It won’t be on the ballot, but California’s cap-and-trade system for carbon emissions is the other big story in November.
That’s the month when the state will launch the world’s second-largest cap-and-trade program. It’s critically important that we get this right, and there will be a lot of pressure to get it wrong.
The first matter of importance is maintaining the price pressure of the carbon credits themselves. The AB32 statute directs the Air Resources Board to minimize all feasible emissions “leakage,” or the scenario by which greenhouse gas reductions in California lead to increased emissions outside the state – particularly because California businesses find it advantageous to relocate.
One way in which the board could minimize that effect is to offer lots and lots of additional greenhouse gas allowances – a move that would dramatically lower prices for carbon credits overall, and a possibility that was discussed by the board in Sacramento on Monday.
That’s the mistake that Europe made. There, regulators flooded the market with free credits, and businesses never felt the cost of carbon. So they took only tiny steps to lower pollution, while customers were still forced to pay the higher rates that had been factored into their utility bills.