未來能源研究所-為不確定性而設計：加州上限和交易市場修正案

DesigningforUncertainty:AmendmentstoCalifornia’sCap-and-TradeMarket

NicholasRoy,MayaDomeshek,andDallasBurtraw

Report24-08

May2024

AbouttheAuthors

NicholasRoyisaresearchassociateatResourcesfortheFuture(RFF).HejoinedRFFinJune2020toworkontheHaikuelectricitysectorsimulationmodel.UsingHaiku,

Nickhasanalyzedanarrayofpoliciesincludingcleanenergytaxcredits,renewable

energystandards,andemissionspricing.Inadditiontoelectricitysectormodeling,Nickalsoemploysvariousresearchmethodstoanalyzefreightregulationandelectrificationinthetransportationsector.PriortojoiningRFF,Roywasa2019summerinternfor

ArtFraasinvestigatingenergyefficiencydeviceusageamongheavydutytrucks.

Betweenthetwopositions,heresearchedportdrayagedisruptionsattheCenterforInternationalTradeandTransportation.HegraduatedfromCaliforniaStateUniversityLongBeachwithaBAineconomics,aBSinappliedmathematics,andaminorin

philosophy.

MayaDomeshekisaresearchassociateatRFF.Herresearchfocuseson

decarbonizingtheelectricitysectorandthedistributionaleffectsofenvironmentalpolicy.SheworkswithRFF’sHaikuelectricitysectormodelandtheSocialWelfareIncidenceModel.Previously,shehasstudiedstatelevelelectricitydecarbonizationpolicyinVirginiaandPennsylvania,theimpactoftheInflationReductionAct,andgreenhousegasregulationsundertheCleanAirAct.

DallasBurtrawistheDariusGaskinsSeniorFellowatRFF.Hehasworkedto

promoteefficientcontrolofairpollutionandwrittenextensivelyonelectricity

industryregulationandenvironmentaloutcomes.Burtraw’scurrentresearch

includesanalysisofthedistributionalandregionalconsequencesofclimatepolicy,theevolutionofelectricitymarketsincludingrenewableintegration,andthe

interactionofclimatepolicywithelectricitymarkets.Hehasprovidedtechnicalsupportinthedesignofcarbondioxideemissionstradingprogramsinthe

Northeaststates,California,andtheEuropeanUnion.HealsohasstudiedregulationofnitrogenoxidesandsulfurdioxideundertheCleanAirActandconducted

integratedassessmentofcosts,andmodeledhealthandecosystemeffectsandvaluation,includingecosystemimprovementintheAdirondackParkandthe

southernAppalachianregion.BurtrawcurrentlyservesasChairofCalifornia’s

IndependentEmissionsMarketAdvisoryCommittee.BurtrawholdsaPh.D.in

economicsandamaster’sdegreeinpublicpolicyfromtheUniversityofMichiganandabachelor’sdegreefromtheUniversityofCalifornia,Davis.

ResourcesfortheFuturei

AbouttheProject

ThisresearchwassupportedbyResourcesfortheFuture’s(RFF)ElectricPower

Program.DalllasBurtrawservesontheCaliforniaIndependentMarketAdvisory

Committee.ThisworkissolelytheworkofRFF.

AboutRFF

ResourcesfortheFuture(RFF)isanindependent,nonprofitresearchinstitutionin

Washington,DC.Itsmissionistoimproveenvironmental,energy,andnaturalresourcedecisionsthroughimpartialeconomicresearchandpolicyengagement.RFFis

committedtobeingthemostwidelytrustedsourceofresearchinsightsandpolicysolutionsleadingtoahealthyenvironmentandathrivingeconomy.

TheviewsexpressedherearethoseoftheindividualauthorsandmaydifferfromthoseofotherRFFexperts,itsofficers,oritsdirectors.

