By a vote of 9 to 1, the California Air Resources Board (ARB) approved yesterday regulations for the implementation of the AB 32 law to reduce the State’s greenhouse gas emissions to 1990 levels by 2020.
The rules adopted last night put in place a cap-and-trade program for sources responsible for 85% of California’s carbon emissions. The program will begin by capping emissions from major sources, including utilities and large industrials, in 2012. Transportation fuels will be phased into the program starting in 2015.
The trading program will create the United States’ largest (and the world’s second largest) carbon trading market with 2.7 billion tons of emissions under the cap from 2012-2020. The program allows for the trading of carbon allowances, as well as the creation of a robust carbon offsets program.
More details on the program can be found in our previously published Executive Brief. The rules adopted by ARB largely conform to their proposed regulations, which were released October 28th. While these rules are now adopted, ARB is likely to continue to refine certain elements of the program and further define important provisions, such as allocation. These revisions will be conducted over the coming months through ARB’s “15 day notice” procedure, whereby changes to adopted regulations are recommended by ARB staff and subject to a 15-day public comment period. Adoption of rule changes under the 15 Day Notice procedure do not require an additional vote of the Board.
A list of some of the issues that will be considered for 15-day changes was provided yesterday by ARB. We will keep you apprised as the remaining issues are resolved by the Board.
Trading in California carbon allowances and California-compliant offsets has already begun in earnest. Evolution Markets is actively facilitating trades in these products. To find out more about the California carbon cap and trade program or to transact in the market, please contact John Battaglia (+1 415.963.9137) with our Western Carbon Desk or our U.S. Carbon Team in New York (+1 914.323.0265).