California adopts ‘cap-and-trade’ plan

SAN FRANCISCO – California formally adopted the nation’s most comprehensive so-called “cap-and-trade” system Thursday, an experiment by the world’s eighth-largest economy that is designed to provide financial incentives for polluters to reduce greenhouse gas emissions.

State officials said they hoped other states and Washington, D.C., would follow suit, calling the plan a “capstone” among the suite of tools California can use to reduce the pollution linked to climate change and cut dependence on foreign oil.

The California Air Resources Board voted unanimously to approve the final draft of its plan, a key part of the state’s landmark 2006 global warming law, AB 32, which seeks to reduce the emissions to 1990 levels by 2020.

Some businesses regulated under the program argue it will increase the price of electricity for consumers and hurt job creation by raising the cost of doing business in the state. But the program’s supporters expect cap-and-trade to spur economic recovery and innovation, by pushing business to invest in clean technologies.

In general, the program will require pollution producers like refineries and cement manufacturers to buy permits, called allowances, from the state. Each permit allows for a specified amount of greenhouse gases each year, with the amount declining over time.

Companies that cut emissions and have extra allowances can then sell the permits in a marketplace; greenhouse gas emitters could purchase those allowances if they failed to cut emissions.