California adopts extensive 'cap-and-trade' plan

October 21, 2011 By JASON DEAREN , Associated Press

(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.

State 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.

"For 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 Resources Board.

"The 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."

The 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.

Some businesses regulated under the program argue it will increase the price of electricity for consumers and hurt by raising the cost of doing business in the state. But the program's supporters expect cap-and-trade to spur and innovation, by pushing business to invest in clean technologies.

While 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 percent of California's emissions.

Former Gov. , who frequently promoted the law, called Thursday's vote a "major milestone" in the fight against climate change.

"I have always believed that we can create a world where economic growth, and environmental protection are all achieved," Schwarzenegger said

In 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.

Companies 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.

A company can also meet up to 8 percent of its emissions reduction obligations by purchasing carbon "offsets," or investments in forestry or other projects that reduce greenhouse gases.

The 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.

"Although 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 percent of the allowances would be free in the first years, providing time for equipment upgrades.

A letter sent by the California Chamber of Commerce and a host of other business groups called the 10 percent in allowances an "arbitrary 10 percent haircut." The letter said that California can't fight global on its own.

"We 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.

The 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.

Work 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 governed facilities.

The California Supreme Court in September allowed work to continue on the regulations.

In response to these concerns, the board on Thursday also approved a new "adaptive management plan," under which the air quality of neighborhoods near 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.

"California 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.

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2.6 / 5 (11) Oct 21, 2011
this system will succeed only in generating fraud/ theft and deceiving pr campaigns and reports advertising its own success and raåid expansion. a hanful of people in the public and private secttor will make off with hundreds of millions and no meaningul impact will be had upon the status quo other than higher costs being passed off to the consumer.
1.8 / 5 (21) Oct 21, 2011
Good for them. CA will set the example of failure.
Should help the real estate market in Las Vegas.
3.7 / 5 (19) Oct 21, 2011
"this system will succeed only in generating fraud/theft and deceiving pr campaigns and reports advertisng its own success and raaid expansion." - Jeddy

Why is that? Are Republicans controlling the program? They corrupt and destroy everything they touch.

3.7 / 5 (18) Oct 21, 2011
"CA will set the example of failure." - RyggTard

That is certainly the desire of many American Conservatives who are working to that goal.

Some dare call those Conservative Campaigns against California, treason.

Don't you agree RyggTard?

4.3 / 5 (17) Oct 21, 2011
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.
Yes, doesn't it suck when you can no longer externalize your product's environmental costs, and instead have to put them up on your balance sheet and into the retail price of your product? Accountability is a real "job-destroyer" for organized industrial crime syndicates. Poor, poor oil companies...
1.6 / 5 (14) Oct 21, 2011
I personally think they should tax farmers to subsidise the CO2 creators that help their land yields.
1.4 / 5 (18) Oct 21, 2011
Pinky, who gets the tax revenue and how will you hold them accountable?
Govts raise taxes to curb customer demand for cigs/alcolhol/gas etc. but the tax money is put into the general fund to further subsidize the state. The state then becomes addicted to the 'sin'.
4.7 / 5 (14) Oct 21, 2011
Pinky, who gets the tax revenue and how will you hold them accountable?
And yet again, you prove that you've got not a clue about what's being discussed. Business lobbyists describe it as "amounting to a tax", but it is not in fact a tax. Govt. only gets a one-time cash in return for initial float of carbon credits into the marketplace. After that, the quantity of carbon credits is fixed, just like the quantity of a public company's stock float is fixed.

Following initial issuance (analogous to a stock market IPO), industry is forced to trade these credits with other market participants, and the credits are naturally priced according to the laws of supply and demand.

This results in exchange of capital between private actors, with no money flowing to the govt. So there's no 'sin' for the govt. to become "addicted" to.

BTW, this is a classic Republican idea. How come you've got no clue as to how it works (and has worked well in the past with sulfur dioxide cap-and-trade?)
3.9 / 5 (15) Oct 22, 2011
"I personally think they should tax farmers to subsidise the CO2 creators that help their land yields." - LVTard

Once taxes go into a general fund, it is impossible to say where any particular penny is distributed.

You may lie to yourself and claim that the tax dollars of farmers is going to subsidize Exxon, but it is only a lie.

And like every other Libertarian/Randite who has ever existed, you are full of lies.
4.1 / 5 (13) Oct 22, 2011
"Govts raise taxes to curb customer demand for cigs/alcolhol/gas etc" - RyggTard

We agree with you RyggTard. It would be best just to criminalize the production and sale of tobacco.

Let Citizen tards like yourself grow it for their own consumption.

As long as no money changes hands the problem will essentially be solved.

2.3 / 5 (6) Oct 22, 2011
"the world's eighth-largest economy"

Possibly not for long...

Seriously, the last time they tried experiments of similar nature in that State the economy tended to tank as businesses moved out of the State. Seems like California never learns until it is too late. Enron redidivus, anyone?

I lived there decades and watched several times as jobs fled the State as a result of costly legislation like the above.

And, 'treason' for not supporting such legislation? I think not. Well, on second thought, as groups of citizens in California have been working to rewrite the dictionary several times over in that State and elsewhere, perhaps it might be so now. It is hard to know what goes on in the land of fruits and nuts at times, especially since fleeing it for the sake of livelihood. :)
not rated yet Oct 22, 2011
What??? I corrected the spelling on the Latin but the correction was not saved. Man, I hate the software they use here. No plus signs and no guarantee that changes made will stay after pressing the Submit button.

The proper spelling is redivivus.
4.6 / 5 (9) Oct 24, 2011
Raise your hand if you're sick of the same few posters traveling from article to article, spewing left/right/conservative/liberal vitriol and bile.

Physorg would greatly benefit from finding some way of putting a lid on these 'comment-abusers'. It makes it hard for those readers looking for substantive, relevant comments to wade through it all.

(You guys know who you are... can you just send private emails back and forth to each other, instead of making the rest of us witnesses to your fascination with each other?)

1 / 5 (1) Nov 17, 2011
Seriously Lorax, you must have no opinion on the life or death of earth by global warming? Have you not read the articles debated?

Worst, have you not seen the positions taken by right/conservative vitriol? The one that says, global warming is a lie, and just plain stupid shit?

Have fun trying to be in the middle my friend.

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