ABSTRACT
On January 1, 2013, California launched a cap-and-trade carbon market as the centerpiece of the most significant climate change regulations in the United States. The creation of this market is the result of 7 years of legislative maneuvering and regulatory negotiation among myriad stakeholders. The bill that authorized the creation of market-based climate policy, AB32, the California Global Warming Solutions Act of 2006, offered significant discretion 1 to regulators on how to achieve California’s emissions reduction goal of returning to 1990 levels by 2020. What has resulted is a state-based emissions trading system with limited use of offsets that covers about 85 percent of the state’s documented emissions (ARB 2011). The market is part of a regulatory suite that blends direct regulations, including performance standards and clean energy quotas, with expansive market-based governance mechanisms. While the basic principles of carbon market design are fairly straightforward, the nuances in rule-making are multitudinous, the negotiations over those nuances protracted, and the number and types of interlocutors trying to inf luence all of the moving parts of the system are vast.
