The revised emissions “scoping plan” roadmap that directs — among other things — the LCFS program, allowances (CCA) trading, and energy production is still aggressive but is tempered by anticipated economic collateral damage.
California’s Air Resources Board had defined four options for its latest update to the state’s scoping plan, and it plans to recommend one with much lower anticipated cost, but that targets carbon neutrality ten years later than the more aggressive choices.
“Alternative 3,” shown in the table below is what CARB is proposing:
Source: California Air Resources Board, prepared by Calmatters.org
The Scoping Plan is due for a refresh, having been revised in 2013 and 2017, from the initial version in 2008. The Plan is a roadmap for reducing GHG emissions with a goal of carbon neutrality (or, CN). CARB uses climate modeling, economic modeling, inputs from a state Environmental Justice Committee, and public comments in its development. The Scoping Plan is not prescriptive in what technologies to use to reach carbon neutrality; it’s a goals document.
Of course, many are not happy. As CARB must weight the consequences and benefits of various plans, it is making judgments about the relative importance of each of those weights. Some criticisms are that a slower approach to CN disproportionately affects people of color, pursues CN too slowly, and that the “cost” of ongoing emissions CARB assumes is too low. https://www.latimes.com/opinion/story/2022-05-17/california-air-resources-board-carbon-neutrality-2045-2030
But one criticism concerns the so-called “cap and trade” system of governing emissions in California. The allowances are traded as California Carbon Allowances, or CCA. The proposed Scoping Plan does not explicitly address the current system.
However, a diminished role of cap and trade is implied, because the scoping plan assigns more GHG reductions to non-cap-and-trade sources. If you back out those increases, then cap and trade may contribute 27% less than in the previous (current) scoping plan.
CARB has a good reason to be careful in how it discusses the future of the CCA. The supply of allowances is generated by GHG-reduction overachievers — those companies that find a way to emit less than carbon than planned, or who develop projects that reduce emissions. If CARB’s rhetoric is too negative toward the CCA market, it could cause allowance prices to drop. And that hurts the most effective GHG reducers.
CARB has plans to address the cap-and-trade program, but not yet. In fact, the board has said in recent years that cap and trade will be limited in the future. Last February (2021), California government and CARB officials said cap and trade would be part of this 2022 Scoping Plan, but it’s absent from the draft released in April 2022. https://calmatters.org/environment/2021/02/california-carbon-trading-program-evaluation/
California’s allowances are traded under the name California Carbon Allowance (CCA). The CCA price has hovered around $30/metric ton of CO2 in recent months, up from around $18 a year ago. AEGIS tracks these prices and the influencing factors in our research offering. Clients with platform credentials can access them directly, here.
Cap and trade is not exclusive to California. The popular scheme of controlling emissions works like this: the state sets a total allowable amount of emissions, and distributes those allowances to individuals (usually companies). If your emissions exceed your allotment, you must purchase allowances from someone who did not use all of theirs (emitted less than their own limit). Sometimes, you can use carbon-offset credits to achieve part of your allowance shortfall. AEGIS helps both buyers (retirements) and sellers (issuances) execute in carbon-offsets markets. Regulators can reduce total emissions by gradually restricting the total number of emissions allowances. Then, “extra” emissions become so expensive that companies try to reduce emissions on their own.