Cap and Trade
The Cap-and-Trade Program is a key element of California’s strategy to reduce greenhouse gas (GHG) emissions. It complements other measures to ensure that California cost-effectively meets its goals for GHG emissions reductions.
The Cap-and-Trade Regulation establishes a declining limit on major sources of GHG emissions throughout California, and it creates a powerful economic incentive for significant investment in cleaner, more efficient technologies. The Program applies to emissions that cover approximately 80 percent of the State’s GHG emissions. CARB creates allowances equal to the total amount of permissible emissions (i.e., the “cap”). One allowance equals one metric ton of carbon dioxide equivalent emissions (using the 100-year global warming potential). Each year, fewer allowances are created and the annual cap declines. An increasing annual auction reserve (or floor) price for allowances and the reduction in annual allowances creates a steady and sustained carbon price signal to prompt action to reduce GHG emissions. All covered entities in the Cap-and-Trade Program are still subject to existing air quality permit limits for criteria and toxic air pollutants.
Program Overview
Cap-and-trade utilizes three funding programs, which are broken into three categories: (1) transportation, (2) energy, and (3) resource and waste. While complete information on these programs, including legislation, guidelines, and additional resource documents, can be found on ARB’s website below is a brief overview of the transportation programs:
Sustainable Agricultural Land Conservation (SALC) Program
This program is administered by the California Department of Conservation, as directed by the SGC, with a funding allocation of $1 million (as part of the $130 million allocated to the SGC as part of the AHSC Program). Activities associated with this program include the formulation/placement of Sustainable Agricultural Land Strategy Plans.
High Speed Rail Program
This program is administered by the High-Speed Rail Authority, with a funding allocation of $250 million. Activities within the program consist of the planning, design, and right-of-way acquisition, and construction of the initial operating segment.
Transit and Intercity Rail Capital Program (TIRCP)
This program is administered by the California State Transportation Agency, with a funding allocation of $25 million. Activities within this program consist of capital improvements and operational investments that will modernize California’s transit systems and intercity, commuter, and urban rail systems to reduce GHG emissions, expand and improve rail service and increase ridership, integrate the rail service of the state’s various rail operations, including integration with the high-speed rail system, and improve safety.
Low Carbon Transit Operations Program (LCTOP)
This program is administered through the Department of Transportation (Caltrans), with a funding allocation of $25 million. Activities within this program are designed to provide operating and capital assistance for transit agencies to reduce GHG emissions and improve mobility, with a priority on serving disadvantaged communities. Approved projects in LCTOP will support new or expanded bus or rail services, expand intermodal transit facilities, and may include equipment acquisition, fueling, maintenance and other costs to operate those services or facilities, with each project reducing greenhouse gas emissions. For agencies whose service area includes disadvantaged communities, at least 50 percent of the total funds received shall be expended on projects that will benefit disadvantaged communities.
Low Carbon Transportation Program
This program is administered by the California Air Resources Board (ARB), with a funding allocation of $230 million. Within this program, Cap and Trade auction proceeds provide an additional funding source for ARB’s advanced technology, clean transportation incentive programs, thus expanding the types of projects ARB has funded through the Air Quality Improvement Program (AQIP). Activities within the program include zero and near-zero emission passenger vehicle rebates, heavy duty hybrid/ZEV trucks and buses, freight demonstration projects, and pilot programs (car sharing, financing, etc.) in disadvantaged communities.