California’s Cap-and-Trade Reforms: March 2018 Comment Letter

At a workshop earlier this month, ARB released its initial thinking on how to implement the post-2020 market design reforms required by AB 398 and invited comments on these materials. In response, we comment on ARB’s overall market design proposal and proposed interpretation of AB 398 offsets limits, focusing on the following five topics:

1.  Pursuant to AB 398, ARB still needs to evaluate market oversupply conditions and allowance banking regulations.

2.  Rather than dispute the cause of market oversupply, ARB should consider how to develop a post-2020 market design that manages a transition from today’s low prices to the higher prices that are likely needed to achieve California’s 2030 target.

3.  ARB needs to indicate how its proposed post-2020 offset limits are consistent with the legislative intent in AB 398.

4.  ARB should exclude consideration of greenhouse gas emissions from its proposed bottom-up determination of an offset project’s “direct environmental benefits.”

5.  ARB needs to show how its proposed market design is consistent with the role the Board identified for cap-and-trade in the final 2017 Scoping Plan.

To read the full comment letter, please download the full PDF comment letter.

We also analyze these issues more extensively in two Near Zero Research Notes, on market design here and offsets here.