Tough Choices: California’s Cap-and-Trade System Takes Shape


Taking its place alongside a host of other climate policy and regulatory mechanisms, California’s mandated and much-anticipated cap-and-trade system received a fresh round of public scrutiny yesterday. At a workshop on December 14, the California Air Resources Board (ARB) took comments from regulated emitters, industry, environmentalists, and the public on its preliminary draft regulation.

Cap-and-trade is a market mechanism with roots in the state’s 2006 pathbreaking climate change bill, A.B. 32. (Click here to read our client alert about A.B. 32.) As drafted, the system would cover about 600 of the state’s largest industrial sources and electricity generators. These emitters must contribute to the state’s overall goal of reducing its emissions to 1990 levels by 2020 – an approximately 29 percent reduction, reducing total emissions by roughly 174 million metric tons of CO2-equivalent (MTCO2e).

The spotlight is on California, because while Congress vacillates, the state’s regulatory scheme is being both actively developed and in some provisions already actively enforced. The cap-and-trade system is the centerpiece, and was mandated by A.B. 32 – so barring a legislative push to overturn that law (as occasionally suggested by politicians looking to score points) or preemption by a national scheme, cap-and-trade is coming to California in 2012.

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