California Takes the Lead on Cap-and-Trade
Cap-and-trade is dead – at least for now, inside the Beltway, where these days, getting bipartisan agreement on the color of the sky might be too much to ask.
On the other side of the country, however, in the state that likes to try out big ideas, cap-and-trade was launched Thursday by the California Air Resources Board – which, by the way, was established through legislation signed into law by a governor named Ronald Reagan.
The board finalized rules putting meat on the bones of AB 32, the climate law that the California Legislature passed in 2006 and which the state’s voters opted last month to keep in place.
Cap-and-trade, a method of imputing costs to pollution and thereby nudging markets to reduce it, was conceived during Reagan’s presidency. It has been used successfully to reduce power plant sulfur dioxide emissions linked to acid rain.
Now, California will serve as a testing bed for scaling up cap-and-trade to reduce climate-tampering greenhouse gas emissions – which are much bigger in volume than SOX emissions, and come from many diverse sources that burn carbon-heavy fuels to supply copious quantities of energy, which is the difference between our lifestyles of comforts and conveniences and lifestyles of ancestors who tooled around in donkey carts.
The rest of the country will be free to watch to see how it all turns out. We might find out that cap-and-trade works fine in shifting a carbon-intensive economy towards cleaner energy sources that don’t throw sand in the gears of the global climate machine. Or not so fine. Or that carbon taxes or fee-and-dividend approaches might work more effectively for imputing a price to carbon pollution.
The proponents of this year’s ballot measure to kill AB 32 predicted that cap-and-trade would mean certain economic doom. Employers would flee the state. Energy prices would soar to the moon and stars. The earth would open up and devour what’s left of California’s tatty economy.
The opponents of the ballot measure – led by outgoing Governor Arnold Schwarzenegger and Reagan administration Secretary of State George Shultz – pushed back hard. They argued that California’s great green hope is to keep attracting the venture capital pouring into the state to finance low-carbon energy technology industries. Kill AB 32, they said, and that clean tech VC would go somewhere else where it would feel more welcome. Like China.
California voters went with the latter argument and hooted the ballot initiative off the electoral stage. The state now will get a chance to prove Shultz and Schwarzenegger are right.