This is huge. From the Wall Street Journal:
California, the nation’s most populous state and a longtime bellwether on environmental policy, will impose the first broad cap in the U.S. on greenhouse-gas emissions, in a clear break with the federal government over global warming.
In essence, California is going to create the nation’s first-ever carbon market, based on the same sort of cap-and-trade system that was so effective at reducing air pollution in the United States.
In the short-to-medium term, this policy will leave California sitting pretty. The smartest first steps for combatting global warming—ramping up conservation and efficiency, eliminating various market failures in the utility industry, and perhaps shifting taxes off of workers and onto carbon emissions—will all be good for just about everyone involved: they’ll allow consumers and businesses to lower their energy expenses or earn more money. Plus, establishing a market for carbon reductions is likely to unleash all sorts of creative solutions, from practically every sector of the state’s economy—and for a high-tech state, the spin-off benefits could be huge.
Still, the state is taking a risk here. Have no doubt, someday, some energy-intensive business will announce—with hoopla and fanfare, though perhaps a bit disingenuously—that it’s leaving California for a place where carbon emissions have no consequences. There could be—will be—political backlash, and a move to weaken the carbon cap.
Which makes it all the more important for other states (paging Cascadia) to join in with California. If everyone’s playing by roughly the same rules, there’s no “race to the bottom”—no attempt by businesses to flee to the places with the lowest standards. Expanding the carbon market beyond California’s borders is the only sure way to lock in the state’s gains.
Plus broader carbon market would also create more options for businesses trying to comply with the law. For example, an energy intensive California business that needed to offset its carbon emissions could find low-cost opportunities in, say, Oregon, or Washington, or Idaho. And that could make carbon reductions into a profit center for an enterprising state.
Imagine that: turning climate protection into a money-making venture. And as far as I’m concerned, there’s nothing wrong with making money doing a good thing.
More (and smarter) on the subject here.
m. leber
California imports an increasing share of its electricity from out of state, much of it coal fired. If California is serious about reducing emissions, those CO2 emissions must be counted towards these caps. There are many other possible examples but this is a big one. Anybody have an idea of whether these proposals cover out of state CO2 emissions?
Alan Durning
I spent several hours with an ally from California the day before yesterday. He’s been closely involved in this victory.The good news is that California well understands the import-export problem.The neutral news—there is no bad news—is that the legislation California has adopted simply hands the task of devising a system for regulating emissions to a new state board and the California Air Resources Board. Though everyone assumes it’ll be “cap-n-trade,” the legislation is mute on that point.If the new board is serious, it will adopt a comprehensive cap-and-trade system that covers all major greenhouse gases and economic sectors. It will auction, not give away, the permits to emit greenhouse gases. The permits will diminish in number over time. Permits will be required of electric utility based on the location of power consumption, not production. And energy intensive manufacturing industries will be able to recoup permits for goods exported from the state (thus neutralizing and competitiveness problems).I expect we’ll have more to say about the design of such a system over time.But the opportunity certainly moves next to Cascadia, as Clark says. Watch this space!