California’s Air Resources Board has formally approved a cap and trade system to minimize climate change pollution, becoming the first state in the nation with a cap and trade program. Legislation authorizing a cap and trade system was passed in California back in 2006, but after multiple reviews, the CARB finally approved the program.

The California Air Resources Board voted unanimously today to adopt rules for a program that will use the trading of pollution permits on the open market to control carbon emissions from a wide cross section of industries, including oil and gas companies, electric utilities, transportation companies, farmers and cement makers.

“We’ve done something important,” said Mary Nichols, the ARB’s chairman. “We will look back at this as an important date in California’s transition to a clean energy economy.”

The cap-and-trade system, which will begin operating in January 2013, is a key component of the state’s landmark climate change law, which aims to reduce carbon emissions to 1990′s level by 2020.

The plan places a hard cap on the amount of carbon dioxide produced by 350 of the state’s largest industrial polluters. The state then provides a limited amount of carbon pollution allowances that can be bought and sold on an open market.

Under the plan, companies that pollute less then their limit can sell their unused allowances to companies that pollute heavily, creating market incentives for everyone to reduce emissions voluntarily.

This was a program passed by a Democratic legislature and signed by a Republican governor. Cap and trade generally was seen as a counterpoint to a command and control program, allowing market forces to spur innovation and reduce greenhouse gas emissions, and allowing companies to purchase emission credits, the funds of which go toward additional climate change programs. There should be nothing terribly controversial about cap and trade except perhaps that it doesn’t go far enough, because it allows polluters to purchase the right to fill the air with a certain level of pollution. In fact, one of the major detractors of cap and trade in California were environmental justice advocates who worry about what it will mean for their communities.

Instead, you have the right opposing cap and trade, invoking the giant boogeymen of higher energy prices and relocation away from California and the government as a boot stomping on a human face forever.

The truth is that climate change mitigation programs are working in California to reduce greenhouse gas emissions. San Francisco’s carbon levels are 12% under 1990 output, for example. And that’s before cap and trade. Has the economy suffered as a result? The economy has dipped in California generally from the recession. But this law makes California poised to become a market leader in clean technology and innovation, mostly out of necessity. It offers the potential for new industries to flourish. And it will reduce public health problems from pollution.

There is a danger in the lack of a comprehensive system. California is the world’s 8th-largest economy, but cap and trade here and a carbon tax in Australia isn’t enough to stop the planet from boiling. There’s no hope of leadership at the federal level on this anymore, at least not in the near future. The only thing that has reduced carbon emissions lately has been the recession, and its attendant lowered economic – and energy – output.

But climate change is happening. Even Koch-funded climate skeptic studies admit that now. And California doing something about it may be inadequate, but it’s better than the alternative.