The 1st CAP and Trade auction in California

The California legislature passed AB32, which is Arnold Schwarzenegger‘s main legislative legacy, to reduce greenhouse emissions in California. AB32 requires Californian’s to get 33 percent of their electricity from solar, wind and other renewable sources by 2020. It also requires new cars sold in California by 2016 to reduce greenhouse emissions by 30 percent and businesses throughout the state to reduce their GHG emissions to 1990 levels.

Hurricane Sandy has pushed the issue of climate change back into the national spotlight. California has been a leader for more than 40 years in the protection of the environment. As it moves forward with enforcement of AB32 limitations on carbon dioxide and other pollutants,  all businesses that are unable to reduce emissions to meet the new regulations will begin to purchase carbon credits to offset GHG emissions in excess of the new limits. Under this program, each company must to have its greenhouse gas allowances in place starting in November 2014.

 “For the first time, business will begin to understand what it means to put a price on carbon,” said Stanley Young, a spokesman for the California Air Resources Board. “The program rewards efficiency. It will help move California away from its dependence on fossil fuels and toward a clean-energy economy.”

“The event comes six years after former Gov. Arnold Schwarzenegger signed AB32, the law that required California to lower its greenhouse gas emissions by 2020 to 1990 levels — the equivalent of a 17 percent reduction”.

 “It’s the largest carbon market in the United States, and the second largest in the world, behind the European Union,” Young said.

“People from around the country are watching it closely,” said Alex Jackson, an attorney with the Natural Resources Defense Council, an environmental group in San Francisco.

“The stakes are high. Climate progress in the U.S. has languished at times and California has an opportunity to develop a model, show that it works and encourage others to take note.”

“It’s going to really hurt consumers. It is going to hurt small business,” said Dorothy Rothrock, vice president of the California Manufacturers and Technology Association, in Sacramento. “These costs are going to be passed down. Energy is what makes the economy run. And we are increasing energy costs.”

The California Air Resources Board estimates the regulation will add 10 cents per gallon to the price of gas for every $10 per ton that industry pays for allowances.

According to the program, any business that emits more than 25,000 metric tons of carbon dioxide or other GHG is included. It covers 360 businesses, representing 600 facilities. Oil refineries, power plants, cement companies; large food processors and major factories are affected. After 2015, the law also will be effected transportation fuels for all the vehicles in the state.

Under this law, every company has three options. “It can decrease its pollution by installing more efficient equipment. Or it can purchase allowances for the other 10 percent of emissions at one of four auctions the state will hold every year. Or it can buy allowances from other companies, which gives each company an incentive to reduce pollution by a large amount so it can sell its excess allowances.”

One billion dollars per year is estimated to be earned from the state auctions, which must fund climate-related programs such as making public buildings more energy efficient, providing rebates for efficient appliances or vehicles, or funding public transit projects such as high-speed rail.

As we look back at some other pollution legislation from 1990, supported by President George H.W. Bush, which addressed sulfur dioxide pollution that causes acid rain, we find that sulfur dioxide emissions have fallen by 65 percent from industry.

“The public’s attitudes on global warming are changing, with 68 percent of Americans in a Rasmussen poll last week saying global warming is a serious problem, up from 46 percent in 2009.”

“After record-breaking drought in the Midwest and forest fires in the West last year, Hurricane Sandy devastated the East Coast late last month. Scientists say that while the hurricane was not caused by warming, warmer ocean temperatures — 5 degrees Fahrenheit in the Atlantic Ocean warmer than the 30-year average — made the hurricane stronger. And the ocean has risen 8 inches in the past 100 years, which made flooding worse during storm surges”.

“Although Congress has refused to pass mandatory climate-change laws, President Barack Obama put in place several policies to address global warming, including doubling the national gas-mileage standards to 54 mpg by 2025 and requiring the EPA to draw up greenhouse gas limits on power plants by next year. Now, the federal government will be watching California to see if it can learn from the experiment”.

“Wednesday is important,” Jackson said. “It is the moment when something that has been gathering momentum since 2006 takes flight.”

HOW CAP-AND-TRADE Will WORK

“Tallying pollutants: A large factory or oil refinery emits 1 million tons of greenhouse gases a year. At the start of the program, the company would only be responsible for 10 percent of those emissions, or 100,000 tons, and more in future years”.
“Totaling the costs: If a company purchased pollution “allowances” for 100,000 tons at $12 a ton it would cost $1.2 million”.

Where the money goes

“To a state fund that would pay for climate-related programs, such as making public buildings more energy efficient, providing rebates for efficient appliances or vehicles, or funding public transit, including high-speed rail”. Copyright 2012 San Jose Mercury News. All rights reserved.

Paul Rogers (2012), Mercurynews, retrived from https://www.mercurynews.com/science/ci_21972739/californias-landmark-global-warming-law-becomes-real-this.

Categorised in: EPA