California should set -40% 2030 CO2 goal, keep cost containment reserve -report

Published 18:23 on April 6, 2015  /  Last updated at 19:12 on April 7, 2015  /  Americas, US  /  No Comments

California should set a 2030 goal of a 40% cut in greenhouse gas emissions under 1990 levels and keep current rules for its carbon market’s cost containment reserve, a think tank report said on Monday.

California should set a 2030 goal of a 40% cut in emissions under 1990 levels and keep current rules for its carbon market’s cost containment reserve, a think tank report said on Monday.

Environmental think tank Energy Innovation published the report, which could influence the US state in setting a goal. California is on track to meet its 2020 goal to cut emissions to 1990 levels and is expected to decide from next year on its post-2020 policies.

“Adopting a 2030 target of 40% below 1990 emissions levels will maintain California’s global climate leadership,” the report said, referring to California’s long-term goal to cut emissions 80% under 1990 levels by mid-century.

It said California should keep its current policy of a cost containment reserve- which currently stands full at 122 million allowances as no company has opted to pay the current $45.20 bottom tier price, way above the market price of around $12.50.

It recommended:

  • Current market structure should continue but with have annual caps that decline linearly between 2020 and 2030, rather than the slightly uneven reductions later this decade due to the way reserve allowances were set aside.
  • Up the cost containment reserve from the current 4.9% of the average cap over 2013-2030 to 7%. This would result in a 50% emission reduction under 1990 levels by 2030 if no allowances were drawn from the reserve and a cap of 168 million tonnes.
  • Allow borrowing up to six years forward to fill the reserve when all highest-tier allowances have been auctioned (currently allowed via borrowing of up to 10% of allowances in 2020 and 2019).
  • Retire allowances remaining in the reserve at the end of 2020, while allowing banked allowances to remain available for compliance.

The report found that by 2030, prices for the cost containment reserve would be $93-116 and the auction reserve price $25, before inflation, if current rules were extended. That’s up from current levels of $45.20-56.51 and $12.10.

The Energy Innovation report said a January study by Energy and Environmental Economics, which concluded the state would achieve a 36% cut by 2030, would under further analysis reveal a 40% cut is achievable if taking into account other reductions in land use, energy savings due to water efficiency and better town planning cutting transport emissions.

By Ben Garside – ben@carbon-pulse.com