California Agency Reaffirms Cap-and-Trade With More Analysis for Implementing Rules

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SACRAMENTO, Calif.—California air quality officials Aug. 24 reaffirmed their commitment to implement an economywide greenhouse gas emissions cap-and-trade program beginning in 2012.

In a unanimous vote, the California Air Resources Board approved the expanded environmental analysis of strategies for implementing the Global Warming Solutions Act of 2006 (A.B. 32) that the agency released earlier in the year in response to a court order (114 DEN A-9, 6/14/11).

As part of the same vote, the agency's governing board readopted the A.B. 32 “scoping plan,” the document that outlines more than 70 measures—including the emissions trading program—to achieve the emissions reductions required by A.B. 32.

The board's action comes just two months before CARB is expected to finalize the rules for the cap-and-trade program it adopted in December 2010 and hopes to phase in beginning in 2012. Litigation pending in the state courts, however, could still prove an obstacle for the full-scale launch of trading program planned for 2013.

California Superior Court Judge Ernest H. Goldsmith needs to sign off on CARB's newly expanded environmental analysis of A.B. 32 implementation strategies. Alternatively, the agency would have to prevail on its appeal of Goldsmith's finding in March, which became final in May, that CARB's initial “alternatives analysis” for the initial A.B. 32 scoping plan violated the California Environmental Quality Act.

In May, Goldsmith issued an order blocking CARB from further implementation of the cap-and-trade program until it complies with the CEQA requirements (Ass'n of Irritated Residents v. CARB, Cal. Super. Ct., No. CPF 09-509562, 5/20/11).

CARB, however, immediately filed an appeal and won a temporary stay of Goldsmith's order (Ass'n of Irritated Residents v. CARB, Ca. Ct. App., No. A132165, 6/3/11; 110 DEN A-6, 6/8/11).

Even though CARB has challenged Goldsmith's ruling, the agency opted to comply with his order requiring it to rescind the agency's 2008 approval of the A.B. 32 scoping plan and its related environmental document, in addition to completing a new environmental analysis that considered alternatives to the cap-and-trade program.

Meanwhile, environmental justice advocates who filed the lawsuit have asked the California Supreme Court to lift the appeals court's stay of Goldsmith's order (Ass'n of Irritated Residents v. CARB, Cal., No. S195112, 7/26/11; 148 DEN A-7, 8/2/11).

Environmental Justice Concerns

CARB's decision on the new environmental analysis and re-adoption of the A.B. 32 scoping plan followed a seven-hour public hearing at its California Environmental Protection Agency headquarters.

At the hearing, dozens of environmental justice advocates, including the litigants in the lawsuit, joined citizens from low-income and minority neighborhoods throughout the state in urging the agency's governing board to abandon the emissions trading program due to its potential adverse impacts in their communities.

“Keep the cap and drop the trade” was the common message from the witnesses, who said that allowing refineries and other industrial and agricultural facilities to purchase credits or offsets rather than reduce emissions would be unfair and do little to improve air quality in their communities.

Environmental justice advocates and citizens also objected to CARB's plan to initially offer “free” allocations, or permits, to the facilities participating in the trading program. In addition, they said direct regulation of the sources and a carbon fee and/or tax would be much more effective than the planned cap-and-trade program.

Brent Newell, an attorney with the Center for Race, Poverty, and the Environment that represents the litigants, called CARB's expanded environmental analysis a “sham” and said it does not meet CEQA requirements.

Staff Still Drafting Final Rules

Representatives from Canadian provinces participating in the Western Climate Initiative and planning to develop their own cap-and-trade programs to link with California's trading program also testified, urging CARB to stick with the market-based program.

Environmental Defense Fund and other groups closely involved in the drafting of A.B. 32 supported CARB's re-adopted scoping plan, although some groups called on CARB to ensure that any offset projects must provide “real emissions reductions.”

Prior to the vote, each of CARB's board members acknowledged personal reservations about pursuing cap-and-trade, but based on the staff's latest report and its large body of research on greenhouse gas emissions reduction measures, the trading program along with the dozens of other measures, many of which would involving direct regulations, would be the best path to implement A.B. 32.

CARB Chairman Mary D. Nichols acknowledged a cap-and-trade program is “complicated” and stressed that agency staff is still “not finished” drafting the rules for the program.

Environmental Defense Fund's Tim O'Connor praised CARB's decision.

“This is a vote of confidence in California's plan to create jobs and clear the air,” O'Connor said. “CARB's vote also reaffirms the value and importance of cap-and-trade: it is the most effective way to cut pollution quickly at the lowest cost, while driving investments and job growth in clean technology.”

Final Rules on Board's Oct. 21 Agenda

CARB will weigh the final set of rules for the program at its Oct. 21 board meeting.

The economywide trading program is a key element of CARB's plan to cut emissions to 1990 levels by 2020, as required by A.B. 32.

As approved by CARB's board in December 2010, the program targets 600 major sources, those emitting 25,000 tons or more of carbon dioxide-equivalent annually, at 360 business and government facilities. It establishes a declining cap on sources responsible for about 85 percent of the state's greenhouse gas emissions.

The plan is to distribute 90 percent of the emissions allowances for free, rather than for sale, during the initial phases to ease the program's early economic impacts.

Facilities would be required to meet their remaining emissions-reduction obligations by either reducing greenhouse gas emissions, purchasing allowances through quarterly actions CARB will offer, or purchasing qualified emissions offsets.

CARB officials believe the program could serve as a model for other states and the nation.

By Carolyn Whetzel

CARB expanded environmental analysis for the A.B. 32 Scoping Plan and related documents are available at .