California Regulators OK Major Greenhouse
Dec 27, 2010 - Jason Dearen - Associated Press
SACRAMENTO, Calif. — California regulators
on Thursday approved the first system in the nation
to give polluting companies such as utilities and
refineries financial incentives to emit fewer greenhouse
The Air Resources Board voted 9-1 to pass the key
piece of California's 2006 climate law — called
AB32 — with the hope that other states will
follow the lead of the world's eighth largest economy.
State officials also are discussing plans to link
the new system with similar ones under way or being
planned in Canada, Europe and Asia.
California is launching into a "historic adventure," said
Mary Nichols, chairwoman of the state's air quality
"We're inventing this," she said. "There
is still going to be quite a bit of action needed
before it becomes operational."
California is trying to "fill the vacuum created
by the failure of Congress to pass any kind of climate
or energy legislation for many years now," said
A standing-room only board chambers featured testimony
from more than 170 witnesses Thursday. Outside the
chambers, a few climate change skeptics held signs
reading "Global Warming: Science by Homer Simpson."
Some businesses that would fall under the new rules
say the system could dampen California's already
flagging economy, complicate lawmakers' efforts to
close a $28.1 billion revenue shortfall and lead
to an increase in the price of electricity. The rate
increases, however, would still need approval from
Gov. Arnold Schwarzenegger told the board he is
sensitive to the recession, but argued that many
of the new jobs being created under the system are
in the clean technology industry.
"The real jobs we're creating right now are
green jobs. Since 2006 or so green jobs have been
created 10 times faster than in any other sector,
so it's also an economic plus," he said.
But he said reducing greenhouse gas pollution is
not just about climate change, but about human health
and national security.
"I despise the fact that we send $1 billion
a year to foreign places for our oil and to places
that hate us. We send this money to people that hate
us and that are organizing terrorists and trying
to blow up our country," he said.
Supporters say the system will help spur economic
recovery and innovation, pushing business to invest
in clean technologies.
They say the billions of dollars the state collects
in the system could help fund clean air programs
and help offset any increases in utility rates. Details
of the uses of these new funds is still uncertain.
Gov. Arnold Schwarzenegger addresses the California
Air Resources Board urging them to adopt some
of the nation's most sweeping clean air regulations,
in Sacramento, Calif., Thursday, Dec. 16, 2010.
The CRB was expected to pass a key piece of the
state?s 2006 climate law, called AB32. If it
passes, power plants, refineries and other major
greenhouse gas emitters will have pollution capped
by new regulations being considered by the regulatory
agency. The new rules set up the nation's most
extensive carbon trading market that officials
hope will provide a financial incentive for the
state's worst polluters to cut emissions.(AP
California has already enacted the strictest climate-related
regulations in the country involving renewable energy
mandates for utilities, tighter fuel-efficiency standards
for automobiles and low-carbon fuel standards.
The state's landmark climate law had a Jan. 1, 2011,
deadline for devising and enacting the so-called
Here's how it would broadly work:
A company that produces pollution, such as a utility
or a refinery, buys a permit from the state that
allows it to send a specified amount of carbon dioxide
and other greenhouse gases into the air each year.
Those permits could then be bought and sold by the
polluters in a marketplace. If a company in Fresno
is 15 percent under its pollution allowance, it can
sell the unused portion to a company
in Long Beach that has exceeded its quota. The Fresno
company gets to keep the money. Polluters can even
make a profit, if the marketplace sets a price above
the initial cost of the permit.
The lone dissenting board member, Dr. John Telles,
said he had concerns that the new market created
by the regulation was too vulnerable to cheating.
"We're potentially vulnerable here to be manipulated," he
said. "And I don't see enough safeguards in
the design of the market."
The board's staff said it would be working on market
issues in the coming year before the launch of the
program, but recognized that they were creating something
that had not been tried before.
Adding another wrinkle, a company that exceeds its
allowance can also buy what are called "offsets." These
can be bought by companies with forestry or other
projects that reduce greenhouse gases.
Those companies can sell those to polluters in the
marketplace, also at a profit.
Under the new California rules, regulators would
enforce limits on heat-trapping gas emissions beginning
in 2012, eventually including 85 percent of the state's
The amount of allowed emissions would be reduced
over time, and the regulations would expand in 2015
to include refineries and fuel distributors, such
as oil companies.
The cap would reach its lowest level in 2020, when
California wants its greenhouse gas emissions reduced
to 1990 levels.
Ninety percent of the allowances would be free in
the first years of the program to give industry time
to upgrade to cleaner equipment or account for increased
future costs as the cap tightens.
Over time, as the cap gets lower and fewer allowances
are available, costs would rise.
"The idea is to incentivize clean technology over
fossil fuels by putting a price on carbon," said
Jon Costantino, a senior adviser at a Sacramento law
firm who formerly served as the climate change planning
manager at the Air Resources Board.
Business groups raised concerns that the board had
not yet given hard details about what each facility's
allowances would be.
"It's crucial for companies to know what their
compliance requirements are going to be far in advance," said
Dorothy Rothrock of the California Manufacturers
and Technology Association.
"There are definitely going to be some costs
incurred right up front for these companies," she
State officials say they had to act, because of
years of delays in Washington. "The goal of
(the law's) authors in 2006 was to lead by example,
and being a leader you have to bring others along
with you," Nichols said.
A bill to place a limit on the amount of greenhouse
gases nationwide narrowly passed the U.S. House in
the summer of 2009, after arm-twisting by President
Barack Obama and other Democratic leaders.
But the measure died in the Democrat-controlled
Senate — because all Republicans and some Democrats
from coal- and industry-heavy states balked about
how it would raise electricity bills.
Obama, who made the climate bill the centerpiece
of his Democratic agenda, pulled support for it after
the midterm elections put Republicans in control
of the House. The president said he would be looking
at other ways to address climate change.
While the Environmental Protection Agency has proposed
the first-ever rules to reduce greenhouse gases from
large industrial polluters, the GOP, with some support
from Democrats, vows in 2011 to block it from moving
ahead with the regulations.
California's system, however, could end up being
linked to ones being developed in other countries.
State officials are talking with the European Union
as well as provinces in China and Canada to link
In the U.S., New Mexico narrowly approved its own
cap-and-trade program last month and OK'd the state's
participation in a regional market. There is another
market proposed in the Midwest and in New England.