BLUE STATE BLUES: Checking the math on California’s cap and trade, some experts say it’s not adding up.
Far more troubling are red flags highlighted in reports from academia, the nonpartisan Legislative Analyst’s Office, independent market experts and other major carbon markets, all concluding that California has a serious problem with too many unused pollution credits.
In the cap-and-trade system, major polluters must either produce fewer greenhouse gases to comply with California’s emissions caps or buy credits to offset their excess emissions from companies that pollute less. Credits are traded at state-sanctioned auctions and on secondary markets. And the state gives some free to utilities, natural-gas suppliers and industries that are vulnerable to out-of-state competition.
Some companies have not yet needed to use up the allowances to stay within state emissions limits and probably won’t have to in the next couple of years, according to some analysts, who estimate there are hundreds of millions of unused credits in the system.
The result is a glut of credits that could allow businesses to keep polluting past state limits in later years, after the overall cap becomes more restrictive. Unless the oversupply is addressed, experts say, polluters will have no incentive to cut emissions to required levels by 2030; instead, industries could continue polluting and use banked allowances to offset their emissions and technically keep them under the cap.
The state Legislative Analyst’s Office foresees a reckoning, estimating that because of excess allowances, actual emissions could be as much as 30 percent over the statewide target by 2030.
Positive spin: Sacramento finally produced a surplus of something.