SharingOurWork

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NonCommercial-NoDerivatives4.0International(CCBY-NC-ND4.0)license.Youcancopyandredistributeourmaterialinanymediumorformat;youmustgive

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DesigningforUncertainty:AmendmentstoCalifornia’sCap-and-TradeMarketii

ExecutiveSummary

Californiaislookingtoextenditsgreenhousegascap-and-tradeprogramforward

intimeandtomakeadjustmentstothetrajectoryoftheannualemissionscap.This

reportlooksatthepossiblereformssuggestedbytheCaliforniaAirResourcesBoard(CARB)usingRFF’sHaikuEmissionsMarketModel.Weanalyzetheallowanceprice,emissions,revenue,andbankingimpactsofcapreductionoptionsproposedby

CARBgivenuncertaintyabouttechnology,theeffectivenessofregulatoryprograms,investmentstrategies,economicactivity,andbankingbehavior.Weconsiderthethreemethodsofimplementingthe“48percenttargetcap”adjustmentproposedinthe

StandardRegulatoryImpactAssessment(SRIA)thatintendtoreducecumulativeallowancesupplyby265milliontonsby2030:1

?OptionA,nominalcapreduction;

?OptionB,partialnominalcapreductionandpartialallowancepricecontainmentreserve(APCR)reduction;and

?OptionC,APCRreduction.

Thenominalcapdescribestheintroductionofnewemissionsallowancesinagivenyear.Theemissionsoutcomewilldifferfromthecapbecauseoftheavailabilityofbankedallowancesandoffsets.

Additionally,weexaminethefullsetofoptionsincludedinCARB’sOctober5,2023,

workshop(the40,48,and55percent“budget”and“target”capreductions)thatwouldachievecumulativereductionsinallowancesupplyrangingfrom115-390milliontonsby2030.Wealsoconsidertheimpactofadditionalpotentialprogramdesignfeatures,includinganemissionscontainmentreserve(ECR);facility-specificcaps,assuggestedbytheCaliforniaCap-and-TradeEnvironmentalJusticeAdvisoryCommittee(EJAC);andmodificationstofreeallocation.

KeyFindingsfocusingontheOptionsA,B,andCforthe48percenttargetscenarioasidentifiedintheSRIA:

?Futureemissionsandallowancepricepathwaysvaryacrossscenarios.In

sensitivityanalysisinvestigatinguncertaintechnologyandenergydemand,wefindgreatervariationinallowancedemand,emissions,andprices.

?Removingallowancesfromthenominalemissionscapwillleadtoahigher

allowanceprice.However,removingAPCRallowancesincreasespricevariability.

?AlthoughOptionsA,B,andCappeartohavethesamecumulativeallowance

supply,thetighternominalcap(A)yieldsloweremissionsthanBandC,especiallyif,asCARB’sSRIAassumesandthisreportreaffirms,APCRsarenevertriggered.

1TheSRIAreports264milliontons.CARB’sworkshopandourmodelingassumes265milliontons.

ResourcesfortheFutureiii

?TighteningthecapinanyofthewaysCARBproposeswillincreaseallowance

valueabovebaselineevenasallowancesdecrease,butthechoiceofwhereto

removeallowances(fromauctionedsupplyorfreelyallocatedallowances,orfromtheAPCR)willhavedistributionalimpactsbychangingtheshareofallowance

valueaccruingtotheGreenhouseGasReductionFund(GGRF)relativetothataccruingtorecipientsoffreeallocation.

?Assumingtheprogramcontinuesbeyond2030,tighteningcumulativeallowancesupplyleadstoroughly40percentreductioninthesizeofthebankby2030,

afterwhichthebankcontinuestobedrawndownslowlythrough2045.Increasedcapstringencywillraisethevalueofbankedallowances.

?AddinganECRwouldsupportallowancepricesandrevenueinlow-demandscenariosandreduceuncertaintyaboutprices,revenues,andemissions.

