California adopts cap-and-trade regulation for CO₂ emissions

The California Air Resources Board adopted the final cap-and-trade regulation, putting into place another key element of the state’s pioneering climate plan. The cap-and-trade program will join a suite of other major measures including standards for ultra-clean cars, low-carbon fuels and renewable electricity. The regulation will cover 360 businesses representing 600 facilities and is divided into two phases: the first, beginning in 2013, will include all major industrial sources along with electricity utilities; the second, starting in 2015, brings in distributors of transportation fuels, natural gas and other fuels. Companies are not given a specific limit on their greenhouse gas emissions but must supply a sufficient number of allowances (each the equivalent of one ton of carbon dioxide) to cover their annual emissions. As the cap declines each year, the total number of allowances issued in the state drops, requiring companies to find the most cost-effective and efficient approaches to reduce their emissions. The first compliance year when covered sources will have to turn in allowances is 2013.