FRANCISCO (AP) — California formally adopted the nation’s most
comprehensive so-called “cap-and-trade” system Thursday, an experiment
by the world’s eighth-largest economy that is designed to provide
financial incentives for polluters to reduce greenhouse gas emissions.
officials said they hoped other states and Washington, D.C., would
follow suit, calling the plan a “capstone” among the suite of tools
California can use to reduce the pollution linked to climate change and
cut dependence on foreign oil.
half a century every American president has been calling for America to
move away from our dependence on foreign oil and become energy
independent,” said Mary Nichols, chairman of the California Air
reason we have not succeeded in addressing our addiction to petroleum
is because we did not have the right set of policy tools,” Nichols said.
“Now we do. Cap-and-trade provides a reward for doing the right thing.”
board voted unanimously to approve the final draft of its plan, a key
part of the state’s landmark 2006 global warming law, AB 32, which seeks
to reduce the emissions to 1990 levels by 2020.
businesses regulated under the program argue it will increase the price
of electricity for consumers and hurt job creation by raising the cost
of doing business in the state. But the program’s supporters expect
cap-and-trade to spur economic recovery and innovation, by pushing
business to invest in clean technologies.
implementation of some parts of the program will begin in 2012,
compliance for power plants and other of the worst polluting facilities
actually starts in 2013, with others joining in 2015. In total, the plan
will cover 85% of California’s emissions.
Gov. Arnold Schwarzenegger, who frequently promoted the law, called
Thursday’s vote a “major milestone” in the fight against climate change.
have always believed that we can create a world where economic growth,
energy independence and environmental protection are all achieved,”
general, the program will require pollution producers like refineries
and cement manufacturers to buy permits, called allowances, from the
state. Each permit allows for a specified amount of greenhouse gases
each year, with the amount declining over time.
that cut emissions and have extra allowances can then sell the permits
in a marketplace; greenhouse gas emitters could purchase those
allowances if they failed to cut emissions.
that reduce emissions could turn a profit if the market price for extra
allowances rises above the initial cost of the permit.
company can also meet up to 8% of its emissions reduction obligations
by purchasing carbon “offsets,” or investments in forestry or other
projects that reduce greenhouse gases.
program, modeled on similar programs in Europe, is also designed to be
able to link up with plans in other states and elsewhere to increase the
size of its market for carbon allowance trading.
other states and some Canadian provinces such as Quebec and British
Columbia hope to link their caps to California’s, a big factor in the
state’s success will be whether or not they have to go it alone,” said
Jan Mazurek, director of strategy and operations for the Nicholas
Institute for Environmental Policy Solutions at Duke University.
“Small markets mean fewer trading opportunities—and so potentially higher costs,” Mazurek said.
To help companies prepare, 90% of the allowances would be free in the first years, providing time for equipment upgrades.
letter sent by the California Chamber of Commerce and a host of other
business groups called the 10% in allowances an “arbitrary 10% haircut.”
The letter said that California can’t fight global climate change on
are very concerned about the negative impacts the policy may have on
the state’s economy, jobs picture and energy costs,” said Catherine
Reheis-Boyd, president of the Western State Petroleum Association, in a
statement. “This policy, if adopted, will amount to a new tax on
refiners and other energy intensive industries that could total billions
of dollars over several years.”
Any electricity price increases would have to be approved by the state.
cap-and-trade plan has seen a number of changes and overcome
significant hurdles since it was first adopted with fanfare in
Sacramento last year.
was briefly halted by a judge after environmental justice groups sued,
arguing the market-based approach of cap-and-trade would allow polluters
to buy the right to pollute more by purchasing more allowances. This,
they argued, would affect mostly low-income neighborhoods located near
The California Supreme Court in September allowed work to continue on the regulations.
response to these concerns, the board on Thursday also approved a new
“adaptive management plan,” under which the air quality of neighborhoods
near power plants and other regulated facilities will be monitored to
see if any more pollution results from cap-and-trade. If increases are
found to be a result of cap-and-trade, the board said it would respond.
Environmental groups that have lobbied for years for a national cap-and-trade program lauded California’s regulation.
is proof that common sense climate action is still possible on a large
scale in the United States even though Washington, D.C., remains
gridlocked,” said Fred Krupp, president of Environmental Defense Fund.
SOURCE: The Associated Press