First Compliance Period Underway for California’s AB32 Cap-and-Trade Program


After years of preparation and controversy, California’s cap-and-trade program has entered a new stage. The first compliance period officially began on January 1, 2013, requiring businesses to comply with GHG emissions limits or purchase allowances for emissions that exceed their allocations. Regulators and businesses have been preparing for the start of California’s cap-and-trade program for the past seven years, since then-California Governor Arnold Schwarzenegger enacted the Global Warming Solutions Act of 2006, commonly known as AB32.

The state’s experiment will have profound consequences—both within California’s borders and as a test case, domestically and internationally. California is the 15th largest emitter of greenhouse gases (GHGs) worldwide, representing about 2% of global GHG emissions.1 AB32 sets an ambitious goal of reducing GHG emissions to 1990 levels by 2020. While only certain industry sectors are required to comply with the law, AB32’s impact will be felt by all companies doing business and using energy in the state. Given the cap-and-trade program’s expansive scope and aggressive goals, it is critical to understand the program’s components and the status of its implementation. This Advisory provides an overview of the AB32 legislation, the design of the cap-and-trade program and its implementation, including recent allowance auctions, and recent legal challenges.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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