Low prices darken California’s cap-and-trade program

Source: By Chediak/Ryan, Bloomberg Businessweek • Posted: Monday, September 12, 2016

The lower-than-expected price of carbon permits continues to challenge California’s cap-and-trade program.

While officials had initially expected carbon permits to eventually be sold at $50 per metric ton of carbon dioxide, they are currently priced at $12.

Companies are steering clear of the permits, partly because of the legal issues surrounding the program: The California Chamber of Commerce has dubbed the cap-and-trade program an “illegal tax” in court, and there are still questions about whether the state has the authority to extend the plan beyond 2020.

Last year, revenue from the program was $600 million short of what Gov. Jerry Brown (D) had predicted; this year, it could be even lower.

However, some observers think concern over the price of the bids detracts from the primary goal of the cap-and-trade program: to lower emissions. California’s power industry has reduced greenhouse gas emissions by a fifth since 1990.

“Let’s not lose sight of the fact that the program is about reducing emissions, not raising revenue. If emissions are staying below the cap, then it is working as designed,” said Alex Jackson, legal director of the Natural Resources Defense Council’s California Climate Project