California Dream 2.0

California’s Cap and Trade a Versatile Tool for Environmental Policies

rp_erica-morehouse-287x377-228x3001.jpgGovernor Brown signed a budget last week that lays out for the first time how to invest the millions from California’s landmark cap-and-trade program ($734 million so far). California has shown another way that cap-and-trade is like the Swiss army knife of environmental policies: a versatile tool known for its usefulness and adaptability.

A Multi-faceted Investment Portfolio

California will invest $850 million over the next year to reduce dangerous climate pollution, a portfolio of investments that will benefit almost every part of California’s economy, going to low-carbon and public transportation, weatherization and energy efficient buildings, water efficiency, waste diversion, and natural resources like urban forests. Substantial investments, at least 25% of the total, will be directed to benefit disadvantaged communities most likely to be impacted first, and worst, by climate change.

Research has shown that the green economy is a solid investment since it already grows faster and is more resilient than traditional economic sectors (the San Joaquin Valley saw a 133% growth in employment in seven “green economy” sectors between 1995 and 2010). The budget also creates long-term guidelines for investing in the green economy as the stream of revenue grows in coming years.

Where the Revenue Comes From

California already limits, or “caps,” total carbon pollution from industries like cement manufacturers and food processors, as well as utility companies. Next year, the cap will expand to include transportation fuels and natural gas providers– two of the biggest polluting sectors in the state. The dollars California is investing are generated by holding these polluters accountable for their impact on the environment. Read More »

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A “Virtuous Cycle” of Low-Carbon Investments Especially for California’s Most Disadvantaged Communities

Erica Morehouse photoCalifornians will see a “virtuous cycle” of low-carbon investments begin as cap-and-trade auction proceeds finally head out the door starting this summer.  This is the news from the Brown administration this week detailing how they propose to start investing dollars from 2014 carbon auctions while beginning to repay the $500 million borrowed last year.

We are especially excited to see that California’s most disadvantaged communities — the ones that have suffered environmental burdens for years and will be hit hardest by climate change in the future — will see more than the mandated 25% of auction proceeds invested for their benefit.  Consistent with an investment plan released last year, there will be three major categories: sustainable communities and low-carbon transportation, energy efficiency and clean energy, and natural resources and waste diversion.   Clean transportation and sustainable communities will receive the largest chunk ($350 million) of the proposed $850 million investment.  This means we will see investments in solutions such as clean trucks and buses, electric vehicle rebates, zero-emission freight demonstration projects, and enhanced connectivity and modernization for public transit in disadvantaged communities.

Investments like these will create big wins for California’s most at-risk communities.

Consider this: Diesel trucks and buses are the single-largest source of toxic diesel pollution in the state, causing cancer, heart attacks, breathing emergencies, lost days at work, and even premature death.  Similarly, alternative personal vehicles like those with electric batteries can provide benefits to communities.  A recent study by ICF and an earlier study from UC Berkeley both showed significant benefits from investments in clean transportation and other low-carbon investments which include job creation, increased gross state product, and increases in personal incomes, not to mention indirect health care savings.

Why do we call this a “virtuous cycle” of investment?

The economic benefits are not simply the direct benefits you may think of first, such as job growth in areas like manufacturing and selling clean trucks, buses, and vehicles.  Research also shows that when you save $1 on energy costs — which would more than likely go to an international oil conglomerate — the benefit to the economy is $16.

How does this work?  Instead of sending those dollars overseas, you’re most likely spending them in your community, on local products and services.

Today, Governor Brown committed to the first of many critical cap-and-trade investments in disadvantaged communities and cleaner options for Californians. With this new virtuous cycle of investment, we expect these and subsequent investments to pay dividends to the health of our citizens, our environment, and our economy for years to come.

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One Year Later, Carbon Auctions Thriving in California

KHK pictureAt this time last year, an 11th hour lawsuit was brought by the California Chamber of Commerce on the eve of the state’s first carbon auction —and with it a wave of questions aimed to cast doubt on the landmark program. Will the auction actually happen? Will companies participate? Will allowances sell?

What a difference a year makes.

Since the first auction took place in November of 2012, we’ve come to find out the answers to those questions are – yes, yes, and yes. And, despite attempts to create uncertainty and confusion it’s held true for all four auctions to date.

The Golden State’s carbon market received another dose of confidence last week when state courts upheld California’s ability to auction carbon allowances and hold polluters accountable for their harmful emissions.  The ruling came just in time for the state’s fifth auction, which will take place tomorrow.

