Greenhouse Gas Cap-and-Trade Program

California's Greenhouse Gas Cap-and-Trade Program helps to fight climate change by reducing California's greenhouse gas pollution. Cap-and-Trade was designed by the California Air Resources Board (ARB) to achieve the goals of the Global Warming Solutions Act of 2006 (AB 32).It creates powerful incentives for our utilities and industries throughout the state to reduce their greenhouse gas emissions, improve the efficiency of their operations, and move toward cleaner forms of energy.

Cap-and-Trade Overview

To slow climate change we must steadily decrease the amount of greenhouse gases we release into the atmosphere each year. One way to do this is to limit the total amount of greenhouse gases that can be emitted in California, and then to lower that limit each year. ARB has done just that: it set a statewide greenhouse gas emissions cap, and each year it will lower the cap by about three percent until California reaches its emissions reduction goal.

Find out more about the Cap-and-Trade Program on ARB’s website.

CPUC's Role

As regulators of the state’s electric and natural gas utilities, the CPUC plays several important roles to implement parts of Cap-and-Trade. The utilities are major participants in the Cap-and-Trade Program, and we oversee how they comply with ARB's greenhouse gas emissions requirements. We decide how to use some of the proceeds generated from the program to benefit utility customers. We also ensure that the Cap-and-Trade-related costs utilities include in electric and natural gas rates are fair and reasonable.

To learn more and to participate in our decision-making process, read about our relevant proceedings.

California Climate Credit and Funds to Protect Customers

Power plants, natural gas utilities, and other large industrial facilities must pay when they put greenhouse gas emissions into the air. Some of that money is used by the state to fight climate change, and some goes to customers.

You can use these funds to join California in its efforts to fight climate change and clean the air!

For electric customers:

  • Residential California Climate Credit. Households receive a Climate Credit each April and October. Learn how much your electric Climate Credit will be.
  • Small Business California Climate Credit. Small businesses receive a monthly Climate Credit on their electric bill.
  • CA Industry Assistance. At-risk industrial facilities will receive a credit once per year.  Learn more about CA Industry Assistance.

Impact on Electric Utilities

Cap-and-Trade encourages electricity providers to shift toward clean sources of energy - the kind that comes from wind, solar, geothermal and other renewable resources. Under California law, electricity companies that import or supply electricity from non-renewable sources must purchase permits (known as “allowances") for the greenhouse gas emissions that comes from burning fuel to make this electricity. This gives the electricity industry incentive to find the cheapest and cleanest way to provide electricity to customers.

When utilities buy electricity from power plants that emit greenhouse gases, these pollution costs are reflected in all customers’ electricity generation rates - the portion of electricity bills that represents the costs to generate electricity. The California Climate Credit is intended to help protect households and eligible small businesses from these costs.

Other CPUC Programs that Address Climate Change

Cap-and-Trade is only one piece of California's work to address climate change. For instance, at the CPUC:

  • we're administering an integrated resource planning (IRP) process designed to ensure the electric sector is on track to help California achieve its statewide 2030 GHG reduction target at least cost while maintining electric service reliability;
  • we're increasing the amount of renewable energy that powers the grid;
  • we have created ambitious energy efficiency incentive programs;
  • we're making it easier for people to own and charge electric vehicles, and;
  • we offer incentives for residential and business-owned solar and other renewable energy.

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