?Addingfacility-specificcapswouldhaveverylittleimpactonthemarket(lessthana2.8percentincreaseinallowanceprices)butcouldreduceuncertaintyaroundhealthoutcomesfordisadvantagedcommunities.

Lookingbeyondthe48percenttargetscenariooptions,weconsider40,48,and55

percentbudgetandtargetcapreductions.Wefindthequalitativeimpactoftighter

capsonprices,missions,revenue,andbankingremainsconsistent.However,therangeofoutcomesvarieswidely,withpricesatthefloorinthelessstringentcasesandrisingtothepriceceilinginthemorestringentcases.AnECR,orfacility-specificcaps,can

beaddedtoanyofthesecapadjustmentswiththesameeffectsasforthe48percenttargetA,B,andCoptions.

DesigningforUncertainty:AmendmentstoCalifornia’sCap-and-TradeMarketiv

Contents

TableofFiguresandTables1

1.Introduction2

2.RegulatoryBackground7

3.Methodology9

4.ModeledScenarios12

5.AnalysisofSRIAProposed48PercentTargetPathway14

5.1.AllowancePricePathways14

5.2.Emissions16

5.3.DistributionalEffects17

5.4.BankingBehavior21

5.4.1.ConsideringAlternativeBankingBehavior23

5.4.2.ResultsSummaryfor48PercentTargetScenarioOptionsA,B,andC24

6.EmissionContainmentReserve25

6.1.Results26

6.2.Summary29

7.Facility-SpecificCaps30

7.1.Results31

7.2.Summary32

8.Alternativestothe48PercentTargetScenario33

8.1.Results33

9.Conclusion40

References41

Appendix43

ResourcesfortheFuturev

TableofFiguresandTables

Figure1.ProposedAllowanceSupplyBudgetsinCARB

10

Figure2.ComplianceInstruments,Emissions,andtheBankOverTimeinthe

California–QuebecCap-and-TradeMarket

14

Figure3.AllowancePriceOvertheHistoryoftheProgram

15

Figure4.OverviewofHaikuEmissionsMarketModel

17

Figure5.Non-ReserveAllowancesIssuedUnderSRIAScenarios

18

Figure6.ScenariosConsideredinThisAnalysis

19

Figure7.AllowancePriceRangesAcrossSRIAScenarios

21

Table1.CumulativeEmissionsAcrossSRIAScenariosUnderTwoDemand

Scenarios(MMT)

22

Figure8.CumulativeAllowanceValueAcrossSRIAScenariosUnderDifferent

AllocationSchemes(2025–2030)

25

Figure9.AllowanceValueAccruingtoDifferentInterestsAcrossSRIAScenarios

withDelayedScopingPlanAllowanceDemand

26

Figure10.AllowanceBankingAcrossSRIAScenarios

28

Figure11.TheFinancialValueofBankedAllowancesAcrossSRIAScenarios

(2025)

29

Figure12.AddinganEmissionsContainmentReservetoCumulativeAllowance

SupplyCurves(2025-2030)

32

Figure13.AllowancePriceRangesAcrossSRIAScenarioswithanEmissions

ContainmentReserve

33

Figure14.EmissionsReductionsRelativetoBaselineAcrossSRIAScenarioswith

anEmissionsContainmentReserve

34

Figure15.CumulativeAllowanceValueAcrossSRIAScenarioswithanEmissions

ContainmentReserve(2025–2030)

35

Table2.MarketImpactsofFacility-SpecificCapsfortheSRIAScenarios

(2025–2030)

36

Figure16.AllowancePriceRangesUnderAlternativeCapAdjustments40

Figure17.EmissionsAbatementRelativetoBaselineUnderAlternativeCap

Adjustments

41

Figure18.CumulativeAllowanceValueUnderAlternativeCapAdjustments

(2025–2030)

