California delays start of Cap and Trade until 2013

July 6, 2011

On June 29, 2011, the California Air Resource Board announced that it is delaying the start of the state's cap and trade program until 2013, a year later than was originally envisioned. CARB will initiate the cap and trade program in 2012 but use that year to test various aspects of the program; no greenhouse gas (GHG) emissions reductions will be required until 2013. However, the 2014 reduction target of 6% below business as usual and the goal of reducing emissions to 1990 levels by 2020 are unchanged.

In the announcement, CARB Chair Mary Nichols said that the delay is necessary because it is so critical that the cap and trade regime be a success. CARB will be initiating all elements of the cap and trade program in 2012, including establishing market oversight mechanisms, conducting trainings, holding auctions and developing linkages with partners in the Western Climate Initiative (WCI), to ensure all aspects of the program operate as intended.

In light of CARB's announcement, market watchers consider it reasonable to expect British Columbia and Quebec, the Canadian WCI members on track to initiate cap and trade programs in 2012, to delay industry compliance with GHG emissions reduction targets until 2013 to be in step with California. The readiness of Ontario and Manitoba, the other two Canadian WCI members, to participate in the WCI in 2012 has been in doubt for the past few months. While provincial elections in Ontario set for October have caused the incumbent Liberal government to hold off on pushing ahead with the program, Manitoba expects to join the WCI only after the program has begun.

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