On Oct. 20, the California Air Resources Board approved controversial new “cap and trade” regulations on greenhouse gas emissions from electric utilities and large industrial sources after more than five years of debate. The new regulations — the most comprehensive climate change limits in the country — are likely to generate a political, legislative and judicial firestorm. They are being enacted at a time when many other states and Congress have turned away from GHG regulations, citing the burden they place on a struggling economy. CARB, however, had little choice but to act, in light of impending deadlines established by AB32 — California’s 2006 climate change legislation. AB32 requires California to reduce its GHG emissions to 1990 levels by 2020. The new CARB rules take effect Jan. 1, 2013, although CARB has already determined that major issues need to be revisited before the rules are implemented.
Cap and trade is a market-based framework under which aggregate emissions are capped and regulated businesses must obtain (through government allocations, auctions, or secondary trades) an allowance for each ton of GHGs they emit. In theory, the cost of allowances incentivizes businesses to adopt more efficient methods of production or find alternative technologies for resource use.
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