The Cap and Trade Program covers the power and industrial sectors starting in 2013 and will expand to cover natural gas and transportation fuels in 2015 (see here for a helpful timeline ). Once fully in effect, the program will cover roughly 85% of California’s GHG emissions. The California Air Resources Board auctions allowances to covered entities. Allowances are allocated freely to electric utilities to mitigate costs on customers. Utilities must use the value associated with the allowances to benefit ratepayers. Free allocation decreases over time. Regulated entities can also meet 8% of their obligations by buying CARB-approved offsets — emissions reductions from uncapped sectors.