June 14, 2023
Today, CARB staff held a public workshop on potential amendments to the Cap-and-Trade (C&T) regulation. The meeting was cohosted by the Québec Ministry of the Environment. This is the first workshop concerning potential C&T modifications since the adoption of the 2022 Scoping Plan. The C&T regulation needs updates for consistency with the Scoping Plan. This event kicks off the series of workshops which will introduce the concepts, basis, and particulars of the C&T updates under consideration by CARB staff. The series of workshops will culminate with the initiation of the formal rulemaking process including the filing and publication of draft regulatory text, initial statement of reasons (ISOR), and the environmental and economic analyses.
The highlights of today’s workshop were:
- Staff introduced three Allowance Budget Scenarios: 40%, 48%, and 55% emission reductions by 2030. The scenarios represent the current schedule, the reduction projected in the 2022 Scoping Plan Scenario, and a scenario representing the upper bound, respectively. Each of these may be coupled with an 85% reduction by 2045.
- Staff is evaluating the potential addition of carbon capture and sequestration (CCS) at emitting sources and carbon dioxide removal (CDR) from atmosphere to C&T per legislation, executive order, and Scoping Plan strategy. Importantly, however, Senate Bill 905 (SB 905) prohibits CCS or CDR from facilitating enhanced oil recovery.
- Staff is looking at mechanisms to reduce the current bank of allowances (representing ~5 % of vintage 2013–2030 allowances issued within the joint market). Any such mechanism would not include reducing current holdings but rather reduce the injection of new allowances through the future allocation, auction, and containment tier allowances.
- CARB intends to maintain the linkage with Québec with this rulemaking. Potential linkage with the Washington Cap and Invest (C&I) program is under consideration but will not be part of this rulemaking process.
- The formal rulemaking for C&T will occur after the LCFS rulemaking. As such, C&T rulemaking will likely take place in 2024 with a 2025 implementation (as 2025 begins a new compliance period).
Stillwater will continue to monitor and report on future workshops and announcements concerning the C&T program. To receive in-depth analysis around the C&T program and auctions, subscribe to Stillwater’s C&T Newsletter.