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California's energy and climate policy: A full plate, but perhaps not a model policy
Abstract
California is a leader among states in its efforts to cut greenhouse gas emissions. Under the California Global Warming Solutions Act of 2006 (Assembly Bill 32), the state has set itself on a course to reduce its greenhouse gas emissions to 1990 levels by the year 2020. In addition to its cap-and-trade program, California aims to accomplish this objective via a large assortment of complementary and overlapping policies. To a significant degree, cap-and-trade is a market-based "dessert" that follows a multicourse menu of other regulatory initiatives aimed at cutting emissions. The reduced cost-effectiveness, political costs, and regulatory costs associated with this approach make it unlikely to form a suitable model for states in which political commitment to climate action is more limited or regulatory capacity is not as great as in California.
... Although California plays one of the most visible roles in the global climate policy conversation, its most prominent policy instrument-an economy-wide cap-and-trade program-has only a supporting part in practice. Contrary to common perception, conventional regulatory programs that build on decades of institutional experience are delivering the bulk of emission reductions attributable to policy (Wara 2014). As the state begins to plan for a much deeper climate target for 2030, regulators intend to stay the course, relying on cap-and-trade to deliver only a small fraction of the total reductions required for a globally ambitious goal (CARB 2017, 41). ...
... In 2008, CARB finalized its Scoping Plan, which called for a broad set of regulatory measures-many already being implemented by other agencies, like the CEC and CPUC-as well as an economy-wide cap-and-trade program. Although California's cap-and-trade program is arguably its best-known climate policy, CARB's planning relied on regulations to accomplish most of the needed reductions, leaving the cap-and-trade program as "backstop" policy to ensure that emissions hit the 2020 target (Wara 2014). In practice, the cap-and-trade program has functioned a lot like a modest carbon tax, as a result of persistent oversupply conditions in which the supply of available compliance instruments significantly exceeds demand for those instruments . ...
... Ultimately, California's potential to accelerate implementation through its multilateral processes will be closely related to the performance and transparency of its domestic policy portfolio. California's climate regulator, CARB, produces so-called "Scoping Plans" that describe the state's suite of climate policy efforts (Wara 2014). State law requires periodic updates to assess progress toward the state's formal targets-returning to 1990 emissions by 2020, and reducing emissions another 40 percent below that level by 2030. ...
California has been at the forefront of environmental policy for decades, relying on its unique legal authorities and economic scale to influence out-of-state actors and drive technological innovation in multiple sectors. In the early 2000s, the state developed a comprehensive climate policy framework and has since emphasized its external leadership role under two successive governors. With the U.S. federal government withdrawing from international climate policy, California’s place on the national and global stage has never been more prominent. Even though the U.S. Constitution formally prohibits states from having a foreign policy, when it comes to climate, California has one in all but name. Drawing on California’s rich history of environmental policy, this article evaluates past and current efforts to build multilateral climate policy cooperation at the state level. California is at once a proactive outlier—a subnational government with the political will and regulatory capacity to rival even the European Union’s policy regime—as well as a microcosm of the broader climate mitigation puzzle, where the problem of implementing aggressive targets looms large. In order to build on the state’s successful legacy, California policymakers should pursue strategies to: increase transparency in domestic policy and between the state’s partners abroad, increase cooperation within the state government, and minimize the legal risk of foreign policy preemption challenges.
... Muhovic-Dorsner (2005) explained how it is critical to pursue climate justice when formulating climate change policy in California. The four main courses in California for energy and climate change policy include (a) tailpipe emissions standards for cars and trucks, (b) low carbon fuel standard for gasoline, (c) energy efficiency for commercial buildings, and (d) renewable portfolio standards for electricity utilities (Wara 2014). Dean (2016) demonstrated that California has reduced its carbon footprint utilizing GHG targets and mitigation since 2005. ...
... Although research about energy policy for energy efficiency in commercial buildings has addressed components of performance standards and implications for California, there is a lack of emphasis on the implications on the California economy, society, integrating building technologies, and funding mechanisms that would allow commercial buildings to meet policy goals economically and efficiently. Wara (2014) noted a model energy policy and climate program should be able to accomplish performance standards given the resources California is willing to commit. There are growing concerns in California that energy and environmental policies incur extensive direct and indirect costs to building owners, businesses, and consumers (Wei, 2014). ...
