How does the Cap-and-Trade Program Work?
This program sets a decreasing limit on major GHG sources in California, providing a strong economic incentive for cleaner technologies.
Covering about 80% of the state's emissions, the program issues allowances equivalent to allowable emissions (the "cap"). An allowance represents one metric ton of CO2 equivalent emissions. These allowances decrease yearly, along with the cap.
With rising auction prices for allowances and reduced yearly allowances, a consistent carbon price signal is established, driving GHG reduction action.
Covered entities must still adhere to existing air quality permit limits for pollutants. Some covered entities may be allocated allowances, as well as purchase additional allowances from others or purchase offset credits.