California's carbon market is a big success. Here are the facts.

Erica Morehouse

A decade ago, critics of California’s ambitious climate policies grimly described the kind of disastrous economy they said would follow. Skeptics have also tried to dismiss the state’s whole cap-and-trade program because demand for credits sold on the combined California-Quebec carbon market slowed this year.

Except, these naysayers’ predictions are missing the mark, as 10 years of clear facts now prove. California’s track record also helps explain why lawmakers this week moved to ramp up the state’s climate efforts – in which the carbon market is expected to continue to play a key role.

1) California is beating emissions targets

Today, California is ahead of schedule in meeting its nation-leading climate goals.

The state’s nearly 10-year-old climate program, of which the carbon market is the backbone, initially required a reduction in greenhouse gas emissions to 1990 levels by 2020, 15 percent below where emissions would be without regulation.

But the Golden State is expected to be well below 1990 levels four years from now; emissions have been below required levels every year for which we have data.

On the foundation of this remarkable success, the California legislature passed climate bills on August 24 that set targets for another 10 years into the future – while ratcheting up ambition. Under the new legislation, which Gov. Jerry Brown has said he will sign, the state will reduce emissions by 40 percent below 1990 levels by 2030.

2) California’s economy is booming

Increased economic activity tends to be tied to rising pollution, a major challenge in the fight against climate change. Not so in California, which has instead grown to become the sixth largest economy in the world.

The state’s economic output has increased steadily since the recession as emissions have continued to fall.

In 2013 and 2014, the first two years of California’s experiment with capping carbon, the state added a whopping 900,000 jobs, a growth rate of 5.4 percent that by far eclipsed the national rate of 1.8 percent.

Many of those jobs are a direct result of investments in clean energy technology spurred by the state’s climate policies.

3) California is inspiring global climate action

The impressive first decade of California’s 2006 climate law, and the successful implementation of the world’s most comprehensive carbon market, have attracted numerous partners. States, provinces, cities and countries are watching carefully and taking action, a race to the top that is good for the planet.

At the Paris negotiations at the end of 2015, Gov. Brown led an effort that resulted in states and regions committing to reducing greenhouse gas emissions by at least 80 percent below 1990 levels by 2050. A total of 135 states, provinces and cities, representing one-quarter of the world economy, have signed the agreement.

California is now partnering directly with several Canadian provinces to implement joint cap-and-trade programs, like it did with Quebec. It also established agreements to share information and work with Mexico and China on their efforts to price carbon.   

State’s reward: $23 billion in benefits by 2025

With full implementation, we project that California’s cap-and-trade and transportation regulations will result in cumulative benefits from avoided health costs, improved energy security, and reduced social costs of carbon valued at $10.4 billion by 2020 and $23.1 billion by 2025.

It begs the question: Will the rest of the world continue to be inspired by California’s successful model as the globe shifts to a low-carbon, sustainable economy?

We think so.


This statement about California does not mention [the economic] burden for companies that are lowering toxic emissions…In Ontario, companies that are lowering toxic emissions want [price] increases for gas and electricity distribution. They are doing the opposite: Instead of lowering prices, they are increasing them.

Ronald Ivan Juarez
December 14, 2017 at 3:43 pm

I don't know why you think decreasing aggregate consumption by a percent or two a year is sufficient. Cap and trade would be fine in principle but the parameters set are far too lax. Climate change is becoming an emergency.

Prof Robert An…
March 24, 2018 at 11:46 pm

So what! I do not mind paying to see the system work. It is to our health and benefit. We all have to pay for worthwhile benefits.

Ed Morin
May 9, 2018 at 9:16 pm

Ontario, Canada’s, recently elected conservative government has moved to cancel participation in the carbon market with California and Quebec. Legislation introduced today (July 25, 2018) is headlined “Ontario Introduces Legislation to End Cap and Trade Carbon Tax Era in Ontario”

Government-speak promises consumer savings and blatantly calls cap-and-trade a carbon tax. I hope EDF will keep this backward move front and centre in its discussions , research, media releases and blogs.

Donald Alexander
July 25, 2018 at 4:38 pm

In reply to by Ed Morin

My problem with a cap and trade program is that the funds, or penalties, are not used to reduce pollution or improve climate change.Caps are a good idea and all companies should meet the standards.

[But] it’s wrong to issue allowances to pollute. And those companies that sell their credits should not receive any money. Should not be rewarded for doing what is right. It is a company’s duty to comply with the limits or caps. The money raised through penalties should go toward reducing pollution. For example money should be spent on re-forestation. Planting trees reduces carbon in the air.

The penalty money now is just spent by the government on general budget items. Just another tax.The money raised should be spent on reducing pollution!

Carlos Gusts
June 4, 2018 at 1:06 pm

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