42

Figure19.AllowancePriceRangesUnderAlternativeCapAdjustmentswithan

EmissionsContainmentReserve

43

Table3.MarketImpactsofFacility-SpecificCapsUnderAlternativeCap

Adjustments

44

DesigningforUncertainty:AmendmentstoCalifornia’sCap-and-TradeMarket1

1.Introduction

Thisreportexaminesmarketanddistributionaloutcomesthatcouldresultunder

variousapproachestoreformingtheCaliforniagreenhousegas(GHG)cap-and-

trademarket.ThesereformsaremotivatedinpartbytheCaliforniaAirResources

Board(CARB)2022updatetoitsScopingPlan(SP)(CARB2022)thatidentified

technologychoicesthatcouldachievethestate’sGHGreductiongoals,reflecting

increasedambitionidentifiedbyAB1279(Muratsuchi2022),whichestablishedan85percentreductiongoalfrom1990levelsby2045,andreinforcedinthestate’sClimateCommitmentplan.In2023,CARBbeganaseriesofinformalworkshopstoexamine

reformstothemarkettoenableittoachievethosegoals.

Thecap-and-tradeprogramisanimportantelementofthestate’sregulatory

landscape,accompanyingotherpolicies,includingperformancestandardsandotherregulations.Theperformancestandards,includingforvehicles,energyefficiency,

therenewableenergy,andthelowcarbonfuelstandard,affectemissionsoutcomesprimarilybyreducingtheemissionsintensity,notthelevels,ofactivityinspecific

sectors.Otherregulationsincludethoseforbuildingandlanduseplanningand

thoseintendedtoimproveairqualityoutcomes,whichtogetherpointthestateinthedirectionofenvironmentalimprovements.

Mostofthestate’sreductionsinGHGemissionshavebeendrivennotbycapand

tradebutbytheregulatorymeasuresthataccompanyit(Cullenwardetal.2017).

Nonetheless,thecap-and-tradeprogramoffersimportantcontributions.Theemissionsimpactsofmostregulationsareuncertain,makingitdifficulttodesignpolicyto

meetcodifiedtargets;theemissionscapprovidesassurance.Thecarbonpriceandemissionsbankthatresultfromthecaprespondtochangesineconomicactivity,

energydemand,andtechnologyevolution.Theemissionscapcoversaboutthree-quartersofthestate’stotalGHGemissionsandsoboostsconfidencethatthestate’seconomywideclimategoalswillberealized.

Thecarbonpricealsoimprovesthecost-effectivenessofemissionreductionefforts.Historically,thecarbonpricehasbeenmoderate,yetitprovidesanincentivetorealizelow-costopportunitiesthatmightnotberealizedbydirectregulations.Theemissionscapcontributestothecredibilityofthestate’soverallcommitmenttodecarbonization,providingincentivesfortheprivatesectorthatalignwiththeforcinginfluenceof

regulations.

Finally,thecarbonpriceprovidesanimportantsourceoffundingforthestate’sclimatepriorities.TheGreenhouseGasReductionFund(GGRF)hasreceived$27.9billion

raisedbyintheallowanceauction.Thestatehasbeenabletospendthismoneyonaffordablehousingunits,transitagencyprojects,andzero-emissionvehiclerebates,amongotherprograms(CCI2024).SB535andAB1550requireallocating35percentofGGRFrevenuestowarddisadvantagedcommunities,assistingthestateinits

goalsofequityandenvironmentaljustice(DeLeón2012;Gomez2016).California

ClimateInvestmentshasfoundthat76percentofinvestmentsarebenefitingpriority

populations.

