While development of a greenhouse gas "cap and trade" program has stalled at the federal level, the California Air Resources Board ("CARB") is scheduled to consider final approval of a cap and trade program for California on October 20, 2011.

A cap and trade program establishes a cap on greenhouse gas emissions and requires emission sources to collectively achieve the cap by obtaining and annually submitting emission allowances, offset credits, and sector-based offset credits. The program is one of the mechanisms established by CARB's "Scoping Plan" to implement the requirement in California's Global Warming Solutions Act (AB 32) to reduce greenhouse gas emissions to 1990 levels by 2020.

A legal challenge to CARB's adoption of the Scoping Plan resulted in a state Superior Court decision forcing CARB to expand on its original California Environmental Quality Act assessment and address other deficiencies. At its public hearing on August 24, 2011, CARB approved the supplemental assessment and reapproved the Scoping Plan.

In addition, CARB is putting the finishing touches on regulations establishing the cap and trade program. Modified regulations were released for public comment on both July 25, 2011 and September 12, 2011. CARB is scheduled to consider the cap and trade regulations for final approval on October 20, 2011.

If, as expected, CARB approves the modified cap and trade regulations, the program will begin in January 2012. Emission sources covered by the program will have to register with CARB by January 31, 2012, the first auction of emission allowances will be held in August 2012, and the obligation to obtain compliance instruments for most covered sources will commence on January 1, 2013.