Amid a presidential campaign that's studiously avoiding the whole topic, Californians are launching the world's second largest "cap-and-trade" program for ratcheting down industrial greenhouse gas emissions from large emitters.
It's a development worth chewing over before next week's Global Climate Change Forum, a Carbon Disclosure Project event that will be moderated by Diane Brady of Bloomberg Businessweek and broadcast on Bloomberg.com.
Last week, California's Air Resources Board (known as CARB) conducted a test-run of the online system that companies will use to buy CO2 pollution permits this fall. It's not a significant story in and of itself ("It’s about as exciting as paying your bills online," a CARB spokesman said of the new system). Government and corporate officials are relieved that the system worked smoothly before the first actual auction of permits, which is expected in November. Years of politics, legal-wrangling and regulation-writing have brought California's emissions program this far. About 85 percent of the state's emissions will eventually be covered by the program.
The phrase "cap and trade" still sounds strange to a reasonable anglophone ear, a nonsensical mishmash of "cap and gown" and "stock in trade." It refers to a complex policy program that limits -- or caps -- the amount of pollution tolerated from regulated companies, and allows them to buy and sell -- or trade -- permits for each ton of CO2 they send skyward. The U.S. has had an emissions trading program for acid-rain pollutants since the 1990s.
California's nascent program is only one of several new experiments to regulate the industrial emissions of heat-trapping gases. Australia last week moved to link its new CO2 program with the European Union's Emissions Trading System, the world's largest cap-and-trade program. South Korea in May approved a market-based system to cut greenhouse gases.
Emissions trading can require some pretty complex policy, which is why other options have garnered more attention recently. After 2011's record 14 billion-dollar-plus weather disasters, and 2012's Dust Bowl-rivaling summer, carbon taxes have re-entered the conversation. Two scholars argued on the New York Times's op-ed page in July that British Columbia's climate policy is "The Most Sensible Tax of All." The Bloomberg View editorial board wrote on Aug. 14 that "A carbon tax could be a crucial piece of a simpler, pro-growth tax system that lowers rates for corporations and individuals while also reducing the federal deficit."
The message from California is that, since cap-and-trade legislation died on Capitol Hill in 2010, climate policy experiments haven't vanished: They've just gotten smaller.
Does this emerging patchwork of national and subnational laws embolden global companies' emission-reduction efforts? Does California's new program give institutional investors momentum to pummel more or better disclosures out of companies? Both are possible questions for Global Climate Change Forum participants next week. (Follow the conversation on Twitter, using the hashtag #CDPforum.)
Click here to register for the Carbon Disclosure Project's Sept. 12 online Global Climate Change Forum.
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