We are coming up on the one-year mark when everything changed for us as a society due to COVID-19. At first, we thought it might only last a few weeks. But weeks turned to a few months, and then months turned to seasons. Now here we are about to start our second spring in this parallel state.
Looking back on the year, I recall wondering about the implications of the pandemic and how that might impact the conversation on climate policy. With most of us working from home and sheltering in place, vehicle miles traveled plummeted. I watched the May 2020 cap-and-trade auction (the first auction after the pandemic truly took hold) and wondered how the market might react.
In response to that auction, I wrote a post about the results, noting a lack of surprise about the downturn.
Around that time, we also heard some of the same old refrains about the program – notions such as the price of allowances is not high enough, there are too many allowances in the system, or there is not enough revenue coming into state coffers.
But these complaints – which we still hear echoes of today – miss the point of the program. And they ultimately miss the point of placing a price on carbon.
A price on carbon is about driving action on climate – and it is working.
Cap-and-trade is an environmental program, first and foremost. It is not intended to be a revenue generator. Its primary function is to place a price on carbon and create the right incentive structure to drive investments in greenhouse gas emission reductions through technological development and conservation.
We should continue to celebrate the fact that California was ahead of schedule in delivering on its commitment to reduce greenhouse gas emissions to 1990 levels by 2020. And cap-and-trade has served as the backstop to all other state programs to ensure that we were able to meet that goal.
For those who doubt the program, all they need to do is observe the auction trends from this past year. The last two auctions have been fully subscribed. Prices for current year allowances and future year allowances have been steadily increasing. And even during the August auction when we were in the throes of uncertainty, future year allowances sold out completely.
Moreover, technological development and innovation is on the rise. Within the oil and gas industry alone, we have seen an exponential increase in investment and interest in technologies for carbon capture and sequestration, direct air capture, alternative fuels, and more. And as the state gets ready to kick off the update to the Scoping Plan – the California climate blueprint – which will be focused on carbon neutrality, we expect to see a positive conversation on all the innovation that is coming down the pike.
It’s truly exciting – and there is light at the end of the tunnel. We are all on this journey. And in my humble opinion, that is the mark of success.
Tiffany Roberts is Vice President, Regulatory Affairs at the Western States Petroleum Association. You can follow her on Twitter @tiffanykroberts, and keep up with her personal blog, Energy is Vital, where she chronicles the impacts of energy inequality through individual stores.