Updated Scoping Plan raising state’s climate ambitions

With the objective of accelerating efforts towards decarbonization in California, the 2022 Scoping Plan outlines an economy-wide GHG mitigation target of 48% below 1990 levels by 2030. The plan also incorporates an act passed in August 2022 that aims to further reduce carbon emissions to 85% below 1990 levels by 2050. There is also an introduction of a variety of further sustainability projects geared towards transitioning the state away from fossil fuels. Carbon neutrality has been included as a cornerstone of the new plan’s climate initiatives, aiming for the state to be carbon neutral by 2045. The addition of such diction is substantiated with increased funding and prioritization of carbon capture and storage (CCS), aiming to establish a target of 20 MMTCO2 by 2030 and 100 MMTCO2 by 2045. The plan also includes increased funding towards renewable energy projects, vehicle electrification, and further conservation of working and natural lands. Highlighting the importance of environmental justice initiatives in the clean energy transition, the 2022 Scoping Plan includes projects seeking to expand inclusion of, and support to, disadvantaged and minority communities.

2017 and 2022 Scoping Plan Comparison

The table above compares the legislation and targets included in both the 2017 and 2022 Scoping Plans. The table most notably shows the increased carbon reduction methods for reaching the 2030 benchmark and carbon neutrality for 2045. The more ambitious emission targets for the state leave a gap of 79-98 Mt CO2 needed for abatement based off current initiatives to reach the target emission level of 226 MMTCO2e for 2030.



The emission reductions needed to achieve these updated targets and fill this emissions gap will necessitate an accelerated reduction of the emissions cap and the number of allowances in future auctions. Although speculated to have an impact on market behavior, the announcement of the plan has not reflected a price increase in the secondary market nor in the recent auction. Since the plan’s announcement on 16 November, there has been a -6.03% decrease in price for the CCA V22 future Dec. 22 contract from USD 28.04 (16 Nov) to USD 26.35 (30 Nov). This decrease in price has been a continuation of a several week-on-week price decline. This price trend, therefore, is reflective of the announcement’s minimal immediate impact on the market.


In order to achieve the increased CO2 reduction targets highlighted in the 2022 Scoping Plan, a reduction of the current emissions cap, and subsequently a reduction of projected carbon allowances, is certain. Concrete measures to decide the extent to which the carbon market’s emission cap will be reduced and the number of allowances that will be taken out of future auctions will be discussed in 2023.


The cut to allowance volumes as a result of the new, ambitious targets will have a tightening effect on the market, driving up prices in the mid to long-term. The 2022 Scoping Plan will not take effect until 2024, delaying any short-term spikes in prices in auctions and on the secondary market.


Furthermore, the delayed implementation provides compliance entities with time to position themselves for the impending effects on the carbon market.
It is likely that we will see an uptick in long positions for CCA V24 futures in the short-term by compliance entities to hedge exposure to higher prices from the expected cuts to longer-term supply. 


Although the 2022 Scoping Plan will put more pressure on compliance entities’ decarbonization timeline, it will provide more incentives, pathways, and resources through which such entities will be able to utilize to reduce their demand for allowances in the long-term.

All information regarding the 2017 and 2022 Scoping Plans via 

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On 16 November California released its 2022 Scoping Plan outlining the state’s updated climate initiatives and decarbonization targets. The updated scoping plan includes more ambitious carbon reduction targets compared to the previous 2017 Scoping Plan and shorter timeframes for reaching these targets. The new plan entails a reevaluation of WCI’s emission caps and allowances in order to successfully achieve the updated decarbonization goals. A restructuring of the carbon market design will affect both the price and quantity of allowances made available to market participants.

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California’s 2022 Scoping Plan poses long-term impact on WCI allowance prices

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