Californian authorities plan to extend the cap-and-trade agreement (US)

The Californian authorities (United States) have proposed a bill for the extension of the state's current cap-and-trade program aimed at reducing its greenhouse gas (GHG) emissions, which is set to expire by 2020.



If adopted, the new agreement will extend the program by 10 years and will help California meet its goal of cutting GHG emissions by 40% below 1990 levels by 2030. It now consists of two bills: Assembly Bill (AB) 398, which plans to extend the program by 2030 and AB 617, which aims to address air quality concerns. It would require oil refineries and power plants located in heavily polluted areas to replace their equipment with cleaner technology gear by the end of 2023.



The California Air Resources Board (CARB) adopted the state’s cap-and-trade rule in 2011 and California enacted the statewide cap on GHG in 2013. Its rules apply to electric power plants, industrial plants and fuel distributors which emit 25,000 MtCO₂ and the concerned industries have to obtain a permit or allowance for every ton of CO₂ and other GHG they emit. The cap drops by 2 % every year (2013-2015) and by 3% over 2015-2020. As the cap goes down, companies have several choices to obtain enough allowances to cover their emissions: operate more efficiently, buy allowances from another company or obtain allowances under the framework of a state auction. Emission allowances are distributed by a mix of free allocation and quarterly auctions. The share of emissions covered by free allowances vary by industry, but account for approximately 90% of overall emissions.