Litigation threatens to delay the start of the multibillion-dollar program, and industry executives worry that its regulations will fall short of guaranteeing a smoothly operating market. Fear is growing that it could be susceptible to the fraud that has plagued a similar European system.
“It feels as though the sun has risen in the West,” Henry Derwent, head of the Geneva-based International Emissions Trading Assn., told traders, bankers, entrepreneurs and oil and utility executives in Los Angeles last week.
“But however tempting it may be … to celebrate getting out ahead of the rest of the United States,” he cautioned, California’s trading system must show “real momentum.... If the program goes poorly, if the regulations don’t allow for a functioning market, there may be little market for California to lead,” Derwent said.
Scientists say that carbon dioxide and other gases, mainly from fossil-fuel burning, are trapping heat in Earth’s atmosphere. leading to dangerous climate change, including rising sea levels, longer droughts, floods and melting glaciers.
In 2006, California passed the nation’s most comprehensive climate law, mandating a cut in carbon pollution to 1990 levels by 2020 — about 10% below today’s emissions. Although Congress balked at similar legislation in 2009, California has moved forward. Its plan to cap greenhouse gases at 600 industrial plants and allow companies to buy and sell emissions permits is modeled on Europe’s 6-year-old cap-and-trade system.
The 700 executives who signed up for the Navigating the American Carbon World conference last week included officials from Alcoa, Chevron, General Electric, Shell, Southern California Edison and other major companies. They were joined by financiers from Merrill Lynch, Deutsche Bank, Morgan Stanley, Barclay’s Capital and other large Wall Street firms.
Engineers and entrepreneurs manned booths and handed out shiny brochures to promote companies that verify carbon emissions, manage greenhouse gas data, broker credits and develop offset projects such as systems to control methane from farm manure or increase forest carbon sequestration.