On October 20th, the California Air Resources Board (CARB) adopted final rules for a state wide cap-and-trade program to reduce greenhouse gases. Once the program commences in 2013, large industrial facilities and power plants will become the main targets. Details for the program still aren’t finalized, but the adoption of rules at least shows the sincerity with which California is engaging in climate change related policies. As there is large debate over the merits of such a system, even in California, the program was designed to reduce negative economic impact as the program gets underway. The overall economic effect is still unknown, however. Forward contracts under the program are already going for $18-$19 per ton, which is higher than EU Emissions Trading Scheme (ETS) prices.
This doesn’t impact national policy at all as the federalist system allows states some leeway in instituting its own policies in the case that national policy is not possible. That said, it will be interesting to see how this is all implemented and if it has any impact on the national debate about cap and trade.
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