California’s Cap-and-Trade Program

The California Cap-and-Trade Program is a market-based approach to reducing greenhouse gas emissions in the state. Under this program, the state of California sets a limit, or cap, on the amount of greenhouse gases that can be emitted by the largest emitters in the state, such as power plants and industrial facilities. These emitters must obtain permits, called allowances, for each ton of greenhouse gases they emit. The number of allowances is capped and decreases over time, creating a declining cap on emissions.

Emitters can comply with the program in one of two ways: they can reduce their emissions to meet the required number of allowances, or they can purchase additional allowances from other emitters who have reduced their emissions beyond their required amount. This “cap-and-trade” system creates an economic incentive for emitters to reduce their greenhouse gas emissions, as they can sell their excess allowances to other emitters for a profit.

The California Cap-and-Trade Program was created as part of the state’s broader efforts to address climate change and reduce greenhouse gas emissions. The program is administered by the California Air Resources Board (CARB), which sets the cap on emissions and auctions allowances to emitters. The proceeds from the allowance auctions are used to fund a variety of programs designed to reduce greenhouse gas emissions, such as renewable energy projects and energy efficiency initiatives.

Overall, the California Cap-and-Trade Program is an important tool for the state in its efforts to reduce greenhouse gas emissions and address the challenges of climate change.

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