Providing in-depth coverage of California’s climate policies and flagship cap-and-trade program, Dave Roberts of Vox spoke with Near Zero’s Danny Cullenward, and drew heavily on Near Zero’s work on cap-and-trade implementation in California (see the many links embedded in the article).

For example, regarding oversupply in the cap-and-trade program:

Concerns about oversupply in the California system have been raised for years, dating back at least to May 2016, when allowance prices collapsed and 90 percent of allowances went unsold. Later that year, Danny Cullenward, policy director at the think tank Near Zero, and Andy Coghlan of UC Berkeley published a paper in The Electricity Journal warning of “structural oversupply.”

The Carbon Market Supply Association warned CARB in September 2016 that oversupply was “as high as 300 million tons.” Warnings were echoed by the LAO (in February 2017 and again in December 2017), Chris Busch at the energy policy firm Energy Innovation in December 2017, the Environmental Commissioner of Ontario (in a January 2018 report contemplating that province’s own carbon pricing system), Near Zero in March 2018 (and many times since; see here for a synthesis), and the Independent Emissions Market Advisory Committee in October 2018.

The article also contains a detailed description of the California Air Resources Board’s (CARB) evaluation of oversupply as mandated by AB 398, Near Zero’s critique of that analysis, and CARB’s subsequent responses (e.g., here). The article then sums up as follows:

In 2010, CARB was conscious of the oversupply problem (and thus collapsed allowance prices) in the EU Emissions Trading System (ETS), which was due in part to regulators overestimating emissions at the outset. CARB was focused on using real, facility-level emissions data in its program.

“In 2007, [CARB] put in place a mandatory reporting program to provide accurate greenhouse gas emissions data for the sources that will be covered in the first compliance period of the cap-and-trade program,” it wrote in the staff report justifying its original program caps in 2010. “The data gathered through this program will help ensure that the over-allocation issue is not repeated in the California context.”

In 2018, for reasons it has never adequately explained, CARB returned to using an inflated number to project emissions.

The contested analysis from the April workshop remains the only analysis CARB has done of the risk of oversupply. It remains the only analysis CARB has done of whether the cap-and-trade system will be stringent enough to yield the emission reductions required of it.

That means, despite the clear intent of AB 398, there is still no analysis of whether cap and trade will yield the necessary reductions in annual emissions, which are the actual subject of the 2030 target.

Read the full article, “California’s cap-and-trade system may be too weak to do its job” by Dave Roberts, on the Vox website.