California adopts emissions cap plan

Adelaide Advertiser
22 Oct 2011, Page: 85

CALIFORNIA formally adopted America's most comprehensive "cap-and-trade" system yesterday, 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 hoped other states and Washington DC, would follow, calling the plan a "capstone" among the tools California can use to reduce 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", chairman of the California Air Resources Board, Mary Nichols said. "The reason we have not succeeded in addressing our addiction to petroleum is because we did not have the right set of policy tools. 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 raise the price of electricity for consumers and hurt job creation by raising the cost of doing business in the state. Program supporters expect cap-and-trade to spur economic recovery and innovation, by pushing business to invest in clean technologies.

While implementation of some parts of the program will begin next year, compliance for power plants and other of the worst polluting facilities starts in 2013, with others joining in 2015. The plan will cover 85% of California's emissions. Former Governor Arnold Schwarzenegger, who frequently promoted the law, called the vote a "major milestone" in the fight against climate change.

In general, the program will require pollution producers, such as 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 sell the permits. Greenhouse gas emitters could purchase the allowances if they failed to cut emissions.

Polluters reducing emissions might turn a profit if the market price for extra allowances rose above the initial cost of the permit.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 possibly affecting mostly low-income neighbourhoods located near governed facilities.

The California Supreme Court in September allowed work to continue on the regulations, saying the air quality of neighbourhoods near power plants and other regulated facilities would be monitored to see if any more pollution results from cap-and-trade.