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California releases draft cap-and-trade regulations

By Chris Rizo | Nov 24, 2009

Arnold Schwarzenegger (R)

Jerry Brown (D)

SACRAMENTO, Calif. (Legal Newsline)-California officials on Tuesday released draft regulations of the state's cap-and-trade system aimed at limiting emissions blamed for global climate change.

The 135-page draft regulation was released by the California Air Resources Board. The proposed rule would establish a declining ceiling on greenhouse gas emissions and allow companies that emit large volumes of greenhouse gasses to buy and sell permits to meet their requirements.

The ARB plans to adopt the program rules in December 2010. There is one goal in mind: To reduce California's carbon dioxide and other greenhouse gas emissions to 1990 levels by 2020.

The reduction in greenhouse gasses is required under the state's Global Warming Solutions Act -- Assembly Bill 32 -- passed by the Legislature and signed by Republican Gov. Arnold Schwarzenegger.

The California cap-and-trade system would first tartget 600 major sources of greenhouse gas emissions, including power plants, refineries and concrete factories. Then beginning in 2015, the rule would apply to emissions from industrial and transportation fuels.

"This marks another important milestone in California's efforts to deal with the very difficult and complicated process of developing a broad program to address climate change," said ARB Chairman Mary Nichols in a conference call Tuesday with reporters.

Nichols said the annual pool of carbon dioxide allowances in the state's proposed cap-and-trade program could provide the state of $2 billion to $4 billion. California's cap-and-trade program is scheduled to begin Jan. 1, 2012.

California's groundbreaking anti-global warming effort was stymied for years by President George W. Bush's administration, which refused to approve California's preemption waiver to enforce its own tailpipe emissions standards.

In denying the waiver late last year, then-EPA Administrator Stephen Johnson said there ought to be a national approach to cutting tailpipe emissions, so it would not be well to allow individual states to set emissions standards.

The U.S. Environmental Protection Agency, under the Obama administration, has since granted California's request for a waiver to enforce its legislatively-approved emissions standards, aimed at achieving a 30 percent reduction in tailpipe emissions by 2016.

"We have seen our green economy grow along with California's green initiatives, and I have no doubt the nation's first cap-and-trade program will also drive innovation and generate green jobs," said Schwarzenegger in a statement. "I look forward to a program in California that achieves our environmental goals and boosts our economy and I applaud the California Air Resources Board for laying the groundwork in developing a program with flexibility to achieve emission reductions at lower costs."

Not so happy about the program is the California Manufacturers & Technology Association. In a statement, the industry group said the cap-and-trade program would essentially tax production in the Golden State.

"California lost more than a half million high-wage manufacturing jobs over the past eight years, and companies are suffering in the current recession," said CMTA Vice President of Government Relations Dorothy Rothrock.

"Manufacturers are making critical decisions about where to maintain facilities and deploy scarce capital for expansion and modernization. I am concerned that continued uncertainty about the scope and design of the program is putting a damper on job creation and investment in the state," she added.

California's cap-and-trade program will be linked to a regional effort to reduce greenhouse gas emissions by 2020.

Aimed at cutting regional carbon dioxide and other greenhouse gases by 15 percent over 2005 levels by 2020, the Western Climate Initiative includes Arizona, California, Montana, New Mexico, Oregon, Utah and Washington and the Canadian provinces of British Columbia and Manitoba.

Their goal could eliminate 350 million metric tons of carbon dioxide, or roughly the same as taking 75.6 million cars off the road.

To help get there, member-states agreed in 2007 to create a market-based mechanism in which heavy polluters such as manufacturers could purchase carbon credits from below-average greenhouse gas emitters.

Enacting greenhouse gas emission standards has been endorsed by state Attorney General Jerry Brown, who recently called greenhouse gas regulations an insurance policy against catastrophic effects if indeed the planet is warming.

"This not about whether it's absolutely going to happen -- because it is -- but might it happen," Brown told a convention of corporate attorneys this month. "What's the risk that your house will burn down? Pretty remote. But I would venture to say everyone in this room has fire insurance."

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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