The purpose of this Policy Delphi study was to identify and assess the energy efficiency policies for commercial buildings in California that experts believe are most important and likely to be implemented by the year 2025 to create energy resiliency, reduce carbon emissions, and lessen dependency on electrical utilities in the future California economy. Methodology: The methodology for this Policy Delphi study was descriptive, and used to forecast the future relative energy policy for energy efficiency in commercial buildings in California. Inside the theoretical framework of policy analysis, this Policy Delphi study was designed around the insights of a nominated expert panel. The sample population was 24 experts randomly drawn from a list of individuals who were nominated by one of three advisors. Individuals were nominated for their expertise with energy policy, building industry, economy, and business. The panel was asked to identify policy options, and systematically rate those options in three structured rounds, to achieve consensus on a common set of future policies. Findings: The analysis of data from the Policy Delphi expert panel’s ratings identified that 20 policy statements were considered to be of high priority in this study. Secondly, seven policy statements received consensus on high ranking of importance. Finally, only vi one policy statement received consensus on high rankings of importance and likelihood of implementation. Conclusions: Based on the research findings, 10 conclusions were drawn including: (a) increasing ratepayer investments in energy efficiency for clean energy distributed resources for California Integrated Resource Planning policy for utilities was unmistakably the highest priority identified in this study and (b) energy efficiency policies affecting commercial buildings in California may be difficult to implement in the near future. Recommendations: Further research is recommended in the following areas: (a) replication of this study using a different expert panel selected utilizing the same or different selection criteria and (b) analyzing data on the effectiveness of the high importance policy statements.
... In light of challenges to environmental and economic sustainability posed by climate change, the State government has enacted proactive climate change mitigation and adaptation legislation and policies, notably the California Global Warming Solutions Act of 2006 (Assembly Bill 32) aimed at reducing greenhouse gas emissions (40). California is one of the least greenhouse gas-intensive states in the country, and its climate change mitigation policies have built on its legacy of air quality and energy efficiency programs from the 1970s and 80s that developed technical and legal expertise among state agencies (41). ...
... They suggest that the CPM addresses climate change as a market failure problem rather than as a more fundamental systemic issue, leading to emphasis being on efficiency as opposed to effectiveness. Critics suggest that observed emissions reductions in some jurisdictions are not attributable to the CPM, but rather that some or most of these cuts have been obtained through regulatory instruments [20][21][22]. ...
Research on climate change mitigation has increasingly considered carbon pricing, with these efforts concentrating on reductions in carbon dioxide (CO2) emissions. Our comprehensive cross-country analysis extends this focus by quantitatively evaluating the effects of carbon pricing on four major pollutants: CO2, nitrous oxide (N2O), methane (CH4), and particulate matter (PM). We use regressions and introduce entropy balancing to this research area. Analyzing data from 132 countries from 1992 to 2019, we find that carbon pricing is associated with an average annual reduction in CO2 emissions by 3 percentage points. A one-unit increase in a coverage-weighted carbon price is associated with reductions in N2O emissions by approximately 0.1 percentage points. A shorter panel for 2010–2017 shows a larger impact of 0.3 percentage points for PM. These findings underline the efficacy of carbon pricing not just in curtailing CO2 but in significantly mitigating other harmful pollutants on a global scale. Reductions in pollutants beyond CO2 provide further motivation for policymakers to pursue carbon pricing.
... The California cap-and-trade seems to have had less impact; though, admittedly, it was not designed to be the workhorse of state climate policy. The majority of reductions in California have come from a suite of regulations targeting transportation, buildings and renewable portfolio standards rather than from carbon pricing (Wara, 2014). Others point to a significant leakage problem: the cap-and-trade program in California has simply shifted emissions associated with coal-fired power to other Western States (Caron et al., 2015;Lo Prete et al., 2019;Petek, 2020). ...
The incrementalism of carbon pricing, which includes carbon taxes and emissions trading, has led us astray. It has been proffered as a key component of climate policy, yet evidence clearly shows that its effects are marginal. It provides limited emissions reductions and has provoked considerable political controversy in key large‐emitting countries. More importantly, pricing carbon means viewing climate change as a market failure, rather than as a problem of societal transformation. But rapid decarbonization will require more than market corrections; it demands strong state intervention to reorganize the economy. In this maximalist view, the state must create public goods, rather than merely prevent public bads. This article seeks to expand our collective political imagination about climate policy, moving beyond mundane fights about the appropriate design of carbon pricing. Instead, we need to think bigger. Aggressive climate policy begins with a reassertion of state sovereignty. Multinational corporations use ‘offshore’ tax havens to avoid paying taxes. By closing loopholes on corporate tax evasion, states reaffirm one of their fundamental functions: taxation. This reform would repatriate billions of dollars in missing capital, and help create the political conditions for meaningful action on decarbonization. Tax reform, not just carbon pricing, is climate policy too.
