California Fights to Save Market Plan to Cut Carbon Emissions

In 2012, when California began its cap-and-trade program, it was hailed as a model for the rest of the world. While Congress had failed to pass a similar system two years earlier, California was going to demonstrate how a large, industrialized economy could cut greenhouse gases while also raising billions of dollars for clean energy projects. The idea was fairly straightforward: By forcing oil refiners, power plants, and factories to buy permits to emit greenhouse gases and then gradually shrinking the supply of those permits, the state could steadily raise the cost of carbon dioxide pollution and compel businesses to lower their carbon footprint.

State officials initially set a minimum price of $10 per metric ton of CO. The California Air Resources Board, which runs the auctions where companies bid on carbon permits, projected that prices could eventually reach $50 a ton. Instead, prices have traded closer to $12 per ton, leading to far less revenue than anticipated and raising questions about what, if any, effect the program has had in lowering the state’s carbon emissions.