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California pushes cap-and-trade plan

November 24, 2009 |  1:58 pm
California today issued the nation’s first blueprint for a broad-based cap-and-trade program to control global warming emissions.

The pioneering effort would cap greenhouse gases emitted by more than 600 power plants, refineries, cement plants and other big factories at 15% below today’s levels by 2020. And it would allow companies to buy and sell emissions allowances among themselves as a way to meet the overall goal less expensively.

The preliminary rule is a “milestone ... to address our state’s contributions to climate change, as the eighth largest economy in the world,” said Air Resources Board Chairman Mary D. Nichols. She pointedly contrasted it with the upcoming meeting of 192 nations in Copenhagen next month “for another conference at which no international treaty will be signed.”

Cap-and-trade, a centerpiece of Gov. Arnold Schwarzenegger’s push for flexible market-based regulations, could yield $2 billion to $4 billion per year in revenue to the state from affected industries, depending on the market value of carbon, how many allowances for greenhouse gases are auctioned, how many are given away. Schwarzenegger praised the board’s work as showing that “California has led the nation and the world in developing green policies,” adding that the program will drive innovation and generate jobs.

The state’s landmark 2006 law requires emissions of planet-heating pollutants to drop to 1990 levels by 2020. The cap-and-trade program will take effect beginning in 2012, complementing strict rules to cut emissions from automobiles and slash the carbon content of fuels.

The cap-and-trade rule, which would cover fuel deliverers such as oil and gas companies, could lead to a rise in the price of gasoline by 8 cents a gallon, if carbon permits are eventually traded at a likely $10 a ton. The air board says it is weighing whether to bring fuel deliverers under the cap in 2012 or in 2015.

California’s new push comes amid growing alarm over the likely impacts of global warming on the state, the nation and the planet as a whole. Sierra Nevada snowpacks are diminishing, raising the prospect of further drought and water shortages. Central Valley crops have begun to move north. And the habitats of local animals and birds are changing.

A report in April by California’s Office of Environmental Health Hazard Assessment, “Indicators of Climate Change in California,” said the state’s hotter temperatures, rising sea levels, and increasing wildfires are consistent with climate changes occurring globally.

California’s cap-and-trade proposal was designed in concert with national academic, industry and environmental experts and is likely to influence the shape of eventual federal regulations.The U.S. House in June passed a comprehensive climate bill, which is scheduled to be debated in the Senate next spring.

If a federal bill passes, then California’s program, along with a cap-and-trade program in the Northeast that only covers power plants, would probably merge with a federal program. But Nichols said the state could be free to require more emissions cuts in some cases.

European nations, operating under the 1997 Kyoto Protocol, a climate treaty that the U.S. refused to ratify, have regulated greenhouse gases under a cap-and-trade system for several years.

--Margot Roosevelt
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