... Unfortunately, there are few ex-post comparisons of the reductions associated with different mitigation policies. However, extant work indicates that in jurisdictions with emissions reductions, carbon pricing is not doing the majority of the work (Egenhofer et al 2011, Wara 2014, Martin and Saikawa 2017, Cullenward and Victor 2020. Indeed, Cullenward and Victor note that 'the real work of emission control is done through regulatory instruments' (Cullenward and Victor 2020, p 10). ...
Carbon pricing has been hailed as an essential component of any sensible climate policy. Internalize the externalities, the logic goes, and polluters will change their behavior. The theory is elegant, but has carbon pricing worked in practice? Despite a voluminous literature on the topic, there are surprisingly few works that conduct an ex-post analysis, examining how carbon pricing has actually performed. This paper provides a meta-review of ex-post quantitative evaluations of carbon pricing policies around the world since 1990. Four findings stand out. First, though carbon pricing has dominated many political discussions of climate change, only 37 studies assess the actual effects of the policy on emissions reductions, and the vast majority of these are focused on Europe. Second, the majority of studies suggest that the aggregate reductions from carbon pricing on emissions are limited—generally between 0% and 2% per year. However, there is considerable variation across sectors. Third, in general, carbon taxes perform better than emissions trading schemes (ETSs). Finally, studies of the EU-ETS, the oldest ETS, indicate limited average annual reductions—ranging from 0% to 1.5% per annum. For comparison, the IPCC states that emissions must fall by 45% below 2010 levels by 2030 in order to limit warming to 1.5 °C—the goal set by the Paris Agreement (Intergovernmental Panel on Climate Change 2018). Overall, the evidence indicates that carbon pricing has a limited impact on emissions.
... California's climate laws, known as AB 32 (2006) and SB 32 (2016), require the state to reduce its GHG emissions to 1990 levels by 2020 and to 40% below 1990 levels by 2030. ARB was tasked with developing policy to achieve the state's GHG targets and eventually adopted a suite of policies that include direct regulatory instruments and an economy-wide cap-and-trade programme (Wara, 2014). ...
Carbon offsets allow greenhouse gas emitters to comply with an emissions cap by paying others outside of the capped sectors to reduce emissions. The first major carbon offset programme, the United Nations’ Clean Development Mechanism (CDM), has been criticized for generating a large number of credits from projects that do not actually reduce emissions. Following the controversial CDM experience, California pioneered a second-generation compliance offset programme that shifts the focus of quality control from assessments of individual projects to the development of offset protocols, which define project type-specific eligibility criteria and methods for estimating emissions reductions. We assess the ability of California’s ‘standardized approach’ to mitigate the risk of over-crediting greenhouse gas reductions by reviewing the development of two California offset protocols – Mine Methane Capture and Rice Cultivation. We examine the regulator’s treatment of three sources of over-crediting under the CDM: non-additional projects, inflated counterfactual baseline scenarios, and perverse incentives that inadvertently increase emissions. We find that the standardized approach offers the ability to reduce, but not eliminate, the risk of over-crediting. This requires careful protocol-scale analysis, conservative methods for estimating reductions, ongoing monitoring of programme outcomes, and restricting participation to project types with manageable levels of uncertainty in emission reductions. However, several of these elements are missing from California’s regime, and even best practices result in significant uncertainty in true emission reductions. Relying on carbon offsets to lower compliance costs risks lessening total emission reductions and increases uncertainty in whether an emissions target has been met.
Key policy insights
• Substantial and ongoing oversight by offset programme administrators is needed to contain uncertainty and avoid over-crediting.
• California’s Mine Methane Capture Protocol may have influenced federal decisions not to regulate methane emissions from coal mines on federally-owned lands.
• Government priorities and methodological choices drive outcomes in carbon pricing policies with large offset programmes, contrary to the common perception that these policies delegate decision-making to private actors.
• Offsets are better understood as a way for regulated emitters to invest in an incentive programme that achieves difficult-to-estimate emission reductions, than as accurately quantified tons of reductions.
... Because emissions covered under California's cap-and-trade program are much larger than those of its current or prospective partners, policy decisions in California drive the fundamental economics of the WCI program. To date, CARB has relied primarily on a suite of ambitious direct regulations to accomplish its emission reductions, with the cap-andtrade program playing more of a supporting role [7][8][9][10]. However, CARB expects the program's role to grow as the state pursues a legal mandate to reduce statewide greenhouse gas emissions at least 40% below 1990 levels by 2030. ...
