The California Air Resources Board will operate the market and hire an auction host and monitors. By 2016, about $10 billion in carbon allowances are expected to be traded through the California market, which will be the second-largest carbon market in the world behind the European Union.
What is leakage?
One meaning is leakage of jobs to other states should businesses find the new regulations onerous and shut down. Another meaning of leakage refers to pollution shifting out of state as refineries and other emitters move out of California.
What will this mean for consumers?
The cost of energy is expected to rise, although economists debate the magnitude. The Public Utilities Commission allowed investor-owned utilities to pass on the cost of compliance to customers. The Air Resources Board has a mechanism to protect consumers from price spikes by capping the auction price and releasing credits onto the market to drive down prices.
What effect will this have on California's economy?
The independent Legislative Analyst's Office concluded that jobs probably will be lost because businesses can move elsewhere. Other business leaders applaud the regulations, arguing that the plan gives industry some certainty and a mechanism to reduce carbon emissions. Proponents and the Air Resources Board say the increase in "green" jobs will outweigh short-term negative effects.