California Climate Program Ready to Roll

Next month California’s landmark climate program is set to take another big step with the launch of its first auction.  It’s  time for  industrial polluters  to stop fighting this six-years-in-the-making program and instead join the hundreds of businesses investing in the battle against climate change and for a cleaner, more sustainable economy.

And at last month’s hearing, Mary Nichols, chair of the California Air Resources Board (ARB) tasked with implementing the AB 32 Global Warming Solutions Act, urged industry to work with the State rather than continuing their campaign of obstructionism, and we couldn’t agree more.

We think Nichols is correct that it would be patently unfair and “just plain unacceptable” to exclude industry from AB 32, the law aimed at reducing the Golden State’s carbon pollution to 1990 levels by the year 2020, when “every other member of society, from forestry to municipal sewage treatment plants is taking aggressive measures to reduce their emissions.”

“While no aspect of this program has been free from controversy, an initiative that would have suspended the entire program was overwhelmingly rejected by the voters in 2010, in the depths of the recession,” Nichols noted at last week’s Board meeting. “Since that time, the sponsors of that initiative and others who have opposed every measure directed at reducing emissions from the industrial sector have taken to proclaiming their support for AB32 while attacking every single piece of the ARB's program to implement that law.”

Nichols singled out the California Manufacturers and Technology Association (CMTA), Western States Petroleum Association (WSPA) and the California Chamber of Commerce, which have been ramping up opposition to AB 32 – targeting the upcoming cap-and-trade auction component -- through newspaper ads and other avenues as the Nov. 14 date for the first auction approaches.

The cap-and-trade program, which eventually will cover California’s industrial, utility and transportation fuel sectors accounting for roughly 85% of the state’s greenhouse gas pollution, sets a “cap” on the aggregate emissions from the state’s largest emitters. It does not, however, dictate specific reduction requirements on any one emitter, allowing them flexibility to cut emissions outright, or buy and sell (“trade”) pollution credits known as “allowances,” at quarterly auctions or on the market in order to comply.

The cap declines each year, meaning there are fewer allowances available, and industry must cut emissions or pay increasingly higher allowance prices to internalize the cost of their carbon pollution.

As Nichols noted, no business (other than the utilities which are subject to a different set of rules) is forced to participate in the auction and ARB met with members of the industrial sector “hundreds of times, and developed, with them, an approach where we provided 90% of the allowances for the first years to help with the transition.” She said the intent was to institute an auction “small enough to have minimal or unnoticeable effect on California business and consumers, but large enough to allow for a meaningful market to emerge.”

Although opponents want free allowances to continue longer – or indefinitely so there would be no need for auctions -- 60 renowned economists and other experts recently voiced strong support for them, noting the proceeds can be used to cut costs for households and consumers, and achieve environmental and equity goals that cannot be achieved if they are given free. The group included leading climate economist Dallas Burtraw, who earlier testified in support of the program’s overall design.

“ARB has gone a long way to make these regulations as simple and palatable as possible, and we will continue to work to make sure that they are as efficient and cost-effective as possible,” Nichols said. “At this point it's time for CMTA and WSPA and the Chamber to join the many hundreds of businesses that are investing in the fight against climate change instead of fighting AB32.”

We couldn’t have said it better ourselves.