ResourcesfortheFuture2

Inpreviousworkshops,CARBidentifiedthegoalofreducingcumulativeallowance

supplytocorrecthistoricaloverallocationandmeetmorestringentfutureannual

targets(CARB2023a).Ithasproposedfixingtheoverallocationbyreducingcumulativeallowanceissuanceby115tonsbefore2030,referredtoasan“inventoryadjustment.”CARBproposedreducingallowanceissuancefurthertoalignwithstatutorygoals

(SB32:40percentbelow1990levelsby2030;AB1279:85percentbelow1990levelsby2045)oradministrativegoals(ScopingPlan2022:48percentbelow1990levels).Inthefall,CARBidentifiedsixdifferentcapadjustmentstomeettheseaims:the40,48,and55percent“budget”and“target”scenarios,thatwouldreducecumulativeallowance

supplyby115-390milliontonsby2030.Theadjustmentsfollowthreepathwaysbefore2030(40,48,and55percentreductions)(Figure1)(CARB2023b)1After2030,the

pathwaysdivergewiththe“budget”pathwaysdecreasingdirectlytothe2045goalandthe“target”pathwaysreturningtotheemissionstargetaftertheendoftheinventoryadjustmentperiodandthendecreasingtothe2045goal(Figure1).Thebumpupin

allowanceissuanceinthe“target”scenariosyieldsgreatercumulativesupply,leadingtohigheremissionsandlowerpricesthantheequivalentbudgetscenarios.Regardlessofthecapadjustment,allowancesupplywillnotequalemissionsoutcomesduetotheavailabilityofbankedallowances2andoffsetsascomplianceinstruments.

Figure1.ProposedAllowanceSupplyBudgetsinCARB

Source:CARBCapandTradeWorkshopOctober5,2023

1A48percentreductionwouldaligntheprogramwiththeneededambitionidentifiedinthe

2022ScopingPlanUpdate

tobeontracktoachievestatutory2045targets.Theemissionscapsin2030arebelowtheassociatedpercentagereductiontargettoaccommodatetheinventoryadjustmentthatisimplementedconcurrently.

2Allowancesnotusedforcomplianceretainvalueascomplianceinstrumentsinthefuture.

DesigningforUncertainty:AmendmentstoCalifornia’sCap-and-TradeMarket3

RFFsubmittedcommentstoCARBinDecember2023summarizingpreliminary

modelingtoaddressallowanceprices,annualemissionsoutcomes,bankingbehavior,andtheinteractionwithpotentialchangesincostcontainmentmechanisms,includingtheallowancepricecontainmentreserveandasuggestedemissionscontainment

reserve(ECR)(Royetal.2023).Wefoundthatpricesremainclosetothepricefloor

iflevelsofdemandforemissionsallowancesanticipatedinthe2022ScopingPlan

updatearerealized,andtheyrisetotriggertheallowancepricecontainmentreserve(APCR)underourrepresentationofadelayinachievingthe2022ScopingPlan

outcomes.Cumulativeemissionsreductionsare1,257–1,825millionmetrictons(MMT)by2045relativetobusiness-as-usualemissionswiththecurrentallowancebudget.3Anticipatingtheissuesweexploreindetailinthisreport,wefindthathowallowancesupplyisreducedmattersforbothcumulativeemissionsandallowanceprices.In

low-pricescenarios,removingallowancesfromtheAPCRwouldappearnottoreduceemissions,andintroducingECRcouldrectifythis.Priceswouldlikelybehigherand

emissionsoutcomeslowerifallowanceswereremovedfromtheannualnominal

emissionscaps.ThedistributionofallowancevaluebetweenGGRFandrecipientsoffreeallocationvariesgreatly.Furthermore,weseethefinancialvalueoftheexisting

bankgrowingsubstantiallyandpotentiallygaining$9billionunderscenariosthatleadtoincreasedallowanceprices.4

InApril2024,CARBreleasedaStandardizedRegulatoryImpactAssessment(SRIA)

fortheanticipated2024amendmentstothecarbonmarket,singlingoutthe48

percenttargetscenario(CARB2024).SRIAmainlyfocusedonoptionsforacumulativereductionof265millionallowancestoimplementtheinventoryadjustmentand

alignwiththe2030target.5Oneapproach(OptionA)wouldbetoreducethecapby

reducingthenumberofnewallowancesissuedthroughfreeallocationandtheauction.Another(OptionB)wouldbetoreducetheAPCRby50percenttomeetpartofthe

reductionandtomeettheremainderofthereductionbyreducingthecap.TheAPCRcontainsallowancesthataremadeavailableatrelativelyhighmarketprices.Thethirdapproach(OptionC)wouldremoveallallowancesintheAPCRandmeettheresidualneedwithasmallreductioninthecap.6AnothermajortopicintheSRIAisthepotentialchangetothefreeallocationtoinvestor-ownedandpublicutilities.

