California adopts cap & trade plan

The State of California has adopted a cap and trade program for greenhouse gas emissions that will begin to come into force in 2013. The first phase beginning in 2013 will include all major industrial sources along with electricity utilities. The second phase, beginning in 2015, will include  distributors of transportation fuels, natural gas and other fuels. The two phases will cover 360 companies with 600 major greenhouse gas emitting facilities.

Allowances will be distributed in 2013 – 2014 to all companies covered by the program. An allowance auction will be conducted for a smaller number of allowances for companies that require more than they are granted. Emitters will have to turn in enough allowances to cover their annual emissions. Eight percent of a company’s emissions can be covered using credits from certified  offset projects. Companies with more allowances than they require will be able to sell the excess to companies that have insufficient.

The program is designed to reduce emissions by 15% by 2020 compared to the ‘business-as-usual’ level.

It is likely to set a model for cap and trade programs introduced by other jurisdictions, particularly those that have joined the Western Climate Initiative, which includes British Columbia, Ontario and Quebec.

More details are available at . California anticipates that trading of allowances between jurisdictions with similar will be possible.

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