The Western Climate Initiative is a multilateral cap-and-trade program in California and Québec. The California climate regulator has called for cap-and-trade to deliver nearly half of the emission reductions needed to achieve the state’s legally binding limit on greenhouse gas emissions in 2030, making the program the single biggest driver of the state’s post-2020 policy portfolio. However, the program’s supply of compliance instruments has persistently exceeded emissions subject to the program—a condition known as overallocation, which independent studies have projected may continue into the mid-2020s. If market participants purchase and bank excess compliance instruments for future use, they may be able to comply with the program’s regulations while nevertheless emitting significantly in excess of the state’s legally binding 2030 limit. Here, we present methods for tracking observed banking behavior on both an annual and multi-year compliance period basis. By the end of 2018, market participants had already acquired more unused compliance instruments than the regulator anticipated for 2020. The size of the private bank is now comparable to the cumulative mitigation expected from the program over the period 2021 through 2030, raising questions about the program’s ability to achieve its expected reductions. Beyond diagnosing market conditions, banking metrics can also help policymakers design dynamic program reforms that increase program stringency conditional on observed market behavior deviating from expectations.
... Covered sectors include electrical generation, manufacturing, cement production, and oil and gas production and supply. The majority of the state's carbon mitigation has been attributable to other "complementary measures," such as renewable portfolio standards for electric utilities and low carbon fuel standards for automobiles; the capand-trade program accounts for less than one-third of total mitigation [10,11]. The study by Morello-Frosch and colleagues focuses on the large point-source emitters targeted by the capand-trade program, but the emission trends for these facilities are the joint outcome of both types of policies. ...
In a Perspective, James Boyce and Michael Ash discuss Lara Cushing and colleagues' research study on the implications of California's policy on carbon trading.
... California is also experiencing low carbon prices and low demand for credits (see 'Price crash'). The scheme launched in 2013 as part of the state's suite of policies for achieving its ambitious emissions-reduction goals 6 . It was an open regulatory system from the start, and interacted with other climate-related policies. ...
A global network of cap-and-trade systems would deliver greater complexity and fewer emissions cuts, warns Jessica F. Green.
California presents a puzzle for scholars of US climate politics. In the early 2000s, it passed the country’s strongest climate laws despite the presence of the very factors that ostensibly explain their failure at the federal level: a fragmented system of government with multiple veto points, an active interest group landscape, and a major fossil fuel industry. Moreover, this was achieved under a Republican governorship in a state defined by automobile dependence. Scholars in political science and economics explain California’s exceptional policy emergence by reference to unique “focusing events” in the state, the leadership of elected officials, and the support of a broad advocacy coalition in Sacramento. This article presents an alternative explanation grounded in Gramscian political sociology. It marshals new evidence to argue that the political mobilization of Silicon Valley was the crucial factor in the emergence of California’s climate regime. Silicon Valley’s economic power, extraordinary potential to serve as the engine of a high-tech “green” capitalism, and its lead position in a new business-environmental bloc allowed it to overcome the resistance of the fossil fuel industry and to present climate policy as a winning economic strategy. This suggests that a credible plan for spurring growth, supported by significant fractions of capital, is necessary for achieving comprehensive climate policy.
Global governance has come under increasing pressure since the end of the Cold War. In some issue areas, these pressures have led to significant changes in the architecture of governance institutions. In others, institutions have resisted pressures for change. This volume explores what accounts for this divergence in architecture by identifying three modes of governance: hierarchies, networks, and markets. The authors apply these ideal types to different issue areas in order to assess how global governance has changed and why. In most issue areas, hierarchical modes of governance, established after World War II, have given way to alternative forms of organization focused on market or network-based architectures. Each chapter explores whether these changes are likely to lead to more or less effective global governance across a wide range of issue areas. This provides a novel and coherent theoretical framework for analysing change in global governance.
The U.S. federal system allows state and city governments to set policy and targets, design laws and standards, implement financial mechanisms to develop and support markets (e.g., green bonds), and enforce regulatory compliance. These are key levers through which decarbonization actions can be – and are already being – delivered, and through which a thriving low-carbon goods and services sector is being developed. However, the Federal Government oversees interstate electricity transmission, aviation, shipping, interstate pipelines, and coal and gas leasing on public lands. Key regulatory requirements, such as those for the power sector and for energy intensive industries like cement and steel, may be difficult to implement at the state level because of interstate competitiveness and leakage concerns.
