How does the Cap-and-Trade Program Work?

This program sets a decreasing limit on major GHG sources in California, providing a strong economic incentive for cleaner technologies.

Covering about 80% of the state's emissions, the program issues allowances equivalent to allowable emissions (the "cap"). An allowance represents one metric ton of CO2 equivalent emissions. These allowances decrease yearly, along with the cap.

With rising auction prices for allowances and reduced yearly allowances, a consistent carbon price signal is established, driving GHG reduction action.

Covered entities must still adhere to existing air quality permit limits for pollutants. Some covered entities may be allocated allowances, as well as purchase additional allowances from others or purchase offset credits.

What is the purpose of AB 32?

AB 32 enforces a systematic approach to limiting significant sources of GHGs in California. It aims to encourage investments in cleaner and more efficient technologies.

AB 32 mandates that California achieve a 15 percent reduction in its greenhouse gas (GHG) emissions by 2020, aiming to reach levels equivalent to those in 1990.

Under this act CARB is obligated to formulate regulations that facilitate the most technologically viable and economical reductions in GHG emissions. The comprehensive execution of AB 32 is anticipated to diminish climate change-related risks by enhancing energy efficiency, promoting the utilization of renewable energy sources, fostering cleaner transportation, and curbing waste.

It's important to note that entities subject to AB 32's regulations must still adhere to existing air quality permit constraints related to criteria and toxic air pollutants.