Domestic Carbon Markets – California approves carbon market rules

Posted on October 22, 2011 by

California carbon market mechansimOn 20th Oct 2011, the most populous state of California initiated market based mechanism for carbon market. California regulators approved final regulations for a carbon market and it led a big start for domestic carbon trading mechanism. Although these regulations are from the single state in the United States but it is considered as one of the biggest U.S. responses to climate change. This market based mechanism is expected to start in 2013 and will address global warming in a low-cost way and become the center of alternative energy industries, like solar, wind, bio fuels, etc.

History – It was initiated before

In 2006, California passed the nation’s most comprehensive climate law, mandating a cut in carbon pollution to 1990 levels by 2020 (about 10% below today’s emissions).

The California Air Resources Board voted 8-0 to adopt these carbon market regulations. Board considered these regulations critical to the state’s goal of cutting carbon emissions to 1990 levels by 2020 (about a 22% reduction from forecasted business-as-usual output). Present regulations cover about 350 companies representing 600 California factories and oil refineries. All of these must begin complying with the program from 2013. The state of California is also planning to bring transportation fuels that contribute 85% of the California economy under the cap by 2015.

A cap-and-trade market sets a price on carbon emissions. Carbon credits (One carbon credit is equivalent to one ton of carbon dioxide) from this market can provide economic incentive to replace fossil fuel-powered plants with solar, wind and other renewable energy facilities.

California’s market based mechanism is a domestic system owned by the single state. The success of this market based mechanism will pave the way for other domestic mechanisms in near future.


Posted in: Carbon Markets