November 22, 2012

California starts Cap and Trade

California's market-based system for reducing greenhouse gas emissions made its formal debut on Wednesday with its auction of state-issued pollution allowances. More than six years in the making, the state's cap and trade program sets limits on carbon dioxide emissions for virtually all sectors of California's economy, the ninth-largest in the world. Emissions allowances are allotted to polluters, and companies whose emissions exceed their allocations must either obtain extra allowances or buy credits from projects that cut greenhouse gas emissions.

A free-market auction has established a price for pollution in California: for each metric ton of carbon dioxide emitted, businesses, utilities and industries that bought allowances last week will pay just $10.09 per metric ton of carbon dioxide. 

$10.09 per metric ton works out to about 9 cents per gallon of gasoline. 

That works out to less than $4 a month for someone driving 12,000 miles a year in an average 24 mpg car. At this level, it is hard to see how the cap and trade will have a meaningful impact on the amount of energy consumed. 

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