California’s cap-and-trade program contributes to the golden state’s ambitious goal of achieving carbon neutrality by 2045

I’ve lived in California for 17 years, but I only recently came to know that our state is the frontrunner in the battle against climate change. The 2022 Scoping Plan, created by the California Air Resources Board (CARB), is a roadmap to achieve carbon neutrality by 2045. The Scoping Plan ambitiously aims for greenhouse gas emissions in 2045 to be cut by 85 percent compared to 1990 levels. In addition, the plan aims to reduce petroleum use by 94 percent and fossil fuel use by 86 percent by 2045. The Scoping Plan’s summary states: “This is a challenging but necessary goal to minimize the impacts of climate change.”

California’s efforts for carbon neutrality date back to 2006, when the legislature passed the California Global Warming Solutions Act of 2006. This bill required the CARB to prepare a Scoping Plan, with the first one approved in 2008. Since then, two more Scoping Plans have been approved in 2013 and 2017 respectively, with 2022 being the most recent year with a newly-approved plan.

During this process, the cap-and-trade program was created. It is a market-based program and consists of two parts: the cap and the trade. The program’s administrator, the CARB, sets a “cap” on greenhouse gas emissions that power plants, natural gas providers, and other large industries emit. These companies are responsible for 85 percent of the state’s entire greenhouse gas emissions. The amount of emissions allowed within this cap is split into allowances, which work like permits. Each allowance permits a company to emit one metric ton of carbon dioxide. Companies can receive allowances for free, or through an auction. A company can also sell some of their allowances to other companies who need more allowances. Since the inception of the cap-and-trade program, the CARB has been lowering the statewide cap on greenhouse gas emissions while simultaneously increasing the price of each allowance. This incentivizes companies to go green and invest in cleaner technology.

The credit Californians received on their gas and electricity bills in April is a distribution of the money the government made through the cap-and-trade program. This is why the credit is called the California Climate Credit. 

Climate change affects our lives profoundly, and its effects have been worsening. Human-induced climate change contributed to a 172 percent increase in California’s burned area from wildfires from 1971 to 2021, according to a study by the National Oceanic and Atmospheric Administration (NOAA) and the National Integrated Drought Information System (NIDIS). This worrying trend is amplified to an alarming 320 percent if we narrow the period from 1996 to 2021. The United Nations lists destructive storms, warming and rising oceans which threaten coastal and island communities, increased extinction risk for animal species, poverty and more health risks due to air pollution, disease and hunger as climate change worsens.

Greenhouse gases, caused by burning fossil fuels, are the main cause of climate change. Policies like the cap-and-trade program are critical in California’s fight to preserve our environment.