While the court decision is good news for cap and trade, perhaps even better is the progress that participants and other stakeholders have made in their discussions about the market over the past year.  From the 2013 California Carbon Summit to a recent Lawrence Berkeley National Laboratory Report, discussions are turning to the future of the carbon market post-2020 and potential linkages with other emissions trading programs.

A year later, the overwhelming sentiment is that the carbon market is here to stay.

Part of this confidence stems from the auction results themselves. In the last auction, all 2016 vintage allowances offered were purchased, signaling belief in the future of the carbon market, as these allowances cannot be used before 2016.  In addition, California companies have become more comfortable participating in the carbon market. This is reflected in the healthy volumes traded daily on the secondary market and the increased stability of prices over the past few months.

The settlement price for 2013 vintage allowances for tomorrow’s auction is forecasted to be lower than that of the previous one, which doesn’t indicate a weak market but rather the increased understanding that compliance will be less costly than previously expected. However, with a floor price of $10.71, which will continue to increase every year, a strong price signal for clean energy improvements remains.

Furthermore, the latest 2012 emissions data released by the California Air Resources Board show an increase in emissions from 2011 in California. This was expected for several reasons including the closure of the San Onofre Nuclear Generating Station, the shortage of hydropower generation in 2012, and the state’s significant economic recovery  during that time. California’s economy continues to rebound and the cap-and-trade program will play an important role in the landmark achievement of decoupling this economic growth from growth in carbon pollution that threatens our communities and the world.

Creating an entirely new market around the buying and selling of carbon emissions has been a long and rigorous process, but California’s record over the last year proves it is possible. Look out for EDF’s complete analysis of the successful first year of cap and trade in California at the beginning of 2014.

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Scoping Plan 2.0: Taking Action Today for a Clean Energy Future

Today, the California Air Resources Board (CARB) released its draft 2013 Scoping Plan, the blueprint outlining how the State will address climate change over the next five years, reach its goal of reducing greenhouse gas emissions to 1990 levels by 2020, and create a path for even deeper reductions beyond 2020.

The draft is full of smart and common sense ideas, but here are a few specific things to note about it:

It’s Ambitious

In this draft, CARB expressed the importance of setting a mid-term 2030 target to guide California’s effort to achieve the deep reductions needed to avert disastrous climate change.

Let’s be clear, efforts to set a 2030 target are significant for California.  It will provide a crucial market signal for businesses that the state’s clean energy efforts are here for the long-term.

California is already on track for reaching its 2020 climate change target, but is not resting on its laurels.

“California needs a 2030 target that is consistent with the level of reduction needed in the developed world to stabilize warming at 2°C and aligns with targets under consideration elsewhere,” ARB said.

Driven by a history of leadership, and a 2005 Executive Order signed by Governor Schwarzenegger for the state to reduce emissions 80% by 2050, CARB recognizes that there is much more that California can do to combat climate change. In their Scoping Plan comments, even the oil companies acknowledged “the AB 32 mandate does not vanish in 2020.”

It Doubles the Benefits

In this 2013 Scoping Plan draft CARB was directed by Governor Brown to prioritize areas to invest the state’s nearly $400 million in auction proceeds from cap and trade. In addition to placing a cap on carbon, these investments will help promote clean energy, reduce carbon pollution and foster innovation – and shows that environmental policy is also good economic policy. As ARB noted, “Programs such as sustainable community development and forests can provide near-term benefits while also laying the foundation for future, more ambitious projects.

It’s comprehensive

Reducing climate change pollution requires a collaborative approach across many sectors including water, energy, waste and natural resources – all of which are reflected in this draft. With this holistic approach, CARB can find cross-cutting ideas to move the state forward and advance the goals of AB 32. In EDF’s Scoping Plan comments we submitted recommendations in nine areas  and hope the State continues to take advantage of these interdependent opportunities.

Emissions in California fell every year from 2008- 2011, and sectors such as refineries and cement manufacturers are already taking advantage of energy saving opportunities. EDF commends CARB on using the 2013 Scoping Plan as a way to continue this trend, plan and invest in the future, and think big when it comes to addressing the most pressing environmental issues in California.

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California’s Cap-and-Trade Auction Investment Plan: Top 10 Reasons it’s a Winning Formula for California

California’s clean economy is dominated by industries like clean transportation, energy generation, and energy efficiency. So it comes as no surprise these areas were targeted for cap-and-trade auction proceeds investments in the draft investment plan released by the California Air Resources Board (CARB) last week and discussed at today’s CARB hearing.













