California put in place a cap-and-trade program in 2013. In such a program, companies pay penalties if they exceed a cap in carbon emissions but can buy and sell allowances that permit them to emit a given amount. Trading gives companies a strong incentive to save money by cutting emissions. Since taking effect, the California program has raised more than $6.5 billion and is the fourth largest in the world.
But there is more to it than just reducing carbon emissions. The state law directs 35% of these greenhouse gas auction proceeds to benefit low-income neighborhoods and disadvantaged communities. The goal is to democratize climate policies and benefits by addressing energy inequality.
Low-income households pay more for utilities per square foot than the average household – by some estimates at triple the rate.
The cap-and-trade money in California is being put to use to try to address some of these problems. For example, a farmworker housing project in the Central Valley now has energy-efficient, heat-pump water heaters, low-E windows, and solar carports. These improvements have reduced utility bills by 75%.
Residents in East Palo Alto, a heavily Latino city with a poverty rate of 16.6% located minutes from the riches of Silicon Valley, are getting energy efficient appliances, new lighting, and even solar power. Solar systems for multifamily affordable housing in California can access $100 million in annual rebates over the next 10 years under a new statewide program.
California is not alone in seeking energy justice. Some of the nine New England and Mid-Atlantic states in the Regional Greenhouse Gas Initiative, including New York, are also using cap-and-trade auction proceeds to assist low-income residents and communities.
Photo, posted March 8, 2009, courtesy of Brian Sterling via Flickr.