Putting a Price on Carbon

As the Air Resources Board meets this week, they’ll be facing a deadline – how to implement a cap-and-trade program that is a pivotal part of a 2006 climate law, called AB32.

The program will offer financial incentives for power plants and other major polluters to cut emissions, setting up the largest U.S. carbon trading market as a way to enforce a gradually tightening cap on emissions.

AB32 has a Jan. 1, 2011 deadline for devising and enacting details on how it would work.

Nothing like a little procrastination.

Under the new California rules, regulators would enforce limits on heat-trapping gas emissions beginning in 2012, eventually including 85 percent of the state's worst polluters.

Ninety percent of the allowances would be free in the first years of the program to give industry time to upgrade to cleaner equipment or account for increased future costs.

Over time, as the cap gets lower and fewer allowances are available, costs would rise.

 "The idea is to incentivize clean technology over fossil fuels by putting a price on carbon," said Jon Costantino, an attorney in Sacramento, who formerly served as the climate change planning manager at the Air Resources Board.

Up to 8 percent of companies' emissions reductions can also be fulfilled by buying so-called carbon offsets -- credits for forestry or other projects that reduce greenhouse gases.

Catherine Reheis-Boyd, president of the Western States Petroleum Association, said California has to ensure the cap-and-trade program gets linked with other states and countries that plan to do the same thing, so that the market broadens and becomes more robust.

"California can't do it alone, we won't help fix climate change alone," Reheis-Boyd said. "If we're the only ones doing cap-and-trade, it will be a huge competitive disadvantage for California when compared to other states, and a huge competitive disadvantage globally."

California wants its greenhouse gas emissions reduced to 1990 levels by 2020.

Copyright AP - Associated Press
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