Specifically, the plan lays out three major categories for investing auction proceeds: 1) Sustainable Communities and Clean Transportation 2) Energy Efficiency and Clean Energy, and 3) Natural Resources and Waste Diversion. Transportation and energy represent the two largest sources of GHG emissions in California, while natural resources and waste represents a huge untapped potential for reductions that will also create multiple benefits.

What are the facts though?  Why are we so sure that these are the right investments that will create a winning formula for California?

1.         It has worked before. A similar investment strategy in New England turned $912 million of proceeds from selling carbon allowances to the electricity sector into $1.6 billion in benefits which included reduced electricity bills and job creation.

2.         It targets our disadvantaged communities. There is clear data indicating  these communities are the most vulnerable to severe pollution and environmental harm and existing law requires at least 25% of auction proceeds benefit these communities. This investment plan lays out ways to exceed that target so that they can expect to disproportionately benefit from California’s plan.

EDF’s Invest to Grow Report showed that

3.         Investing in the state’s clean economy is investing in job growth. In California, it has added jobs up to 178% faster than traditional economic sectors over the past 15 years, meaning that we can expect investing auction proceeds in the clean economy will continue to spur job growth for years to come.















4.         California’s clean economy has proven more resilient during economic downturns than traditional economic sectors. While overall state unemployment fell seven percent during the recent recession, clean economy sectors remained stable. This means investing in the clean economy is a safe strategy for long term prosperity.   For example, the following graph shows that during economic downturns in 2002 and 2010, the green economic sectors either grew or remained stable while the rest of the economic retracted.













Investing in clean transportation makes sense because it …

5.         Will improve our health. California suffers from some of the dirtiest air in the nation. Forty percent of California’s GHG pollution comes from the transportation sector (cars, trucks, trains, etc.). Traffic pollution from cars also costs California nearly $15 billion in health damages annually. A recent report by the American Lung Association in California confirmed that in 2012, California was home to 11 of the nation’s 25 most polluted cities – so these investments are needed both now and in the future.

6.         Will create jobs. Every $1 billion invested in public transportation creates approximately 24,000 jobs in California – where the state unemployment rate is still about the national average.

Investing in clean energy and energy efficiency makes sense because it …

7.         Has already proven to be a game-changer for California. Energy efficiency projects have saved Californians over $66 billion in the last 35 years. and lowered energy use 25% below 2008 standards.

8.         Benefits recipients from cities and counties to businesses. An EDF’s Climate Corp program demonstrated that cities in North Carolina could save between $534,000 and $2,192,000 over a five year period.  Department of Energy assessments found that on average industry could reduce its electricity bills by 17% with energy efficiency projects that would pay for themselves in 1-2 years.  

Investing in natural resources makes sense because it …












9.         Helps farmers and the planet. Fertilizers commonly used in agriculture have a heavy GHG impact so reducing their use can generate big GHG savings; it can also save farmers money while reducing the release of harmful air and water pollutants.

10.      Protects open space and agricultural land. Together they can reduce vehicle miles traveled by preventing urban sprawl.  Estimates show that protecting 25 square miles of agricultural land would save an amount of energy that is sufficient to power 48,000 homes and would create health saving of $38.7 million by reducing air pollution.

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Invest to Grow: EDF’s newest report highlights the opportunities created by the strategic investments behind California’s landmark emissions reduction program

Over the past 20 years, the unprecedented growth and resiliency of California’s clean and efficient economy has continued throughout economic recessions and budget crises – even while many other sectors of the economy have shrunk.  This growth has created a statewide infrastructure of companies providing the products and services that are at the heart of the transition towards a lower carbon economy envisioned by California’s landmark climate law.

Companies across the California landscape are now ready, willing and able to capitalize on opportunities to increase the efficiency of our state’s buildings, industries and transportation system.  The investments offered under California’s climate law will enable families, businesses and the government to spend less money on energy and fuel, resulting in dramatically reduced pollution. And, as documented in our new report, there is no limit to the benefits these investments can provide.

Invest to Grow tells the story of how investing emissions credit auction proceeds will move California’s clean economy forward, creating jobs and cutting pollution.  Investment opportunities profiled in the report include improvements in buildings and business operations, municipalities, transportation, schools, universities and hospitals.  These opportunities are supported by data drawn from state and federal government programs, industry led initiatives, and EDF’s own Climate Corps program.

By investing emissions credit proceeds in opportunities that decrease greenhouse gases, the state will keep California firms—from LED manufacturers and distributors to energy efficiency retrofitters—in the driver’s seat during the transition to a lower carbon economy.

That’s just another reason why recent misguided and inaccurate reports that California can’t afford to make these investments are so ludicrous. Not only can we afford to invest in California’s clean economy future now – these investments will pay dividends far into the future.



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