CAP AND TRADE

California’s Global Warming Solutions Act of 2006 (AB32) set a series of policies and programs across all major sectors to return California emissions to 1990 levels by 2020. The California Air Resources Board (CARB) updates a Scoping Plan every 5 years to outline California's strategy to meet AB32 goals. The Cap and Trade Program caps greenhouse gas (GHG) emissions from key sectors in California, ensuring that AB32 GHG reductions are met.

The California Cap and Trade Program is designed to achieve cost-effective emissions reductions across the capped sectors. The Program sets maximum, statewide greenhouse gas (GHG) emissions for all covered sectors each year (the “cap”), and allows covered entities to sell off allowancesAn allowance is a tradable permit that allows the emission of one metric ton of CO 2 e. (permits) that they do not need (the “trade”). The California carbon price is driven by allowance trading.

By 2020, the Cap and Trade Program is expected to drive approximately 22% of targeted greenhouse gas reductions still needed in capped sectors after reductions from AB32’s complementary policies. For general information on how cap and trade systems work, check out this C2ES primer on cap and trade.

In September of 2016, the post-2020 successor to AB32, SB32, was signed into law and established emissions reductions targets of 40% below 1990 levels by 2030. The dashboard will be updated to reflect this once the second update to the scoping plan has been published, outlining specific plans for achieving these reductions.