On October 29th, the California Air Resources Board (CARB) released its proposed greenhouse gas (GHG) cap and trade system regulations. The regulations are a component of the state’s climate change law, the Global Warming Solutions Act of 2006, AB32.
When the program launches in 2012, the emissions cap will be set at the emissions forecast for the year, declining about 2% annually until 2015 when it will begin declining approximately 3% per year. The 2020 emissions cap will be roughly 15% below 2012 levels.
The proposed program will freely allocate approximately 90% of emissions allowances at its onset, including to the industrial and utilities sectors. Further allowance distribution will be done through auctions, and a floor price of US$10 per tonne of CO2 equivalent (CO2e) has been proposed. Funds accumulated through allowance auctions will be invested in direct emissions reductions and carbon offset projects.
The percentage of carbon offsets that can be used for compliance has been raised to 8% from 4%. Valid offset projects are forestry, urban forestry, livestock management (manure/methane), and removing existing stock of ozone-depleting substances.
The regulation proposal comes at a critical time before the November 2nd midterm elections. Californians are facing two propositions that threaten AB32: prop 23, proposing AB32 be delayed until unemployment reaches 5.5% for over a year, and prop 26, proposing redefining ‘fees’ as ‘taxes’ which would reclassify the sale of emission allowances under cap and trade (see Delphi’s previous coverage). The results of these propositions will dictate how California moves forward addressing climate change and the implementation of AB32. Either proposition could end Californian cap and trade, a move which may have consequences for the Western Climate Initiative, a regional initiative to mitigate GHG emissions of which California is a key member.
An overview of the proposed program has been prepared by CARB and is available here. CARB will accept public comments on the proposed regulations for 45 days beginning November 1st. More information on that process is available here. The draft rules are expected to be officially adopted December 16th.
By Cheryl Johnson, .(JavaScript must be enabled to view this email address)
