Cap and Trade in Practice

The document analyzes the impact of California's Cap and Trade Program on the cement industry, using financial modeling and interviews to assess abatement options. It finds that while carbon pricing makes some investments more attractive, significant barriers—such as short internal payback period requirements (1.5-3 years), uncertainty regarding alternative fuel supplies, and prescriptive customer procurement standards—often outweigh the carbon price signal. The authors suggest that complementary policies, such as public financing for long-term projects and performance-based procurement standards, are necessary to unlock low-cost emissions reductions.

• The carbon price signal influences how firms approach abatement, with higher prices making more options financially attractive, though it is rarely the most important factor in a decision.
• Internal capital constraints and short payback period criteria (typically 1.5-3 years) act as a major barrier, preventing investment in projects that are profitable over their lifetime but take longer to pay back.
• Fuel switching to biomass is highly profitable over the long term and particularly attractive because biogenic emissions are not covered under the Cap and Trade Program, but firms are deterred by uncertainty over future fuel availability and pricing.
• Increasing the blending of supplementary cementitious materials (SCMs) is the abatement strategy most sensitive to carbon pricing, but it is hindered by prescriptive technical specifications used by customers and state agencies.
• Energy efficiency investments in thermal improvements are profitable at any carbon price at or above the floor, but only meet firms' internal investment criteria when carbon prices are high.
• Switching to waste tires as fuel is financially attractive even without a carbon price due to low fuel costs, meaning the carbon price is not the primary driver for this specific investment.
• The California cement industry is at high risk of emissions leakage, leading the state to provide freely allocated allowances based on benchmarks from the least carbon-intensive plant.
• Policy uncertainty during the first year of the program led industry focus toward securing free allowances rather than abatement investments.

APA

Zuckerman, J., Laughlin, K., Abramskiehn, D., & Wang, X. (2014). Cap and Trade in Practice. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf

Chicago

Zuckerman, Julia, Karen Laughlin, Dario Abramskiehn, and Xueying Wang. Cap and Trade in Practice. Climate Policy Initiative, 2014. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/07/Cap-and-Trade-in-Practice-Full-Report.pdf.

Wikipedia

{{cite report |last1=Zuckerman |first1=Julia |last2=Laughlin |first2=Karen |last3=Abramskiehn |first3=Dario |last4=Wang |first4=Xueying |title=Cap and Trade in Practice |publisher=Climate Policy Initiative |date=June 2014 |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{zuckerman2014cap, author = {Zuckerman, Julia and Laughlin, Karen and Abramskiehn, Dario and Wang, Xueying}, title = {{Cap and Trade in Practice}}, institution = {Climate Policy Initiative}, year = {2014}, month = jun, 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} }