The Future of California Cap-and-Trade: Questions and Scenarios
This study focuses on the evolution of the nascent California cap-and-trade market. In particular, the analysis presents different scenarios with the potential to derail the market from its current and projected state. The paper outlines situations that exacerbate the oversupply and bearish outlook for prices, but focuses in particular on the events that could move the market in the opposite direction. Specifically, the analysis explores two sources of market disruption in detail, the shutdown of the Diablo Canyon nuclear power plant and a boom in oil production from the Monterey/Santos shale. Upon completing this evaluation, the study determines that a substantial increase in oil production yields the most profound changes to the market.