By David Boles

The Californian Cap and Trade seems to be extraordinarily well designed. In order to protect the every day consumers of electricity,the developers of the program have a number of measures to protect the man on the street from bearing the full cost of the transition to a zero carbon economy. Allowances will be freely distributed to electrical distribution companies. In addition, Utilities must use their allowance value to reduce the cost ofAB32 policies on their ratepayers. The Air Resources Board (ARB) proposes that 89 million allowances from the 2012 cap be allocated to the distribution utilities free of charge. This allocation will decrease with time. The initial allocation was calculated by multiplying the sector's 2008 emission's (98.9 million tonnes CO₂) by 0.9 to give the electricity distribution sector a total of 89 million. The free allocation to the distribution network will decline by 15% by 2020 and breaks down as follows:

• First compliance period: 0.981 for 2013 and 0.963 for 2014.
• Second compliance period: 0.944 for 2015,0.925 for 2016 and 0.907 for 2017
• Third compliance period: 0.888 for 2018, 0.869 for 2019 and 0.851 for 2020.

   

The main motivation for these measures is to spread the cost of carbon through the retail and wholesale electricity market. The utilities will pay for of their emission allowances and will be the primary demand for allowances within the program. Waste to energy facilities are also lumped in which makes good common sense. The Industrial sector will have free allocations determined by their sensitivity to an embedded carbon price. Different industries will be allocated varying amounts based on comprehensive studies. It will be very difficult for Industry to pass on the cost of Carbon in the manner that utilities can. In order to protect Industry and maintain competitiveness and ease transition to a low carbon economy they will receive free allocations to cover Direct and indirect costs of their carbon cap. This is illustrated in the schematic below:

The underlying philosophy is to embed a carbon price in anything produced in the program's jurisdiction. The Industrial sector under this program will receive free allocations according to the following table:

By David Boles

The Californian Cap and Trade seems to be extraordinarily well designed. In order to protect the every day consumers of electricity,the developers of the program have a number of measures to protect the man on the street from bearing the full cost of the transition to a zero carbon economy. Allowances will be freely distributed to electrical distribution companies. In addition, Utilities must use their allowance value to reduce the cost ofAB32 policies on their ratepayers. The Air Resources Board (ARB) proposes that 89 million allowances from the 2012 cap be allocated to the distribution utilities free of charge. This allocation will decrease with time. The initial allocation was calculated by multiplying the sector's 2008 emission's (98.9 million tonnes CO₂) by 0.9 to give the electricity distribution sector a total of 89 million. The free allocation to the distribution network will decline by 15% by 2020 and breaks down as follows:

• First compliance period: 0.981 for 2013 and 0.963 for 2014.
• Second compliance period: 0.944 for 2015,0.925 for 2016 and 0.907 for 2017
• Third compliance period: 0.888 for 2018, 0.869 for 2019 and 0.851 for 2020.

   

The main motivation for these measures is to spread the cost of carbon through the retail and wholesale electricity market. The utilities will pay for of their emission allowances and will be the primary demand for allowances within the program. Waste to energy facilities are also lumped in which makes good common sense. The Industrial sector will have free allocations determined by their sensitivity to an embedded carbon price. Different industries will be allocated varying amounts based on comprehensive studies. It will be very difficult for Industry to pass on the cost of Carbon in the manner that utilities can. In order to protect Industry and maintain competitiveness and ease transition to a low carbon economy they will receive free allocations to cover Direct and indirect costs of their carbon cap. This is illustrated in the schematic below:

The underlying philosophy is to embed a carbon price in anything produced in the program's jurisdiction. The Industrial sector under this program will receive free allocations according to the following table: