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Comments to California on Its Cap and Trade Program

California has legislation authorizing its Air Resources Board (ARB) to extend its cap-and-trade program for carbon emissions. This extension, while defining much of the program’s structure, asks ARB to develop some design features through a regulatory process and public feedback.

California’s most recent changes to the plan are consistent with our previous comments on the program, and they place California on the path to internalizing the cost of climate change from carbon emissions. Our most recent set of comments encourage ARB to continue to set the price ceiling for carbon permits at least as high as the Social Cost of Carbon set by the Interagency Working Group in 2016, as it does in its Concept Paper on carbon pricing. We also encourage ARB to allocate preferentially any unsold carbon allowances to the price ceiling, rather than to a lower price.