The program will affect 360 businesses and will be implemented in two phases. Phase one will start in 2013 and includes all major industrial sources of GHG including electric power utilities. The second phase, which starts in 2015, includes transportation fuels, natural gas and other fuels.

The program will affect organizations that are responsible for 85 % of California’s GHG emissions. During the first phase CARB will give allowances to industrial GHG sources using a calculation that rewards the most efficient companies. Companies that need more allowances to cover their emissions can purchase them at quarterly auctions CARB will hold or buy them on the market. The first auction is slated to be held in August 2012.

Up to 80 % of a company’s emissions can be covered using credits from CARB-certified offset projects (in forestry management; urban forestry; dairy methane digesters; and, the destruction of existing stores of ozone-depleting substances in the U.S.) The intention of the program is that by 2020 California will have reduced GHG emissions to 1990 levels.

The program is designed to be compatible with similar programs in other states and Canadian provinces in the Western Climate Initiative (WCI), a regional carbon trading initiative. There are six states (California, Montana, New Mexico, Oregon, Utah and Washington) and four Canadian provinces (British Columbia , Manitoba, Ontario and Quebec) in the WCI.