CA Carbon Market ‘Well-Constructed, Strong’

The first year of California’s cap-and-trade program for greenhouse gas pollution shows the carbon market is well-constructed and strong while the state’s economy continues to improve, according to analysis by Environmental Defense Fund.

California Carbon Market Watch: A Comprehensive Analysis of the Golden State’s Cap-and-Trade Program, Year One, analyzes data and key metrics of the program, including a focus on the development of the secondary carbon market. It also examines the impact of notable partnerships, including recent linkage with Quebec and agreements signed with China, Australia and other regions.

Since California’s program started on Jan. 1, 2013, the state has transitioned smoothly to a capped economy, weathered legal challenges, and expanded its clean energy sector, the report says. Most notably, under cap and trade, California has continued its economic recovery, balancing its budget for the first time in more than a decade.

First-year conclusions from the report include:

• Five successful cap-and-trade auctions are evidence of a well-constructed, strong, and adaptive policy.
• The average price for allowances suggests that reducing emissions under the cap may be less costly than some expected.
• The secondary market for California carbon allowances is robust and healthy.
• Wise investment of auction proceeds will be an integral part of achieving California Global Warming Solutions Act’s (AB 32) carbon pollution reduction goals.
• Market experts have given overwhelmingly positive views of the first-year performance of California’s cap-and-trade program.

Photo Credit: California state capitol building via Shutterstock