BLOG POST by BARBARA HAYA
July 17,
2017
AB 398Õs use of excess
carbon credits instead of real reductions
California Governor Jerry Brown is urgently calling for a price
on carbon to cost-effectively drive emissions reductions in the state. But the
bill he is promoting is not designed to create the carbon price needed to
drive CaliforniaÕs reductions down to its 2030 target, and as designed, will
claim more reductions than it actually achieves.
The California legislature is expected to vote today on AB
398, a bill that would extend the stateÕs cap-and-trade program beyond 2020. This
extended cap-and-trade program would be one part of a broad suite of regulations
aimed at reducing the stateÕs emissions by 40% from 2020 to 2030.
Cap-and-trade programs have two important goals. They create
a price on carbon that drives emissions reductions. They also generate revenues
that can be used to fund other emission reduction measures and/or be passed
back to citizens to counterbalance higher costs of electricity, fuels, and
other products.
The cap-and-trade program California is considering today could
largely be met with excess credits instead of real reductions.
First, the cap-and-trade program includes a carbon offset program that could make up the majority of the
effect of the cap-and-trade program on emissions.1 Offsets allow
regulated emitters to pay for reductions outside of the capped sectors in lieu
of reducing their own emissions. CaliforniaÕs offset program generates more
credits than reductions it actually achieves.2
Second, the cap-and-trade program allows for a large
quantity of excess carbon credits left over from the pre-2020 period to carry
forward for use in 2020-2030.3 The quantity of this credit
over-supply could equal the full effect of the cap-and-trade program on
emissions.4
Further, if ACA-1 passes and becomes law, a bill introduced
on Friday that would require 2/3 approval from each house of the Legislature on
the disbursement of cap-and-trade revenues, CaliforniaÕs cap-and-trade program could
also fail to provide a reliable revenue source for policies and programs that
reduce emissions.
As California aims to create a model climate policy, it is
important to be clear what this policy does and does not do. CaliforniaÕs cap-and-trade
program, as currently designed, is unlikely to achieve all of the reductions it
claims, and also may not create the carbon price needed to drive CaliforniaÕs
reductions down to its 2030 target.
1. Fact Sheet: The Size of CaliforniaÕs Carbon Offset Program, prepared by Barbara Haya
2. Fact Sheet: CaliforniaÕs U.S. Forest Offset Protocol
Over-credits Reductions:
prepared by Barbara Haya
3. Letter
from the LAO date June 26, 2017 referenced here: http://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201720180AB398#; See also Chris Busch. 2017. Recalibrating
California's cap-and-trade program to acount for oversupply. Energy Innovation
report.
4. Hot air and offsets in CaliforniaÕs post-2020 carbon
market, prepared by Danny Cullenward