The Cap and Trade Program (Program) is one of the state’s key implementation tools intended to encourage reduction of greenhouse gas (GHG) emissions as part of Assembly Bill 32 (AB 32), passed in 2007. Under the program, which is overseen by the California Air Resources Board (ARB), GHG emission reductions are accomplished through the use of economic pricing mechanisms that place a cost on the emissions of GHGs. Anaheim Public Utilities, like all other electric utilities in California, is a covered entity under the Program and, as such, is required to participate in the program. 

As the Utilities generates electricity from its fossil fuel power plants, GHG emissions are also generated. In order to comply with the program, the Utilities must surrender allowances, essentially permits, equal in number to the total metric tons of GHG emissions from these electric generation facilities. The program gives incentives to the Utilities, and all covered entities, to reduce GHG emissions in order to reduce costs for procuring the allowances necessary to cover their GHG emissions.