Working for a clean and prosperous California for all

The problem

Climate change is ravaging California by worsening wildfires, destroying livelihoods, and putting the state at risk for financial collapse. To mitigate further disaster, California is leading on climate action—including a 48% reduction in greenhouse gas emissions by 2030—but is currently off course. California’s boldness as a climate leader sparks inspiration and scrutiny. Unfortunately, existing narratives around affordability create the false perception that climate action and economic prosperity are competing priorities.

The solution

Economists have spent decades analyzing cost conscious strategies that affordably reduce emissions while growing a prosperous economy. At the core of California’s climate strategy is the cap-and-trade program, a policy that achieves climate targets at lowest economic cost. Economists design carbon prices, including cap-and-trade programs, to marshal the entire economy in a coordinated search for efficient and effective emissions reductions.

Our mission

Our mission is to secure a clean and prosperous California. We examine carbon pricing through an economic lens by synthesizing scientific evidence from the literature and using economic thinking to produce new research. Economic thinking facilitates smart designs for California’s cap-and-trade program so that climate action can be leveraged to solve a variety of statewide problems such as the affordability crisis, devastating wildfires, and budget deficits.

Our Work

We synthesize and produce nonpartisan research on the program’s performance and promising approaches to update the program.

Research

We bring key research findings into the public sphere in ways that are clear, accessible, and engaging.

Education

Convenings

We bring together the public and stakeholders to share ideas and learn from others.

What economists and experts say about carbon pricing

  • 2008: "Overall, a cap-and-trade system provides certainty regarding emissions from regulated sources because aggregate emissions from all regulated entities cannot exceed the total number of allowances. A well-designed cap-and-trade system will minimize the costs of achieving any given emissions target."

    – Robert Stavins, Harvard Professor of Energy & Economic Development; Harvard Environmental Economics Program Director; Harvard Project on Climate Agreements Director.

  • 2010: "[E]xperience suggests that market-based emission controls work. Our recent history with acid rain shows as much. The Clean Air Act of 1990 introduced a cap-and-trade system in which power plants could buy and sell the right to emit sulfur dioxide, leaving it up to individual companies to manage their own business within the new limits. Sure enough, over time sulfur-dioxide emissions from power plants were cut almost in half, at a much lower cost than even optimists expected; electricity prices fell instead of rising. "

    – Paul Krugman, Department of Economics and Stone Center on Socio-Economic Inequality at the Graduate Center, City University of New York; Nobel Memorial Prize in Economic Science recipient

  • 2015: "Most important, cap-and-trade has long since proven to be environmentally effective and economically cost-effective relative to traditional command and control approaches. Less flexible systems would not have led to the technological change that may have been induced by market-based instruments (Keohane 2003; Schmalensee and Stavins 2013), nor the induced process innovations that have resulted (Doucet and Strauss 1994)."

    – Richard Schmalensee, Professor of Economics, Massachusetts Institute of Technology; Robert Stavins, Harvard University

  • 2017: “Economists do agree on one point… Economists are essentially unanimous that a price on carbon is the most efficient way to reduce greenhouse gas emissions.”

    – Christopher Knittle, Professor of Applied Economics, Massachusetts Institute of Technology

  • 2018: "Virtually all economists agree that one of the biggest selling points for pricing greenhouse gases (GHGs) … is that it will boost innovation in low-carbon technologies."

    – Severin Bornstein, Professor of Business Administration and Public Policy, Haas School of Business; Faculty Director of the Energy Institute at Haas

  • 2024: "Today, nearly one-quarter of the world’s GHG emissions are subject to a carbon price through 75 unique carbon prices, with two of the more effective examples having been operating in California and the Northeast United States for over a decade.”

    – Letter from nearly 30 leading economists explaining their support of Washington State’s cap-and-invest program

  • 2025: "California's cap-and-trade program was designed to seek out and incentivize the lowest-cost GHG reduction strategies. It also generates revenues that can be used to offset adverse affordability impacts. Reauthorization of the cap-and-trade program will help contain the costs of climate change mitigation going forward.”

    – Meredith Fowlie, Professor of Economics, UC Berkeley & Vice Chair of Independent Emissions Market Advisory Committee

  • 2025: “The most important moment for cap-and-trade is when climate ambition is high and costs are high…unless you're going to abandon your climate ambition, this is the approach to deliver your climate goals at the cheapest cost possible”.

    – Kyle Meng, Associate Professor of Economics, UC Santa Barbara; Former White House Economist.

Cap-and-Trade: The Basics

California’s cap-and-trade program works by making polluters pay for their greenhouse gas emissions.

1

Cap-and-trade achieves reductions affordably at the lowest economic cost by marshaling the entire economy in a coordinated effort to find emissions reductions.

2

Cap-and-trade’s effectiveness has made it a model for other jurisdictions seeking to implement carbon pricing, including in China, Washington State, and Quebec.

3

Cap-and-trade plays a central role in California’s climate policy portfolio by reducing emissions and mitigating future climate impacts such as drought and wildfires.

4

Cap-and-trade collects funds from polluters that are used to lower utility bills and invest in community projects that promote sustainability and support the clean energy transition.

