California preps mandatory cap-and-trade scheme

The state of California has released a draft plan for a mandatory emissions cap-and-trade programme that it hopes to implement by 2012, extending the voluntary carbon trading already operating across the state.

If passed, the initiative would impose mandatory carbon caps on 600 of the state's largest greenhouse gas emitters and force them to purchase carbon allowances if they exceed those caps.

The scheme, which would use a minimum auction model for carbon allowances, would be designed to work as part of the multi-state Western Climate Initiative – a nascent cap-and-trade programme incorporating six other Western states and four Canadian provinces.

Required by AB32, legislation signed into effect by Governor Schwarzenegger to help reduce carbon emissions in the state, the cap-and-trade system would impose a gradually declining cap on emissions.

Under the draft proposals, compliance periods that could see the scheme extended to cover new types of organisation are proposed for every three years, although the Air Resources Board, which developed the draft, is considering annual compliance periods.

A phased approach to the trading scheme could begin by including electricity generators and large industrial facilities. The second compliance period could cover industrial fuel combustion and transportation fuels.

"Using the approach under consideration, California could link its cap-and-trade programme to other trading systems," the draft document states, raising the prospect of the scheme integrating with any national emission trading scheme that could be passed as part of the US climate bill currently being considered by the Senate.

In January, an economic advisory committee will return a report on the proposed allocation of allowances, which could yet alter auction plans.