California's Smart Approach to Climate Change
California’s decision last month to extend its cap and trade program truly was, as Governor Jerry Brown said, a “milestone” in the fight against climate change, and all the more welcome for coming in the wake of the Trump administration’s misguided decision to withdraw from the Paris accord. The policy maintains and even fortifies its central virtue: It puts an ever-rising price on carbon-dioxide emissions, giving emitters an ever-growing incentive to cut back.
The measure passed the legislature with enough bipartisan support to guard against court challenges -- yet without much fanfare. Many of the state’s environmental groups are unhappy, complaining of giveaways to polluters. The plan does involve compromises, but the criticism misses the main point.
Using prices and market forces is the simplest and most effective way to fight climate change. The other 49 states should pay attention to how it helps California continue its model progress in lowering emissions, and in the absence of any national carbon-pricing program, consider following suit.
California’s original program, running since 2013, gives emitters a limited number of permits to release carbon dioxide, and enables them to buy more, either at state auction or as “offsets” for supporting climate-friendly activities -- tree planting, for example, or projects to lower methane emissions. So far, the permits have remained pretty cheap: They’ve been selling for the minimum price of about $13 a ton, and have raised the price of a gallon of gasoline by 11 cents.
Granted, that’s not enough, and the program’s effect on total emissions has so far been modest. Under the extension from 2020 to 2030, however, emissions limits will be tightened, and permit prices are expected to at least double. It’s estimated that gasoline will go up at least 24 cents a gallon and potentially three times that much. State regulators will put a price ceiling on emissions permits, as well as a floor, to prevent spikes that push the business costs above what’s justified or might trigger political backlash against the program.
The Canadian province of Quebec has already linked its carbon market with California’s, and Ontario is working to do the same. There’s nothing to stop American states from likewise joining the effort, or at least creating cap and trade systems of their own to efficiently lower carbon emissions. California’s approach deserves some fanfare. It’s well worth emulating.
--Editors: Mary Duenwald, Clive Crook.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com .