We are convinced that an intelligent, long-term energy strategy must include a market-based cap-and-trade system that rewards innovation and energy efficiency without inhibiting economic growth. In our minds, cap-and-trade is far better than a straight carbon tax because with a tax, companies can simply pay up without changing their behavior. This is inconsistent with the overriding goal, which is for companies to develop efficient long-term solutions for reducing their overall emissions. 

 

There are several cap-and-trade models, but essentially the government sets a national cap on harmful emissions and companies are allocated a certain number of tons of emissions every year. It’s then the company’s decision as to how it uses its allowance. If a company doesn’t use its share, it can sell its unused allowance on the open market. Companies that need additional allowance can purchase more on the open market. Cap-and-trade is how the EPA reduced atmospheric levels of sulfur dioxide and nitrogen oxides, both of which cause acid rain.   


 

California implemented America’s first cap-and-trade program in 2012 and by many measures it’s a success story. All of the 23.1 million greenhouse gas emission permits were purchased at the initial auction, raising $233 million. Over ten years later, California has seen a reduction in emissions from almost every sector covered by the program. Plus, cap-and-trade has generated revenue resulting billions implemented through California Climate Investments programs, which supports emission reductions, climate equity and improved public health outcomes. ​​​

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The California Climate Investments' 2024 Annual Report revealed that the program "implemented over 17,000 new projects, which are expected to reduce 14.7 million metric tons of carbon dioxide equivalent over project lifetimes. That would be equivalent to taking more than 3 million gasoline-powered vehicles off the road. Projects implemented since the inception of California Climate Investments are expected to reduce more than 109.2 MMTCO2 e over project lifetimes. Seventy-six percent (76%), or more than $8.1 billion, of implemented California Climate Investments projects are benefiting priority populations. Overall, California Climate Investments greatly exceed the minimum percentages required by statute to benefit priority populations."