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. 

[NY Times Announcement] [NY Times Auction Results]

Cap & Trade Boosts Jobs in Massachusetts

The state of Massachusetts is quietly reaping the benefits of cap and trade, the much-maligned process for curbing greenhouse gas emissions that federal lawmakers and many state governments resoundingly rejected in recent years. According to a recent study, cap and trade has created 3,800 jobs and nearly $500 million in economic activity for Massachusetts since 2008.

Massachusetts belongs to the Regional Greenhouse Gas Initiative (RGGI), the first and only mandatory carbon emissions trading scheme in America. A report analyzing data from the first three years of the effort found that of the 10 participating Northeast and Mid-Atlantic states, Massachusetts benefited most economically, because it used the bulk of its money to help fund its aggressive energy efficiency agenda.

"Energy efficiency investments have a much bigger multiplier effect than any other category of spending," said Paul Hibbard, vice president of the Analysis Group, the Boston-based consulting firm that prepared the report. When homeowners and businesses used RGGI dollars to retrofit and weatherize buildings, they not only ended up saving on energy costs and spending money elsewhere in the economy—they also put contractors and installers to work.

RGGI "is a very successful program … and we look forward to continue achieving those results," Mark Sylvia, commissioner of Massachusetts' Department of Energy Resources, told InsideClimate News.

Climate Progress Post

California approves cap on greenhouse gasses

California regulators voted to approve the most comprehensive U.S. cap yet on greenhouse gases and create the biggest carbon market in the country. 

The California Air Resources Board voted 9-1 to approve the state's cap-and-trade plan, the keystone of its effort to reduce emissions to 1990 levels by 2020 under A.B. 32 and the nation's first economywide, market-based greenhouse gas scheme in the absence of federal action. California has the world's eighth-largest economy and the highest gross state product in the United States, at $1.7 trillion in 2009.

"It just shows to you that a huge majority of Californians are big believers in A.B. 32," Schwarzenegger said. "And they're big believers not just in global climate change -- let's be honest, not everyone believes in that. It's also about our health. It is about 19,000 people that die every year because of pollution-related illnesses. Every sixth child in the Central Valley goes to school with an inhaler. We can do much better than that."

Cap and Trade - Musical Chairs?

Joseph Romm at the Center for American Progress likens cap-and-trade to musical chairs.

"Chairs are carbon dioxide pollution, mostly from the combustion of fossil fuels — coal, oil and natural gas," he says.

Only so many chairs are allowed in the room. The government sets the number. That's the "cap" in cap-and-trade. And to reduce emissions over time, the government gradually takes chairs away.

Now, here's the "trade" part: A chair is a permit, which you need if you want to emit carbon dioxide. If you don't have enough permits, you can buy them from someone who has extras.

Say you're an electric utility. The government has given you a bunch of chairs to start with. You can use them, sell them or hang onto them and use them later.

But remember this: Each year, the federal government will be allowing fewer and fewer chairs in the room. Romm says that's how cap-and-trade reduces carbon dioxide pollution, in a predictable way.

"You know exactly how many chairs there are going to be every year, so no one's going to be surprised and they can plan ahead," Romm says. "And the whole point of doing it this way is to allow utilities and other big polluters to have a certainty about what's going to happen so they can make the transition over time to a clean-energy economy."