California Cap-and-Trade clears a big hurdle (and why that’s important for transportation)

California’s cap-and-trade program for reducing greenhouse gas emissions has just cleared a big legal hurdle in the state courts (story here).  And this could be important for the transportation sector.

Why?

Unlike some other cap-and-trade programs, California’s very explicitly includes transportation fuels.  And if it proves successful in encouraging cleaner transportation it could provide a model for other states.

Climate change experts and policy makers are looking more closely at the California system for three reasons:

1.     The transportation sector has recently overtaken the electricity generation sector as the leading source of greenhouse gas emissions in this country.  While GHG emissions from electricity generation have been going down (government regulations, cheap natural gas), emissions from transportation have been going up (cheap gasoline, rising post-Recession VMT).

2.     Although many strategies for transportation GHG reduction have been developed – and many of them have been at least partly implemented – the trend lines are not good and even aggressive implementation of more conventional strategies looks to fall short of science-based targets for emission reductions.

3.     The federal government appears to be out of the game for the foreseeable future, leaving the initiative for climate policy squarely in the hands of the states.

The California program is (not surprisingly) a bit complicated.  A good overview can be found here.

One of the key features of the California program is that it generates significant revenue, which by law has to be plowed back into “green” investments.  (Some people have called a program like this “cap-and-invest” rather than “cap-and-trade.”)  According a recent report to the Legislature (here), in the first four years of the program, $3.4 Billion has been appropriated from cap-and-trade proceeds.  In the transportation sector, this has funded, among other things, more than 100,000 rebates for zero-emission and plug-in hybrid vehicles and more than 200 transit projects. 

At least 25% of the appropriations from the program must be targeted for disadvantaged communities.  California policy makers have decided – I think wisely – that for both practical and moral reasons it’s a bad idea to make rural and disadvantaged communities pay a premium, say in higher gas prices, without receiving targeted investment in their mobility needs.

Is California-style Cap-and-Invest coming to other states?  Perhaps.  It certainly has major potential benefits and should be watched closely as it develops.