California Cap-and-Trade Program

Synonyms

California Cap and Trade Program, , Cap and Trade

Definition

A cap and trade system sets an overall emissions limit, allocates emissions allowances to participants, and allows them to trade emissions credits with each other. California recently launched its cap-and-trade program, which uses a market-based mechanism to lower greenhouse gas emissions (GHGI, 2014). California’s program is second in size only to the European Union’s Emissions Trading System based on the amount of emissions covered. In addition to driving emission cuts in the ninth largest economy in the world, California’s program will provide critical experience in how an economy-wide cap-and-trade system can function in the United States. California’s emissions trading system will reduce greenhouse gas emissions from regulated entities by more than 16 percent between 2013 and 2020. It is a central component of the state’s broader strategy to reduce total greenhouse gas emissions to 1990 levels by 2020 (C2ES, 2014).

A cap and trade system sets an overall emissions limit, allocates emissions allowances to participants, and allows them to trade emissions credits with each other. California recently launched its cap-and-trade program, which uses a market-based mechanism to lower greenhouse gas emissions (GHGI, 2014). California?s program is second in size only to the European Union?s Emissions Trading System based on the amount of emissions covered. In addition to driving emission cuts in the ninth largest economy in the world, California?s program will provide critical experience in how an economy-wide cap-and-trade system can function in the United States. California?s emissions trading system will reduce greenhouse gas emissions from regulated entities by more than 16 percent between 2013 and 2020. It is a central component of the state?s broader strategy to reduce total greenhouse gas emissions to 1990 levels by 2020 (C2ES, 2014).