Under cap and trade, a company that pollutes must buy one "allowance" for every ton of carbon dioxide it emits.
The Air Resources Board plans to sell those allowances at an auction with part of the proceeds going to clean air programs.
The business community calls that a tax. Rob Neenan is with the California League of Food Processors.
"CARB does not have to auction off all these allowances to achieve its goals, as long as there is a declining emissions cap and the companies have to abide by that then reductions will be achieved."
Businesses want the allowances awarded for free.
If that doesn't happen, compliance costs could be passed on to consumers.
Tiffany Roberts is with the Legislative Analyst's office.
"That could have the effect of leading consumers to seek out lower cost goods that aren't produced in California."
Not only would that hurt the state's economy, it wouldn't help reduce greenhouse gas emissions.
But Dave Cleggern with the California Air Resources Board says 90-percent of the allowances will be free in the first two years.
"Giving them 100 percent would be the equivalent of giving them a windfall essentially, this is a program that among other things is designed to set a price on carbon."
The Air Resources Board has set the auction for November 14th.