An Analysis of the Economic Impact of Cap-and-Trade Policy on the California Food Processing Industry: A Look at Processed Tomatoes and Dairy Products

Abstract

California Cap-and-Trade policy, sets a statewide limit on sources responsible for an estimated 85 percent of the state’s greenhouse gas emissions. To maintain the cap as per the policy, individual industrial facilities in California must obtain enough allowances to cover their emissions either by purchasing allowances at auction or reducing their emissions by operating more efficiently. This research report analyses the economic impact of the Cap-and-Trade policy on the California food processing industry. The results indicate that the average cost of production in tomato processing industry may ultimately increase by 7 to 21 percent and by about 1.5 to 3 percent in dairy product manufacturing industry.