A Cap-and-Trade Primer Based on California’s Experience

California has been able to reduce emissions while growing its economy.  Source: EDF
California has been able to reduce emissions while growing its economy. Source: EDF

At the United Nations’ Framework Convention on Climate Change meeting in Germany this week, California Governor Jerry Brown has been designated Special Advisor for States and Regions, and will be working with state and international partners on ways to meet the commitments of the Paris Agreement on climate change. While California is not the only place that has created a cap-and-trade system to help reduce greenhouse gas emissions, it has gained considerable experience since the state legislature passed the Global Warming Solutions Act in 2006.

To help focus the conversation, the Environmental Defense Fund has prepared a quick fact sheet on cap-and-trade. It explains how California created its system, listing ten steps on a timeline towards designing, operating, and refining a market-based system that uses industry’s self-interest to help reduce global greenhouse gas emissions.

The fact sheet is timely, because the convention will include discussions about broadening the scope of systems like cap-and-trade beyond a single state or nation. California already coordinates its cap-and-trade system with Ontario, and is working with other nations and states, but to truly make a difference the system needs to have a much broader reach.

California’s results have been strong. Statewide greenhouse gas emissions have declined since 2006, and the carbon intensity of the state economy has also decreased, according to the fact sheet.

At the same time, California’s economy has grown, with job growth outpacing that of the rest of the country (6.2 percent growth, compared to 4.8 percent for the U.S. as a whole), and so-called “green jobs” especially high (23.3 percent more green jobs between 2013 and 2015). Says the EDF:

California’s cap-and-trade program is directly benefiting residents through climate investments from auction revenues, new clean energy jobs, and local air quality initiatives.

Screen Shot 2017-11-08 at 11.10.23 AM
California invests in a range of programs that reduce greenhouse gas emissions, but also create opportunities for involvement in shaping cap-and-trade. Source: EDF

EDF’s fact sheet could be useful for explaining the benefits of cap-and-trade to your relatives at Thanksgiving. It focuses on the economic benefits California has reaped, in part because it is a strong counter argument to charges that cap-and-trade will wreak havoc with the economy.

But because the fact sheet is so short, it also risks underemphasizing a few very key points. The use of offsets, for example, has to be very carefully considered, not just “considered” as Step 4 has it:

In California, offset credits must be real, additional, permanent, verifiable, quantifiable, enforceable and produced based on a CARB-approved protocol.

Offsets are not just an economic question, but one that directly affects local residents. Charges from some advocates that being able to pay for offsets elsewhere have led to companies emitting more pollution locally have sometimes been lost in the focus on economic gain.

It would also be worth pointing out how crucial “Step 8” of the fact sheet is: “Engage stakeholders, communicate and build capacities.” California is investing in several programs that ostensibly are about reducing greenhouse gas emissions but also create opportunities for people to be involved in the discussion around shaping cap-and-trade. An example is the Affordable Housing and Sustainable Communities program, the purpose of which is to connect sustainable transportation choices and housing, thus helping reduce greenhouse gas emissions–but which also offers real money to create real change.

California’s cap-and-trade investments are the result of robust discussions about what constitutes a fair system to reduce emissions while ensuring opportunities for all residents. Those investments must also avoid making things worse for communities that already pay a high price in pollution exposure and health and other risks from climate change.

New cap-and-trade programs should pay as much attention to equity as they do to economic benefits, to avoid skewing results in favor of polluting industry and away from residents who live with that pollution.

  • Wasting billions on the dumb HSR project is a “benefit”? Okay, I’ll deconstruct the documents on the CHSRA’s website while you do the same with the documents on this site: http://www.cc-hsr.org/financialReports.html

  • Yes @D6vLTZOMb2:disqus, you’re lying. This discussion is about whether there are “real, additional, permanent, verifiable, quantifiable, enforceable, and produced” [environmental] benefits to building the HSR project, not whether it might go over budget. Again, the numerous documents on the sustainability aspect are all over the Authority’s website. Feel free to point out the flaws in them that thus mean that the project will not meet the requirement detailed above.

  • I’m lying? Was the LA Times lying with this story two days ago?
    http://www.latimes.com/local/california/la-me-bullet-train-crisis-20180121-story.html#nws=mcnewsletter

    Of course the CHSRA’s website has documents that support the party line on the viability of the project. What else would they say?

    The folks at this website warned us about what’s now happening with this poorly conceived and under-financed project:
    http://www.cc-hsr.org/

  • Actually, they are. The CHSRA has scores of pages on the topic on their website, go read them instead of spouting lies.

  • The benefits of investing cap and trade money in the high-speed rail project are “not real, additional, permanent, verifiable, quantifiable, enforceable and produced based on a CARB-approved protocol.”+
    http://district5diary.blogspot.com/2017/08/cap-and-trade-program-political-pork.html

ALSO ON STREETSBLOG

CA Legislature Wrestles With How Best to Invest Climate Funds

|
As the California legislative session revs up, several committees have been holding oversight hearings on the state’s cap-and-trade system. Last week, the Senate Environmental Quality and the Select Committee on Climate Change and AB 32 Implementation held a joint hearing to discuss California’s successful worldwide leadership on climate change issues. In that hearing, the committee […]

Another Fact-Free Attack on California Climate Change Bills

|
There’s been a lot of media noise about ongoing efforts to pass new climate change legislation in California before the rapidly approaching deadline. One particular op-ed in the Orange County Register adds nothing useful to the debate, but as one of several efforts lately that have been working very hard to obscure facts, it deserves […]

Cap-and-Trade May Not Be Working

|
At last week’s California Air Resources Board hearing to discuss its plan for meeting climate change goals, the cap-and-trade system that has underpinned much of the state’s efforts got raked over the coals. But not by the industries subject to the emissions cap. Instead, representatives of the communities that are supposed to benefit from investments […]