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California ARB approves cap-and-trade amendments; linking with Ontario

Following more than 18 months of review and public comment, the California Air Resources Board (CARB) approved amendments to the state’s cap-and-trade program that improve its implementation and the state’s effort to curb greenhouse gas emissions. The amendments also establish a framework for the program’s annual limits on greenhouse gas emissions beyond 2020, to be revised in a subsequent, public rulemaking process to reflect the requirements of AB 398.

The Board action includes adopting amendments that have been in development since late 2015, and were first heard by the Board in September 2016. The amendments include linking with Ontario, which launched its own cap-and-trade program earlier this year. The Canadian province is expected to link with California’s program in 2018, becoming the second jurisdiction to join California following Quebec in 2014. Additionally, the Oregon legislature is considering a measure to establish a cap-and-trade system that is compatible with California’s.

Other amendments adopted by the Board address how carbon allowances are allocated to prevent economic and emissions “leakage” (i.e., the risk that an industry would move operations out of state due to competitive disadvantage) and streamline other requirements of the current program.

This week, Governor Edmund G. Brown Jr. signed a legislative package extending the cap-and-trade program through 2030 (AB 398) and establishing a new program to improve air quality in local communities (AB 617).

CARB will begin its new rulemaking process later this year to implement the requirements of AB 398 and reflect the Legislature’s direction in extending the program through 2030.

In addition to the AB 398 rulemaking process, CARB is also beginning to work with stakeholders on the implementation of AB 617. AB 617 directs CARB to work with local air districts on the deployment of community-focused air quality monitoring networks, as well as the development and implementation of community emission reduction plans in the neighborhoods most burdened by poor air quality.

Cap-and-trade is a market-based regulation that is intended to reduce greenhouse gas emissions from multiple sources in the most cost-effective way possible. The declining statewide cap on emissions ensures California will meet its emission reduction goals, while trading puts a price on carbon and creates economic incentives for investments in clean technologies and clean energy.

California’s cap-and-trade program, which began in 2013, is part of a suite of policy tools originally designed to achieve the goal of the California Global Warming Solutions Act of 2006 (AB 32), which is to reduce greenhouse gas emissions to 1990 levels by 2020. California is on track to achieve its 2020 goal. Last year, Governor Brown signed SB 32, which sets a goal of reducing emissions 40% below 1990 levels by 2030, the most ambitious goal in North America.

Through the cap-and-trade program, the state has launched California Climate Investments. California Climate Investments projects include affordable housing, renewable energy, public transportation, zero-emission vehicles, environmental restoration, more sustainable agriculture, recycling and much more. At least 35% of these investments are made in disadvantaged and low-income communities.


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