3Thosecommentsfocusedonreductionsfromthebusiness-as-usualemissionscasefromthescopingplanwiththecurrentbudget;thisreportcomparesreductionsfromthat

budgetwiththesameinitialemissionsdemand.

4Thecurrentallowancebankofroughly330milliontonsvaluedatroughly$40pertonhasavalueofapproximately$13.2billion.

5TheSRIAreports264milliontons.CARB’sworkshopandourmodelingassumes265milliontons.

6TheSRIAwasfollowedbyaninformalworkshoponApril23,2024thatexplained

potentialchangesinmarketrulesthatwouldbecomerelevantifoneoftheSRIA

approacheswerefinalized.

ResourcesfortheFuture4

TheSRIAdoesnotentertainotherpotentialstructuraladjustments,suchaschangingtheauctionpricefloorthatspecifiestheminimumpriceatwhichallowanceswillbe

soldintothemarket.ItalsodoesnotconsidertheintroductionofanECR,whichwouldconditiontheavailabilityofaportionoftheallowancesupplyonanauctionprice

triggerthatisabovethepricefloorandbelowtheAPCR.BothmechanismsreduceallowancesupplyifallowancepricesarelowinasymmetricwaytotheAPCR,whichexpandssupplyifpricesarehigh.TheSRIAdiscussesandrejectstheintroductionofno-tradezones(restrictingallowancetradingfornearbyfacilities)indisadvantagedcommunitiestoprioritizeemissionsreductionsinthesecommunities,anditdoesnotdiscussotherapproaches,suchasfacility-specificemissionscaps.

Thisreportapproachestheseissuesbyexploringindetailtheemissionsandallowancepricepathwaysanddistributionaloutcomesassociatedwiththethreepotential

approachestoimplementingtheSRIA48percenttargetscenario.WeprovidecontextbycomparingthesescenarioswiththefullrangeofpossibleemissionsandallowancepricepathwaysthatresultfromthesupplyadjustmentsinitiallyconsideredbyCARB,whichremainviableoptionsfortheregulatoryproposalCARBisexpectedtopresentlaterthisyear.WealsoexaminesometopicsthattheSRIAdidnotembraceincludinganECRtoreducecumulativeemissionswhenpricesarelow,andfacility-specificcapstoaddressenvironmentaljusticeconcerns.

Wefindthatfutureenergyuseandemissionsandthusallowancedemandare

uncertain,stemmingfromuncertainfuturetechnology,regulatoryoutcomes,and

economicactivitythatisapparentinCARB’sanalysisandrepresentedexplicitlyinourmodel.Theallowancemarketcandynamicallyrespondtotheseuncertainoutcomesthroughadjustmentsintheallowanceprice.Themarketalsoexhibitsdynamic

allowancesupplythatisenabledbythepricefloor,APCR,andpotentiallyanECR,

thatmoderatesuddenchangesintheallowancepriceandtogetherprovidegreaterconfidenceabouttheemissionspathwayandachievementofCalifornia’sinterimand2045emissionsgoals.

Animportantfeatureofthemodelingisthedifferencebetweenanticipatedpricesandcurrentlyobservedprices(andimpliedpricepathsforthefuture).Thisdifferenceis

partiallyduetooptimisticassumptionsintheCARBmodelingaboutenergydemandandtechnologydescribedinthe2022ScopingPlanupdate.Weexplorethese

assumptionsbyconsideringpotentiallyhigheremi