Thursday, November 15, 2012

Cap and Trade Has Come To Be in California

Consider it a birthday of sorts.  Yesterday, California launched their first "Cap and Trade" market by auctioning off allowances in the California Carbon market.  This, while just being California, actually becomes the world's second largest carbon market right behind all of the European Union.

While right now it essentially only applies to major refineries and electric plants the day is coming when it will apply to transportation fuels.  My personal recommendation is the industry should get prepared to deal with this inevitability rather than fight it.  Politics aside, what we have found is what generally starts with the California Air Resource Board (CARB) moves across the Nation fairly quickly.

The Wall Street Journal reports on this launching and reports California expects to raise $1bl in 2012 and $2.8 to $11bl by 2015.  A critical factor for success is we have to ensure this money goes to actually reducing emissions or offset projects rather than the general coffers of the state.  If we can avoid the "money grab" then this will be a very effective way to use market incentives to lower emissions.

 According the the California auction site, the results will be listed on November 19, 2012. Auction information can be found at the CARB auction site.

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