are transforming California to a clean energy economy. And money raised by the auctions will be invested in this clean energy future, and especially benefit communities hit hardest by climate change. These investments will boost clean tech in California, improve air quality, and create jobs.

3. The foundation is set for a strong, long-term program. In 2015, California’s cap will more than double in size to cover 85% of the state’s economy and include transportation fuels, thus ensuring carbon pollution reduction from its largest source – transportation. And, there is already discussion in the state capital about the program’s future after meeting its goals by 2020.

With these positive indicators, we’re confident cap and trade is here to stay. The continued success of this program will also show the world that cutting carbon can be done efficiently and affordably, while driving innovation and growing an economy that builds healthier – and more resilient – communities.

4. The world is watching…and is starting to act.The program is the most comprehensive and ambitious in North America, in both the sheer size of the state’s economy (the 8th largest in the world) and the number of sectors covered. Cap and trade is not only cleaning up California, it’s also serving as a model to build a comprehensive solution to the global climate crisis.

If we want to move the needle on climate change, it will take a global community to make it happen. The state’s carbon market is an important step, and we hope other jurisdictions will follow our lead to create market programs of their own.

In the past year alone, there are promising signs of collaboration beyond California’s borders: the Golden State has formed a series of important partnerships including linkage with Quebec, a non-binding agreement with Oregon, Washington state and British Columbia to establish a regional climate plan, a Memorandum of Understanding (MOU) with China which launched seven of its own pilot trading programs last year, and a MOU with Australia to guide collaboration in addressing climate change.

Environmental Defense Fund:

  • California placed a cap on carbon, while the state’s economy, the 8th largest in the world, continued to rebound.
  • California’s carbon market weathered legal challenges and demonstrated a smooth launch and viability in its first year.
  • Five successful quarterly auctions with full sale of current year allowances, and an actively trading secondary market, are strong indications of a well-designed program.
  • California’s program is serving as a model for the rest of the world. China, Australia, and three states and provinces along the Pacific Coast of the North America signed memorandums of understanding with California to guide collaboration in addressing climate change, and as of January 1, 2014 Quebec and California formally linked their cap-and-trade programs.

17 Responses to “Cap and Trade in California”

  1. dumboldguy Says:

    Talk about mindlessly (and oh-so-gleefully) whistling past the graveyard. Cap and trade is a market-based “solution” that will ultimately fail because free-markets in general are doomed to failure. The fact is that AGW appears to be progressing far too rapidly, and we really need a carbon cap and a carbon tax rather than the kick the can down the road of C&T. (And wouldn’t that get the greedy ones and the “don’t tread on me” types on the right screaming? They already call cap and trade a “jobs-killing TAX” and an intrusion on the free-market).

    Gilding and McPherson (and the rest of us) may not be around when the SHTF, but the present path of mankind on the planet is unsustainable, and the slow bandaid of C&T isn’t going to get it done on a global basis. The progress made in CA is going to be buried by the LACK of progress in the developing world, INDIA in particular.

    And there is something ironic in talking about how C&T is going to help CA’s economy to grow while reducing emissions when CA is likely to come to a screeching halt because it’s running out of water. Has anyone been reading about the ideas people are floating about having a cap and trade system for water? Maybe we should have one for air as well? I would be more than glad to hold my breath 1/5 of the time (if someone paid me enough). Lord love a duck, but man is just too smart for his own good.

    • MorinMoss Says:

      DoG, you gotta chill out a bit. The developing world is showing signs of moving ever more quickly than the enlightened West.

      China doubled the world’s coal consumption all by itself but is now starting to scale back, and with India’s investment in nuclear and goals for solar, it’s not likely they’ll follow China’s example of nearly destroying their country’s environment before deciding to make the green shift.

      • dumboldguy Says:

        Sorry, but at my age, I haven’t got time to “chill out” even the slightest bit. I would like to see some real progress made on curbing AGW before they send my body off to the composting “church” to be turned into mulch. (see the other thread).

        “The developing world is showing signs of moving ever more quickly than the enlightened West” is true enough, but only up to a point—-IMO, it looks like it’s going to be too little too late.

        “China doubled the world’s coal consumption all by itself”? It has also tripled its total carbon emissions in just the last 15 years, and we shall see what comes from “starting to scale back”. As for “India’s investment in nuclear” and “goals for solar”, they have not yet “invested in nuclear” or set realistic plans to achieve their solar “goals”, so it is HIGHLY likely they’ll follow China’s example of “nearly destroying their country’s environment” before they begin the turnaround many years from now. India is where China was 20 years ago and will surpass China in population before long. (Are you aware that China is now encouraging people to have more children? The old “one child” policy has turned out to be bad for economic growth.)

        PLEASE read this link in its entirety, and pay particular attention to the graph.

        It’s also useful to look at per capita emissions—-these are not the latest figures but close enough:


        India has moved ahead of Russia and Japan in total emissions and is now 4th. and is catching up to them in per capita. Where does it lead? If China cuts theirs by 1/3 and India doubles (as is likely), the total stays the same—BAU—-and CO2 climbs by 2+ppm/yr. And all the while, the US, the second highest total emitter and the highest per capita is digging and drilling for fossil fuels everywhere.

        Bright-sidedness and wishful thinking will be the death of us all. I will “chill out” only if the climate talks this year tun out better than those in the past AND China lives up to its promises AND India actually makes some real promises and progress AND Citizens United is nullified and shits down the Kocks AND the Democrats take the White House and Congress in 2016 AND 2015 is not full of as much bad news AGW-wise as 2014 was. You can then take me to be composted.

        • dumboldguy Says:

          “shits down the Kocks” must a bit of parapraxis (or Freudian slip) rather than the usual problem of my keyboard rearranging itself when I’m not looking—-my subconscious obviously transposed the I and the U to get a word that is quite appropriate to the Kocks.

