January 10, 2011
California voters made a statement when they turned back an attempt to delay a landmark global warming law. State regulators have since added the exclamation point.
The California Air Resources Board (CARB) has adopted a cap-and-trade program for CO2 emissions, whose supporters say will grow the state's clean energy economy. Opponents have said the rules would hamstring the California economy, or worse. At a time of such high unemployment and when businesses need to expand, the move to clamp down on them is unwise, those critics add.
The green movement disagrees: "California is turbo charging its already fast-growing clean energy economy by creating incentives and a market for pollution reducing technologies," said Fred Krupp, president of the Environmental Defense Fund. "The state is leading a new industrial revolution that will give U.S. companies an edge over foreign competitors in a global market opportunity valued at $2.3 trillion."
CARB approved a part of its clean energy plan to reduce greenhouse gas emissions to 1990 levels by 2020, as required by The Global Warming Solutions Act (AB 32). That's the law that survived the November ballot challenge.
The trading program will create a firm limit on pollution that covers 80 percent of the state's emissions, including those from the utility, large industry, natural gas and transportation fuels sectors.
"The fundamental building blocks of a well-functioning program are in the proposed rule," said Jamie Fine, an economist with the EDF in California.
Because of California's utility deregulation plan that split generation from transmission and distribution, the plan will function a bit differently from trading regimes in effect elsewhere in the world.
"They will be giving allowances to the utility sector and they will in turn be sold to generators, those who actually producing the pollution," Fine said. "Though the utility sector will be given allowances, there will be an auction function within that giveaway."
Big industrial emitters will be getting an allocation but that will be reduced over time. That's something in which the environmental movement has been critical, saying that unless the credits are sold and a price is established, utilities will lose their incentives to cut carbon levels.
But those will toughen when a major component will come with the second phase of the program.
That starts in 2015, when rules begin to be applied to combustion through transportation fuels.
In the beginning, utilities will not see many changes, Fine said. "Given that, in the beginning, to ease the transition to this new regulatory playing field, most at first will not see significant changes to their regulatory compliance costs," he added.
Supporters are relying on history as a guide, citing the 1990s experience following the Clean Air Act amendments. Sulfur dioxide emissions were -which cause acid rain-were reduced at a third of the cost forecast by the U.S. Environmental Protection Agency. The experience with CO2 will be the same, proponents hope.
This story first appeared in RenewablesBiz Daily and was written by its editor, Bill Opalka.
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