This study assists entities that are directly affected by cap-and-trade regulations, as well as affected markets and industries, and provides an overview and status update of the program with a detailed analysis of key AB 32 program elements. The study also provides quantitative analysis of key implications.
With a federal greenhouse gas (GHG) reduction program on indefinite hold, the cap-and-trade scheme developed under California’s Assembly Bill 32 (AB 32) is the current focus for GHG trading and U.S. mandatory GHG offset markets. The program immediately establishes a GHG trading program for large emitters and providers of electricity. The program expands to smaller stationary emitters and the transportation sector in 2015. It also has the potential to link to other states in the Western Climate Initiative (WCI) and Canadian provinces, some of which already have mandatory GHG programs in place.
The AB 32 cap-and-trade program includes a never-before-tried approach to include imported electricity under the cap. AB 32 also includes a complex system of overlapping command-and-control programs for various sectors, in addition to the cap-and-trade program. There is much anticipation for the implementation of the program, but there are also many questions about the structure, the workability, and the implications for GHG allowance and offset markets as well as related impacts on electricity, fuels, and renewable energy credit markets.
ICF's study covers the following key elements of the AB 32 cap-and-trade program and their implications for market participants:
1. Introduction to the California cap-and-trade program
- Program rules and implementation status
2. California’s demand for emission reductions
- Baseline emissions forecasts and the compliance target
- Emission reductions achievable through complementary programs, including the Renewable Energy Standard (RES)
3. Analysis of the allowance allocation
- Approach to allowance allocations by sector
- Sectors long versus short on allowances
4. Outlook for the supply of internal emission reductions
- Discussion of sector abatement potential
- Special focus on sources of power sector emission reductions
5. Outlook for the supply of offsets
- Offset provisions and rules under Air Resources Board (ARB) accepted protocols
- Projected available volumes, supply ris and potential for an expansion of offset types
6. Prospects for linkages with other cap-and-trade programs
- Western Climate Initiative (WCI), including the Canadian provinces
- Other linking options
7. Allowance prices for each compliance period through 2020, based on:
- Offset demand and supply
- Achievement rates for the complementary programs
- Economic/load growth rates
- Fuel prices
- Allowance banking behavior
8. Summary discussion of impacts on fuel prices, electricity prices, and power sector developments
The study is based on ICF’s unparalleled analytical framework for fuel, electricity, and allowance markets. It includes a written document, teleconference briefing to participants, and exclusive access to ICF’s expert staff. The study will be of particular interest to the following:
- Large GHG emitters in California
- Other energy consumers in California
- Electricity generators and others who participate in the California power market
- Renewable or conventional power developers in California
- Participants in the GHG offset markets