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Regulatory: Why California’s Cap and Trade program impacts every business

The program will affect many sectors of California’s economy

The January 2013 start of California’s first-in-the-nation program to cap greenhouse gas (GHG) emissions and create a market to buy and sell carbon emissions is receiving daily attention from regulators, environmentalists and California’s industrial sector. Stakeholders and industry media are treating this launch of California’s Cap and Trade program as a watershed event for their respective interests. They are right, of course.

Cap and Trade involves broader issues balancing the environmental and industrial sectors’ interests. The program is a multi-billion dollar source of new revenue for the deficit-ridden state. California is also setting national and perhaps international policy with Cap and Trade. The program will have economic ripple effects far beyond its regulatory boundaries. Meanwhile, the courts have not even decided whether the program will go forward and in what form. Consequently, California’s Cap and Trade program should be of interest to us all.

While Governor Brown sees Cap and Trade as a source of budget balancing revenues, the Democrat-majority legislature sees revenues from the program as a new source of funding for programs dear to it, such as energy efficiency, the green economy and clean technology. The legislature is considering three separate bills that would spend revenues from Cap and Trade, each with a different set of priorities and potentially new funding bureaucracies.

How these revenues are applied or spent is significant to every Californian. They are available to offset energy costs at healthcare facilities or school districts and free up other general fund monies to avoid healthcare program cuts or increases in class sizes. However spent, these revenues will eventually touch many sectors of California’s trillion dollar economy.

Contributing Author

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Thomas McMorrow

Tom McMorrow is a Partner at the law firm Manatt, Phelps & Phillips, LLP, in the Sacramento Government practice group and is Chair...

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Contributing Author

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Jon Costantino

Jon Costantino is a Senior Advisor at law firm Manatt, Phelps & Phillips, LLP, in the Sacramento Government practice group. He manages complex...

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