          • pendantry Says:

            Typo alert:
            “… KocksKochs… “

          • dumboldguy Says:

            It’s not a typo, but some deliberate “word play”.

            I would use “Pricks”, but that might offend some folks.

          • pendantry Says:

            I thought it might be. But surely it’s better to use the right name? Googling for ‘Kock’ is not very informative, whereas ‘Koch‘ hits the nail on the head.

            (Nominative determinism snippet: I understand that the name is pronounced ‘coke’.)

          • dumboldguy Says:

            All true enough, although I would hope that anyone who visits Crock is well-informed enough to know the correct spelling. Even if they did google “Kock”, good old google will ignore them and give them 9+million hits on the pricks who go by Koch.

            I grew up in northern NJ in an area first settled by the Dutch, and we had Kochs, Kocks, Kucks, and many other variations of what in English is Cook or Cooke,so my spelling IS correct. Many were quite sensitive about pronunciation—-one of my HS classmates was always saying “My name is k-u-c-k COOK!” t5o the mispronouncers, so we naturally started calling her that—-“Hey, K-U-C-K Cook! How’s it going?”

            BTW, there is a ton of very interesting stuff out there about the Kocks, such as how Joseph Stalin gave the family its start and therefore Stalin is the father of the Tea Party.


            And although there were some infamous Nazis named Koch, as in Ilse and hubby, they are not related—-our Kochs are of Dutch descent, and can only be blamed for the American Holocaust.

          • MorinMoss Says:

            “Stalin is father of the Tea Party” – quick, someone go tell Dr Ben Carson so he can spread the word. He was quick to parrot the fabricated far-right talking point that Lenin said socialized medicine was the linchpin of a socialist state.

            I’m waiting for him and the rest of the rightwingnut contingent to find out that Jozef Stalin outlawed all abortions in 1936, in a decree that underlined the importance of the family unit to the state.
            So all those biblethumpers, pro-lifers and American Family Association supporters are nothing but a bunch of Stalinists.

    • andrewfez Says:

      I’ve heard the cap and trade scheme is a credibly hard thing to pull off, as it requires the government to keep screwing the cap on, tighter and tighter [or hold it in place as the bottle gets bigger]. If that act is, for whatever reason [regime changes, economic woes, etc.], not accomplished, or accomplished slower than necessary, then…

  2. Gingerbaker Says:

    ” These investments will boost clean tech in California, improve air quality, and create jobs.”

    Yeah. Sure they will. 75% of these “investments” are siphoned off for profiteers. Then, the 25% itself is “invested” somehow and somehow that helps poor people in their communities exactly how????

    By building a new renewable energy utility system for them? Nope, I guess not. By building renewable energy infrastructure for everybody? Sorry, nope.

    So – what do we have here with this vaunted Cap & Trade? I’ll tell you: A lot of money exchanging hands as businesses spread liabilities and lots of monies being spent on administrative agencies…. and virtually zero actual construction and deployment of new carbon-free electricity production as a direct result.

    Why are we cheering about this?!?

    • greenman3610 Says:

      With the sturm und drang over new federal rules to cut carbon emissions from the nation’s power plants, it might go by unnoticed that nine U.S. states have had their own system to do that since 2008 — and this week, it had its most successful auction of carbon permits yet.

      The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade system that covers nine states in America’s northeastern corner. It works by placing a hard cap on the overall amount of carbon participants in the system can emit in a given year, then slices that cap up into permits — all worth a ton of carbon each — that emitters can then buy and sell among themselves. The idea is to create a market incentive to cut emissions: if a plant or businesses in the system reduces their emissions, they either don’t need to buy as many permits or can sell off excess ones for a profit.

      • dumboldguy Says:

        It’s still a slice-and-dice, smoke-and-mirrors shell game that has the profit motive at its base. Moving the crap around under the so-called “hard cap” is meaningless unless the hard cap is set low enough to force some real efforts to reduce emissions, and that would really only work if those who couldn’t fit under the cap by one means or another were told they would be shut down and therefore would make NO profit.

        We need to stop playing games with “indirect” means like C&T and very directly tax carbon where it’s used and put local caps in place. C&T is kicking the can down the road and a death of a thousand cuts (or have we said that before). Stop sugar-coating the problem and looking for solutions that will please those who are creating the problem, and that includes ALL of us. I have been grinding my teeth while reading about the price of gas dropping so low, the sales of big SUV’s and pickup trucks climbing, the sales of hybrids and electrics slowing, and the DFAO’s refusing to vote for increases in the gas tax even though our roads and bridges are falling apart. Just tax carbon! And at every step from the well to the refinery to the pump. (That’s after coal is first taxed out of existence, of course)l.

        It is insane to let some company in Ohio to pollute because they have bought “carbon credits” from some company in NJ. The dirty air from the polluter in Ohio ends up in NJ and the people of NJ get to breathe it without reaping any benefits from the purchase of the credits—-they go into the private pockets (and any reduction in emissions in NJ benefits the downwinders in NY and CT).

        (Aren’t you glad you wound me up?)

  3. Until Australia changes it’s Federal government, the MOU isn’t worth the paper it’s written on.

  4. pendantry Says:

    Cap and Trade does not work. I think Europe has proved that.

    James Hansen recommends Cap and Dividend.

    • dumboldguy Says:

      I wonder if Hansen will ever be asked to testify before Inhofe’s committee? Don’t bet on it. (Although the bit about “liberals would try to spend the carbon tax revenues on making the government bigger” was warmly received by the mindless ones who love slogans and “talking points”.

      Someone needs to do a study of just how many “panders” one needs to do and how often they need to be inserted to make the WIFI’s pay attention to testimony before Congress.

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