Climate-related policies at the federal level should provide cities and states with economic development benefits as states and cities shift to infrastructure systems associated with low-carbon development. Cities and states cannot fund climate change responses on their own. Multiple funding sources are needed to deliver the financing that is essential to low-carbon development and climate risk management.
As states and cities plan and implement bold strategies for reducing GHG emissions, an opportunity exists to address existing disparities and to create stronger, more equitable communities for everyone. Making climate action plans more responsive to equity concerns will also help to galvanize broader constituencies of support for bold climate solutions.
This article investigates the roles of policy diffusion and policy learning in shaping the design of California’s cap-and-trade system. On the surface, it is very similar to other cap-and-trade programs, but in practice many detailed differences reflect active efforts by California policy-makers to avoid flaws that they saw in other systems, such as the EU ETS and the US East Coast’s Regional Greenhouse Gas Initiative. We assess how California’s cap-and-trade system emerged, the significance of policy diffusion, and the lessons for other trading systems by applying two broad sets of theoretical frames—the role of policy diffusion and the role of organized local political concerns. We find that despite the signature status of the trading system, California mostly relies on much less transparent and more costly direct regulation. We also find that California’s cap-and-trade system has developed mostly in its own, special political context, which hampers the feasibility of cross-border trading.
Almost 10 years ago, California's legislature passed Assembly Bill 32, the Global Warming Solutions Act of 2006. AB 32 set the most ambitious legally binding climate policy in the United States, requiring that California's greenhouse gas emissions return to 1990 levels by the year 2020. The centerpiece of the stateOs efforts-in rhetorical terms, if not practical ones-is a comprehensive carbon market, which California's leaders promote as a model policy for controlling carbon pollution. Over the course of the past 18 months, however, California quietly changed its approach to a critical rule affecting the carbon market's integrity. Under the new rule, utilities are rewarded for swapping contracts on the Western electricity grid, without actually reducing greenhouse gas emissions to the atmosphere. Now that the Environmental Protection Agency is preparing to regulate greenhouse gases from power plants, many are looking to the Golden State for best climate policy practices. On that score, California's experience offers cautionary insights into the challenges of using carbon markets to reduce greenhouse gas emissions.
Despite efforts by some congressional legislators to pass laws to limit greenhouse gas emissions and reduce the use of fossil fuels, no such laws have yet been adopted. Is this failure to pass new laws attributable to a lack of public desire for such legislation? Data from national surveys support two answers to this question. First, large majorities of Americans have endorsed a variety of policies designed to reduce greenhouse gas emissions; second, policy support has been consistent across years and across scopes and types of policies. Popular policies include fuel economy and energy-effciency standards, mandated use of renewable sources, and limitations on emissions by utilities and by businesses more generally. Support for policies has been price sensitive, and the American public appears to have been willing to pay enough money for these purposes to cover their costs. Consistent with these policy endorsements, surveys show that large majorities of Americans believe that global warming has been happening, that it is attributable to human activity, and that future warming will be a threat if unaddressed. Not surprisingly, these beliefs appear to have been important drivers of public support for policies designed to reform energy generation and use. Thus, it seems inappropriate to attribute lack of legislation to lack of public support in these arenas.
Almost 10 years ago, California's legislature passed Assembly Bill 32, the Global Warming Solutions Act of 2006. AB 32 set the most ambitious legally binding climate policy in the United States, requiring that California's greenhouse gas emissions return to 1990 levels by the year 2020. The centerpiece of the stateOs efforts-in rhetorical terms, if not practical ones-is a comprehensive carbon market, which California's leaders promote as a model policy for controlling carbon pollution. Over the course of the past 18 months, however, California quietly changed its approach to a critical rule affecting the carbon market's integrity. Under the new rule, utilities are rewarded for swapping contracts on the Western electricity grid, without actually reducing greenhouse gas emissions to the atmosphere. Now that the Environmental Protection Agency is preparing to regulate greenhouse gases from power plants, many are looking to the Golden State for best climate policy practices. On that score, California's experience offers cautionary insights into the challenges of using carbon markets to reduce greenhouse gas emissions.
Ongoing work on linking markets and mixing policies builds on successes and failures in pricing and trading carbon.
Forecasting supply and demand balance in California’s greenhouse gas cap and trade market
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Available at: www.bloomberg.com/news/2014-06-03/states-may-look-to-california-for-ways-to-meet-epa-rule
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