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Key Issues Facing California's GHG Cap-and-Trade System for 2021-2030

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  • Schatzki, Todd

    (Analysis Group, Inc.)

  • Stavins, Robert N.

    (Harvard Kennedy School)

Abstract

California’s Greenhouse Gas (GHG) cap-and-trade program is a key element of the suite of policies the State has adopted to achieve its climate policy goals. The passage of AB 398 (California Global Warming Solutions Act of 2006: market-based compliance mechanisms) extended the use of the cap-and-trade program for the 2021-2030 period, while also specifying modifications of the program’s “cost containment†structure and directing CARB to “[e]valuate and address concerns related to overallocation in [ARB’s] determination of the allowances available for years 2021 to 2030.†The changes being considered by CARB will not only affect the program’s stringency, but also its performance by affecting the ability of the “cost containment†structure to mitigate allowance price volatility and the risk of suddenly escalating allowance prices. We address key design issues that were identified by the legislature in AB 398 and have been identified by CARB in its “Preliminary Concepts†white paper, including: (1) Price levels for the Price Ceiling and Price Containment Points; (2) Allocation of allowances between the auction budgets, Price Containment Points, and Price Ceiling; (3) “Overallocation†of GHG allowances; and (4) the program’s administrative and operational rules, such as procedures for distributing allowances to the market from the Price Ceiling or Price Containment Points, procedures for using allowances once distributed, and banking rules.

Suggested Citation

  • Schatzki, Todd & Stavins, Robert N., 2018. "Key Issues Facing California's GHG Cap-and-Trade System for 2021-2030," Working Paper Series rwp18-025, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp18-025
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    Cited by:

    1. Jesse M. Keenan & Anurag Gumber, 2019. "California climate adaptation trust fund: exploring the leveraging of cap-and-trade proceeds," Environment Systems and Decisions, Springer, vol. 39(4), pages 454-465, December.
    2. Robert N. Stavins, 2020. "The Future of US Carbon-Pricing Policy," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 8-64.
    3. Stavins, Robert, 2019. "The Future of United States Carbon-Pricing Policy," RFF Working Paper Series 19-11, Resources for the Future.

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