CARB was focused on using real, facility-level emissions data in its program. In , for reasons it has never adequately explained, CARB returned to using an inflated number to project emissions. The contested analysis from the April workshop remains the only analysis CARB has done of the risk of oversupply. It remains the only analysis CARB has done of whether the cap-and-trade system will be stringent enough to yield the emission reductions required of it. That means, despite the clear intent of AB , there is still no analysis of whether cap and trade will yield the necessary reductions in annual emissions, which are the actual subject of the target.
The effect of oversupply, ceteris paribus, is to keep allowance prices low, which has always been the main policy priority of the oil industry. And oversupply is part of a pattern, a whole series of design decisions meant to hold prices low. Some of them are built into AB For instance, the bill exempts oil and gas refineries and other polluting facilities covered by the cap-and-trade program from direct air-quality regulations determined at the district level.
That infuriated environmental justice groups. The premise is that those facilities will be hit by rising carbon costs anyway If prices had hit that ceiling, a limited number of additional allowances would have been released. Of course, prices never got close to the ceiling, so it never mattered.
Prices, not emissions, have a hard limit. That makes the price floor the most important number in the whole system. So what is that floor?
Emissions trading
That decision, made under vastly different circumstances, with vastly different expectations placed on cap and trade, has not been revisited since. So the state has exempted oil facilities from direct regulation, implemented a low, hard price ceiling, kept the price floor at an absurdly low level, and failed to take any action on oversupply. Despite all this, CARB has found itself continually under fire from the oil industry. The November 15 hearing offered an illustration of all these dynamics. Sahota testified, and when she did, she dismissed concerns about oversupply with the same language used in the April analysis.
The cap-and-trade system in Québec
But the more notable feature of the hearing was the endless procession of low-income and minority voters, having been terrified and then transported to the hearing by WSPA, the oil industry trade association. It was a vivid display of the kind of manipulative, underhanded tactics the oil industry has been using in California for years, demanding concessions, getting them, and demanding more. Around three hours and 45 minutes in, Nichols, exasperated, asks CARB staff to show their price forecast.
But what they project on the screen is the graph above — the price floor and ceiling — not a forecast. Nichols seems to be implicitly conceding that CARB expects prices to sit on the price floor. Projections by market analysts and the third parties indicate we will be at that lower line [the price floor] through the next decade, into the next decade The reality is that prices are going to be along that lower line [the price floor]. We know the projections are there.
That is Severin Borenstein and colleagues at UC Berkeley did a preliminary forecast of allowance prices through and determined, as most researchers have, that macroeconomic factors like economic and population growth are the biggest sources of price uncertainty. There are circumstances in which low allowance prices could do the job, but it would basically require another recession.
We are blessed, and I mean that sincerely, by large numbers of economists and other market experts who have ideas about how to make it work better. And we have to really listen but also then make some recommendations as a result of it.
It recommended a system that is effectively an extension of the current one, with all its flaws and with additional features designed to keep prices low. And still the oil industry keeps pushing. After all, they had practically guaranteed low prices for the oil industry WSPA got much of what it wanted, but it will not be pacified.
California’s central climate policy may be too weak to do its job - Vox
That is literally its job and mission. But in the past few months, staff language has shifted. The price of carbon will sit on a price floor decided semi-arbitrarily eight years ago — a price floor too low to spur the kinds of massive reductions needed. There are plenty of things CARB could do to make the program more stringent. It could reform banking rules or raise the price floor.
If CARB implemented that system today, it would immediately push prices upward, as investors anticipate cap adjustments. Or, if it is determined to keep prices low at all costs, CARB could simply concede that cap and trade will do less than expected and crank up other regulations to compensate. But going into the second phase of the program with high expectations of cap and trade on one side, and an excess supply of allowances on the other, is not ideal.
The cynical take on all this is that in California, the oil industry simply has too much sway to allow a cap-and-trade system with real teeth. There is muttering in Sacramento that the whole system has become nothing more than an administratively burdensome carbon tax. But if, in the early s, the price is still sitting at the floor, who knows what future legislators might do.
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Sahota did express openness to revisiting the oversupply issue. If CARB reacts the same way in that it has so far, dismissing oversupply concerns, the system will probably underperform. Alternatively, sometime in the s the system could absorb the banked allowances and prices could spike. Either way, California carbon policy could blow up on incoming Gov.
But carbon emitters often have a second option as well: purchasing credits from carbon offset projects that claim, through one of several ways, to reduce greenhouse gas emissions. Different cap-and-trade programs have different standards for what types of projects qualify, and for how their impacts are measured and verified.
California cap-and-trade scheme
It enables forest landowners to sell credits if they halt plans to cut trees, agree to plant more, or manage forest lands in a way that increases the amount of carbon they store. The main argument for offsets is that they allow the market to find cheap ways to reduce emissions, and push sectors beyond those covered in the cap-and-trade program to improve their carbon footprints as well. But Haya argues further that many of the promised cuts may not actually happen at all. The following parties are required to participate in the Cap and Trade Program if they meet the thresholds delineated by the Regulation:.
Covered entities report previous year emissions in September and submit required allowances in November. They cannot submit future year allowances for compliance with a previous year i. An offset is a credit for greenhouse gas reductions achieved by an activity outside the capped sectors. Under the Program, each compliance offset credit is equal to 1 metric ton of CO 2 e.
CARB is currently considering several additional protocols, which would allow additional offset types to generate credits. See here for detailed and updated information on Compliance Offset Protocols. See here for details. California Carbon Dashboard. Tweets about " ab32". Free Allocation: Electrical Distribution Utilities — All utility allowances are allocated freely to protect ratepayers from rate shocks.
Advance Auctions offer vintages of the subsequent calendar years. Individual Emitters: Generally, facilities that exceed annual emissions 25, metric tons of CO 2 e according to mandatory GHG emissions reporting are covered by the program. Compliance Periods: The program includes 3 compliance periods: Period 1: Period 2: Period 3: Allowance Submission: Each year starting in Covered entities report previous year emissions in September and submit required allowances in November. The year after the end of a compliance period, entities must submit allowances for remaining covered emissions for the period.
Tool for compliance: An offset is a credit for greenhouse gas reductions achieved by an activity outside the capped sectors.