cap-and-trade-in-practice-full-report-5082066ae2763c3f.pdf

This research paper by the Climate Policy Initiative examines how California's Cap and Trade Program, established under the Global Warming Solutions Act of 2006 (AB32), influences investment decisions in the cement industry. Through financial modeling and stakeholder interviews, the authors analyze the impact of carbon pricing on three primary abatement strategies: energy efficiency, fuel switching, and the blending of supplementary cementitious materials (SCMs). The study finds that while carbon prices make emissions reductions more financially attractive, significant non-price barriers—including short corporate payback period requirements, fuel supply uncertainty, and prescriptive customer procurement standards—often prevent firms from pursuing cost-effective abatement options.

• The carbon price signal influences how cement firms approach abatement, making some options meet investment criteria and increasing interest in abatement strategies. However, the carbon price is typically not the most critical factor in making a decision financially attractive.
• Internal capital constraints and conservative investment criteria act as a major barrier to abatement. Cement firms typically only invest in projects with very short payback periods, cited as between 1.5 and 3 years, which excludes many profitable long-term projects.
• Thermal energy efficiency investments are profitable at any carbon price at or above the floor, but they only meet firms' internal investment criteria when carbon prices are high (at the allowance reserve price tiers of $40-50 per ton in 2013).
• Fuel switching to waste tires is financially attractive even without a carbon price due to low fuel costs, with the modeled investment paying back within three years across all price scenarios.
• Switching to biomass is highly profitable under high carbon prices, with a payback period of two years, primarily because biogenic emissions are not covered under the Cap and Trade Program, allowing firms to sell excess allowances.
• The feasibility of fuel switching is hindered by non-price barriers, specifically the lack of certainty regarding the future availability and pricing of alternative fuels.
• Increasing the blending of supplementary cementitious materials (SCMs) is the abatement strategy most sensitive to carbon pricing. While profitable at the price floor and very profitable at high prices, it is blocked by prescriptive technical specifications from state agencies and customers.
• The California cement industry is at high risk of emissions leakage, leading the California Air Resources Board (CARB) to provide free allowance allocations based on production benchmarks to protect trade-exposed firms.
• The authors suggest that the Cap and Trade Program alone will not remove all barriers to a low-carbon transition. They recommend complementary policies such as public financing (e.g., a green bank), guarantees for alternative fuel supplies, and shifting to performance-based procurement standards for cement.

APA

Climate Policy Initiative (n.d.). cap-and-trade-in-practice-full-report-5082066ae2763c3f.pdf. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf

Chicago

Climate Policy Initiative. cap-and-trade-in-practice-full-report-5082066ae2763c3f.pdf. n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=cap-and-trade-in-practice-full-report-5082066ae2763c3f.pdf |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiativendcapandtradeinpracticefullreport5082066ae2763c3fpdf, author = {{Climate Policy Initiative}}, title = {{cap-and-trade-in-practice-full-report-5082066ae2763c3f.pdf}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }