On June 13, 2013, the California Air Resources Board (ARB) held a day-long workshop to kick off the stakeholder process for the Scoping Plan update. Presenters from various California agencies discussed high level plans to reduce emissions further from the energy, transportation, agriculture, water, waste, and land use. The workshop confirmed that cap-and-trade would play a central role in California’s post-2020 climate policy, but the key question is: what will the cap look like after 2020?
AB 32 and the 2008 Scoping Plan
California Global Warming Solutions Act, AB 32, mandates the Air Resources Board to develop a “scoping plan for achieving the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions” by 2020. The first version of the Scoping Plan was approved in December 2008 and was instrumental in establishing California’s overall climate strategy. Indeed, the 2008 Scoping Plan included a thorough cost-benefit analysis of various options to reach California’s 2020 target, and concluded that a combination of a cap-and-trade program with a wide array of complementary policies was best suited to the challenge ahead, which provided the foundation for California’s climate policy as we know it today.
The law also required ARB to update the scoping plan every five years, which brings us to the June 13 workshop. ARB is working in collaboration with other agencies to release a draft late August, with the goal of presenting a final version to the Board on November 21-22 this year.
What to expect from the Update?
The most interesting element of this Scoping Plan update is not so much the ongoing assessment of how the strategy outlined in 2008 is performing – the consensus is that California is well on track to meet its 2020 target of 427 Mt. The interesting part is that ARB is using this as an opportunity to lay the groundwork and start thinking about what happens after 2020.
California does not have a target set by law, but Gov. Schwarzenegger set by Executive Order a target for 2050 at 80 percent below 1990 levels, the recommendation from scientists from the United Nations International Panel on Climate Change (IPCC) to avoid the worst impacts of climate change. This 2050 goal was further reinforced by Gov. Brown as part of his zero-emission vehicle strategy.
Just to put things in perspective, 80 percent below 1990 level looks like this…
What Role for Cap-and-Trade Post-2020?
California’s cap-and-trade program is currently scheduled to last for three compliance periods: 2013-2014, 2015-2017 and 2018-2020. The regulation does not indicate what the cap might look like after 2020, or even if the program should continue at all. The June 13 workshop confirmed without any ambiguity that cap-and-trade would continue beyond 2020, and remain a centerpiece of California’s climate policy.
The Scoping Plan Update will not be the place for an extended evaluation and revision of the regulation, though. ARB is currently in the process of making final changes to the cap-and-trade regulation – both processes will run in parallel and the Scoping Plan will keep a bird’s eye view on all the GHG reduction policies rather than interfere with ongoing regulatory processes.
Now, if cap-and-trade does continue past 2020, the question is: how steeply the cap will decline after 2020? The scoping plan update will indeed address this issue, in particular by attempting to set intermediate target(s) between 2020 and 2050. How fast should emissions decline? How fast can emissions decline?
Reaching the 2050 target
How will California reach its 2050 target? Is it even feasible? ARB regulators acknowledged they didn’t have a crystal ball, and that it was the hardest issue they were grappling with. Two landmark reports have looked in depth at the technology that would be needed to meet the 80 percent below 1990 levels. The California Council on Science and Technology and the Lawrence Livermore National Laboratory found in their California’s Energy Future: the View to 2050 report that California could achieve roughly 60 percent below 1990 level with technology with “largely know about today” if those technologies are “rapidly deployed at rates that are aggressive but feasible.” Reaching the 80 percent target, however, would require “significant innovation and advancements in multiple technologies.” E3 and Lawrence Berkeley National Laboratory in a Science article entitled: The Technology Path to Deep GHG Emissions Cuts by 2050: the Pivotal Role of Electricity, also concluded that reaching this target would require technologies that are not yet commercialized to electrify the transportation sector.
Making the right choices today
Looking at the long-term target is a stern reminder on the importance of choices made today with regard to auction revenues and investments. Investing in R&D, in infrastructure development and deployment are going to be absolutely crucial to the transition to a low-carbon economy. In that regard, the idea of waiting another six to twelve months before deciding where the monies shall be used may after all be the right decision.
Meanwhile, it is safe – wise even – for market participants to assume that 2020 will bring a more stringent cap, declining rapidly over time and that cap-and-trade is here to stay.