Tools of change
California’s strategies for achieving its ambitious goals encompass a suite of sector specific standards and incentive programmes as well as overarching climate policies aiming to reduce emissions. Among the centrepiece climate policies is the Cap and Trade Programme, the fourth largest emissions trading system in the world, introduced in 2013. Businesses responsible for approximately 85% of the states emissions are required to comply. Emissions allowances are traded at auctions, having generated more than 12 billion USD in revenues that are being deposited in the state Greenhouse Gas Reduction Fund. As of 2020, projects for more than 5 billion USD have been implemented, with the majority of funding being allocated to transportation and sustainable agriculture.
Another key component in Californias decarbonisation efforts is the Low Carbon Fuel Standard (LCFS), implemented in 2011, designed to reduce the carbon intensity of transportation fuel pool with 20% by 2030 and increase the range of lower-carbon, alternative fuels. Carbon Capture and Sequestration projects are included in the LCFS credit program, which in 2018 had resulted in a 6% reduction in fuel carbon intensity and the creation of a market for LCFS credits exceeding 2 billion USD. Other programs, such as the Low Carbon Fuel Production Program and the Clean Transportation Program, further aims to accelerate deployment of clean vehicle technologies and improve access to clean transportation by leveraging public and private investments.
California ambitious targets on green electricity is supported by f.ex. the Renewable Portfolio Standard setting out renewable energy procurement targets for electricity providers. The Electric Program Investment Charge (EPIC) is another important program, investing more than USD 130 million annually in clean energy research as well as demonstration projects to accelerate the transformation of the electricity sector. EPIC also supports the California Energy Innovation Ecosystem, where clean energy entrepreneurs get access to networking, funding opportunities, mentoring, facilities and expertise.
California is also a pioneer in energy efficiency and f.ex. has legislation requiring utilities to gradually increase shares of renewable energy and improve customers' energy efficiency as well as extensive, green building codes. In the building sector, which accounts for roughly 25% of the state's GHG emissions, there are extensive efforts to boost energy efficient retrofitting to decarbonize the entire building stock. Programs such as EPIC and financial incentives from the utilities, are a crucial stimulus to reduce carbon emissions and increase energy efficiency in buildings. In 2017, California spent approximately 1.5 billion USD on energy efficiency programs.
Acknowledging the role the state can play as a major employer and asset manager, Governor Newsom in 2020 introduced a new Climate Investment Framework, setting out to integrate climate risk strategies of the state's 3 largest pension fund into a statewide approach and develop common climate risk disclosure standards. The pension funds were also directed to increase allocations to low-carbon indexes and increase investment in sustainable technologies. With 700 billion USD in assets under management - more than double Denmark's GDP - the potential in aligning investments with climate goals is significant.
