CARB approves cap-and-trade program

By CMTA Staff

Capitol Update, Oct. 28, 2011

Last week, California’s Air Resources Board (CARB) unanimously approved the country’s first statewide cap-and-trade emissions program under the provisions of AB 32 (California’s Global Warming Solutions Act, 2008).  The program will require companies to hold credits for their greenhouse gas emissions beginning for the year 2013.

An overview of CARB’s program can be found here:

Over the last year, the cap-and-trade program has been subject to criticism by CMTA and others in the business community because the program will lead to higher consumer energy costs and increased unemployment if companies move production out of state to avoid increased costs. While California suffers a 12 percent unemployment rate, a chronic state budget deficit and only slow economic growth, unnecessary new regulatory costs on employers will only make matters worse.

One of CMTA’s concerns with the program is that while CARB previously acknowledged the need to protect California’s industries by proposing 100% direct allowance distribution to companies up to a “benchmark” amount, they have designed the benchmark to give fewer allowances than a typical company needs to operate in the state. This “haircut” is as much as 10% for some industries.

In addition, the program makes the market price of allowances more expensive than necessary. CARB is limiting the use of “offsets”, or emission reductions achieved at projects located away from an industrial site. Those reductions could be cheaper, available as needed, and might have avoided higher costs at the industrial site. Further, CARB has strict rules about what qualifies as an offset, yet they will make innocent buyers responsible to replace offsets that “fail” despite being approved by CARB under their own regulations.

CARB will reopen the rule for further refinements in February of 2012. CMTA will advocate for design changes to lessen the burden on California manufacturers.

Listen to CMTA’s Dorothy Rothrock go head-to-head with CARB’s Mary Nichols on KCRW:

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