5

California Cap-and-Trade: A History

Our name, “Clean and Prosperous California”, is inspired by former Governor Schwarzenegger’s congratulatory remarks to California leaders when they reauthorized the cap-and-trade program in 2017 via the passage of A.B. 398 and S.B. 32: “Governor Brown and legislative leaders from both parties came together to ensure that California continues to march toward a clean, prosperous future”.

Former Governors Jerry Brown and Arnold Schwarzenegger at the signing ceremony of the cap-and-trade extension bill, AB 398, on July 25, 2017.

Cap-and-trade is an inherently American and bipartisan approach that addresses the climate crisis by harnessing the power of markets. Cap-and-trade was first developed by American economists in the 1970s and first employed in the United States by former President George H. W. Bush in 1990 to solve the problem of acid rain.

Cap-and-trade has been in California’s DNA since 2006, when Governor Schwarzenegger signed A.B. 32 and created a suite of climate policies with carbon pricing as a “key element” and its “integral piece”. Since then, California has served as a model for other jurisdictions seeking to implement carbon pricing. Today, cap-and-trade is used by 12 other American states and implemented by a total of 36 jurisdictions worldwide, covering roughly 20% of global GHG emissions.

Governor Brown reauthorized the cap-and-trade program in 2017 with the passage of A.B. 398. The reauthorization reflected California’s commitment to continue using the cap-and-trade program to achieve California’s ambitious climate targets. The reauthorizing included diverse support including from some Republican lawmakers, many environmental groups, and the business community.

Most recently, in 2022, Governor Newsom marked his first contribution to cap-and-trade program with the passage of a suite of new climate laws and ambitious climate targets, including a goal of reducing GHG emissions 48% below 1990 levels by 2030 and a statutorily mandated carbon neutrality target by 2045.

Leadership

We are a team of economists and lawyers based in California and committed to securing and clean and prosperous California for all.

  • BOARD MEMBER

    Joe served as a California State Assemblymember from 2000-2006 and was principal coauthor of AB 32, the statute that authorized cap-and-trade. He is now on the Independent Emissions Market Advisory Committee (IEMAC), which evaluates the cap-and-trade program.

    Joe has been a Stanford Professor of the Practice in Public Policy and Human Biology, co-directing the graduate student Practicum and teaching policy courses on climate change, health care, and California issues. He is a member of the Economic Advisory Board, Bay Area Council, and Climate Cabinet Action. As a longtime RAND consultant, he directs State Statistics, a socioeconomic database launched in 1997.

    Joe holds a Ph.D. in Public Policy Analysis from Pardee RAND Graduate School, an M.Sc. in Diplomacy and Security from Georgetown University, and a B.A. in Economics, German, and French from the University of Colorado, Boulder. Joe resides in Lake Tahoe, CA.

  • BOARD MEMBER

    Alicia began her career as an attorney in the climate change and white collar practices of top-5 law firms prior to co-founding Elevate Climate, a carbon markets intelligence firm. Her work has spanned policy development, market analysis, corporate sustainability, and stakeholder engagement.

    Throughout her career, Alicia has worked to promote human rights, advance women’s rights, and mitigate climate change in the United States and abroad with organizations that include UNICEF, Human Rights Watch, Oxfam America, and The Rotary Club.

    Alicia is also a registered mediator with the U.S. EPA and has experience working with diverse stakeholders to build consensus and common understanding on controversial issues. 

    Alicia received a B.A. from Stanford University in International Relations (with Distinction, Phi Beta Kappa) and a J.D. from Harvard Law School. Alicia is based in Berkeley, CA.

  • BOARD MEMBER

    Emily is Managing Partner of Hua Nani Partners where she specializes in climate and environmental policy advocacy, with a focus on economic analysis and subnational policy implementation.

    Previously, Emily was Chief Economist for the California Air Resources Board, where she assessed the economic impact of California’s portfolio of climate and air quality policies and programs with a focus on carbon markets and transportation.

    Emily also served as Climate Economist at Rhodium Group where she analyzed the economic impact of climate change and policy responses and provided state outreach support to the Climate Impact Lab, , focusing on climate damages and the Social Cost of Carbon.

    Emily holds a Ph.D. in Agricultural and Resource Economics from UC Davis and a Bachelor’s degree in energy, environmental, and mineral economics from Penn State. Emily lives in Sacramento, CA.

  • EXECUTIVE DIRECTOR

    Clayton a widely published climate economist with over four dozen scholarly articles and policy papers on carbon pricing. Clayton has also led research and advised on the design of carbon taxes, cap-and-trade programs, and other carbon pricing policies on six continents.  

    Clayton has held multiple expert and advisory roles including as Board Member at Earthshot, member of Colorado’s GEMM Trading Technical Working Group, and Expert to the International Initiative for Development of Article 6 Methodology Tools. 

    Clayton holds an A.S. from Monroe Community College, B.S. from Cornell University (with Distinction), M.S. from UC Berkeley, and is completing his Ph.D. at UC Berkeley. He is a first-generation college student and a Jack Kent Cooke Foundation scholar through their low-income high-ability “Pathways to Success” program. Clayton is based in Berkeley, CA.

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