California’s ETS gets green light

Yesterday the California Air Resources Board (ARB) approved the final market rules for the implementation of the U.S.’s first economy-wide carbon trading scheme. This represents the final step of a three-year public process during which the ARB worked with stakeholders and considered the related environmental analysis in order to develop a balanced rulemaking package.

The creation of a carbon market is one of the measures included in the Assembly Bill no. 32 (AB32), the Global Warming law approved in 2006 which aims to reduce greenhouse gas emissions to 1990 levels by 2020. The ETS, which will start in 2013, sets a state-wide cap on around 350 sources responsible for 85 percent of California’s emissions. In 2013 – 2014 electric utilities andlarge industrial facilities will be required to reduce their emissions by 2 percent annually below the level forecast for 2012. Distributors of transportation, natural gas and other fuels will join the scheme in 2015, when the cap will start to decline about 3 percent annually until 2020. During the first phase, two-thirds of permits will be auctioned, with the industrial sources receiving the highest quota of free allowances. In 2015 the overall share of permits allocated via auction will rise to 80 percent. The first auction of California carbon allowances (CCAs) will take place on August 15, 2012. The use of offsets will be limited to emissions coming from reduction projects in U.S. and up to 8 percent of every facility’s compliance obligation.

The Board has to submit its finalised regulations to theCalifornia Office of Administrative Law by October 28. Analysts predicted that the programme has the potential to become the world’s second largest carbon marketif it will be able to include also the other States part of the Western Climate Initiative (WCI).


(Image: old trams of San Francisco, California. Photo credit: Dennis Jarvis/Flickr)