Memorandum

Memorandum

To: Barbara Boxer, Committee Chair

From: Ima Planner, Lead Staff Member, Climate Change

Re: Greenhouse Gas Emissions Reduction

As part of a larger, legislatively mandated effort to reduce emissions of GHGs, the ARB recently adopted regulations to establish a new program, known widely as cap-and-trade that relies on market-based mechanisms to help reduce GHG emissions to 1990 levels in California. Cap-and-trade constitutes one of the most wide-ranging and complex regulatory efforts in the history of the state. As we will discuss in this report, the particular design of the program chosen by the ARB involves a number of important policy choices that have broad environmental, fiscal, and economic policy implications. Following are the answers to the question asked in the memorandum:

Cap and trade is essentially a marketing strategy intended to reduce the environmental impact of pollution emitting a large scale without crashing the U.S. economy in the process. A successful cap and trade model is the reward energy innovation, while gradually reducing the harmful emissions of greenhouse gases. There is considerable debate about the overall effectiveness of cap and trade. Skeptics argue that emissions trading will create widespread job losses and market volatility. Cap and trade is an economic model to reduce emissions of greenhouse gases through policies imposed by the government. The U.S. Environmental Protection Agency (EPA) describes the cap and trade as a market strategy for the protection of the environment and human health standards. The program focuses on a clear set of objectives, rewarding the industries that reduce their environmental impact, but remains flexible in the way of achieving these goals. For example, one of the objectives of the CAP and trade policy is to limit global temperature to two degrees above pre-industrial level by 2050 (Stavins, 2008).

We should not be concerned about the environmental justice because during the review period, the U.S. did not remain idle in the face of environmental justice problems, since federal agencies have taken steps to reduce environmental differences that can play against some communities, including groups of low-income and minorities. In addition, during the reporting period, more than 30 states have promoted environmental justice through laws, measures and public initiatives. The program revitalization of brownfields and territories as an effective mechanism for consultation to address environmental justice concerns and stimulate urban renewal (Moore, 2009).

The relative cost-effectiveness of each of the measures included in the Scoping Plan has not been evaluated. Without such an evaluation, the state cannot be assured that the mix of measures, as well as the extent to which any one measure is used, results in the most cost-effective approach to reducing the state's GHG emissions. It is possible, for instance, that a larger role for cap-and-trade relative to the direct regulatory measures currently in the Scoping Plan could be a more cost-effective means of achieving the goals of AB 32. We recognize that many of the direct regulatory measures included in the Scoping Plan were developed to address other policy goals not directly associated with a reduction of GHG ...