Tamar Hallerman
GHG Monitor
10/5/12
California’s air chief confirmed this week that the state is making final preparations before moving forward with its inaugural auction of CO2 allowances next month. The California Air Resources Board will sell off its first batch of CO2 credits to the state’s largest emitters on Nov. 14, the group’s Chairwoman Mary Nichols said earlier this week at the International Emissions Trading Association’s North American Carbon Forum in Washington, D.C. The first auction will sell off 60 million CO2 credits—although about 90 percent of which are expected to be given away for free—to the state’s 600 highest emitting facilities, which are operated by roughly 350 companies, Nichols said. “Barring any unexpected glitches, the auction will go forward,” she added. The allowances will be sold ahead of the official compliance date for the state’s emissions trading scheme (ETS) on Jan. 1, 2013.
The auction officially kicks off the most controversial portion of California’s landmark climate law, AB 32, which has faced numerous legal and political challenges ever since it was signed by then-Gov. Arnold Schwarzenegger in 2006. However, the greenhouse gas emissions reductions generated from the cap-and-trade scheme only constitute about 20 percent of those from AB 32—energy efficiency efforts, a low carbon fuels standard and the further deployment of renewables also constitute large chunks of the effort. Nichols said the ETS will be implemented in phases, first incorporating the electric sector and industrial emitters and eventually being expanded to cover emissions from fuels. The scheme is eventually expected to cover about 85 percent of the state’s economy, making it the second largest ETS in the world behind the European Union’s, according to Climate Action Reserve President Gary Gero. “This is not a program that is going after emitters down to the moms and pops. This is really a program designed around the largest sources in California,” he said in a subsequent speech at the conference.
Linkage with Quebec Could Happen Next Year
Nichols said that California is moving ahead with plans to eventually link its ETS with Quebec, which is launching a similar cap-and-trade scheme, beginning next year. Her remarks come despite a recommendation from one of the Air Resources Board’s advisory committees last month to hold off on linking with the eastern Canadian province until at least 2015, when both schemes are more stable and established. Nichols said that that California Gov. Jerry Brown must first sign off on the linkage, which she said could occur before the end of the year. “It’s very much our hope to be part of a larger system,” Nichols said.
Other speakers at the conference also discussed the possibility of eventually linking California’s ETS to other cap-and-trade schemes such as the Regional Greenhouse Gas Initiative. Experts also floated the idea of also linking with other Canadian provinces, as well as the European Union and Australia, which is expected to transition into an ETS from a carbon tax system in 2015. Linking to other carbon markets is considered desirable, they said, because it increases the size of the ETS and makes it less expensive for emitters to comply. “California is not going to solve this issue by itself. We want to build a big tent and we’re trying to bring in other partners,” Gero said.
Nichols also expressed hope that some of the entities that were previously members of the Western Climate Initiative—a regional cap-and-trade scheme similar to RGGI that at its height boasted 11 U.S. member states and Canadian provinces and 13 observing provinces and U.S. and Mexican states—could rejoin the scheme if California and Quebec prove that it is effective at mitigating emissions cost effectively. “Many fell away after the last election over concerns about cap-and-trade, and I think that the possibility of some them rejoining is a bit better if we demonstrate that this is a program that can achieve good results,” Nichols said. She particularly cited the state of Washington as a likely partner if Democratic gubernatorial candidate Jay Inslee wins his November election. Inslee was a long-time advocate for cap-and-trade during his tenure in the U.S. House of Representatives.
