| October 15, 2008 |  |
California's Otherwise Strong Global Warming Plan Stumbles on Cap-and-Trade
BERKELEY (October 15, 2008) - The Union of Concerned Scientists (UCS) today gave high marks to the California Air Resources Board's (CARB) near-final implementation plan for the state's landmark global-warming-pollution-reduction law, but said its cap-and-trade provisions were still deficient.
"The plan is a huge step forward," said Erin Rogers, climate strategy manager in UCS's California office. "It will help California build a stronger, cleaner economy that will create jobs, insulate us from oil price spikes, and cut the pollution that causes global warming. But the plan still stumbles when it comes to establishing a viable cap-and-trade system, which is a key component of any responsible strategy."
CARB's plan, which relies predominately on direct regulations for the electricity and transportation sectors to reach the state's 2020 emission reduction goal, sets a standard for other states and the federal government in most areas. It will have implications for federal policymakers, the Western Climate Initiative (WCI) cap-and-trade system, the upcoming vote on Proposition 7, as well as potential changes to the states car and truck fleet.
The plan would achieve 80 percent of its emissions reductions through policies directed at specific polluting industries and 20 percent through the WCI regional cap-and-trade program, which is where UCS has identified some problems.
CARB will vote on adopting the plan before the end of the year. The plan has been two years in the making and recent changes follow three months of public hearings and meetings across the state.
OVER-RELIANCE ON OFFSETS UNDERCUTS CAP-AND-TRADE PROGRAM
CARB's plan says it seeks to participate in the WCI, a partnership among seven states and four Canadian provinces to reduce global warming pollution through an economywide cap that will utilize a cap-and-trade system and other policy approaches. The WCI released its minimum requirements for participants just a few weeks ago.
CARB's plan says it seeks to participate in the WCI, a partnership among seven states and four Canadian provinces to reduce global warming pollution through an economywide cap that will utilize a cap-and-trade system and other policy approaches. The WCI released its minimum requirements for participants just a few weeks ago.
"CARB's plan appropriately recognizes that cap-and-trade is not a silver bullet," said UCS Climate Economist Chris Busch. "CARB is reducing pollution in the most cost-effective way. It starts with strong policies that do most of the work by targeting specific reductions in highly polluting sectors and then uses a market-based cap-and-trade system to produce additional cuts."
One area where CARB's plan falls short is its embrace of offsets, he said, which are credits that polluters in capped sectors can buy based on estimated reductions made by offset providers in uncapped sectors. In this way, offsets substitute for cuts that could have been made directly by polluters in the electricity, industrial, and transportation sectors that cap-and-trade directly addresses. Both CARB and WCI would allow approximately half of the required pollution reductions under a cap-and-trade system to occur through offsets.
However, CARB's plan does more than the WCI's minimum offset limit requires. WCI allows states to use offsets for as much as 49 percent of reductions over the lifetime of the program without rules on when polluters can use offsets. Under that approach, polluters could rely entirely on offsets in the early years of the program, which could allow polluters in capped sectors to delay making their own emission reductions until later years, in some cases not until 2018. In contrast, California has decided it will limit the use of offsets to 49 percent during each three-year round of reductions under WCI. In that way, California will guarantee real reductions in sectors covered by a cap-and-trade system throughout the program's earlier years.
"CARB should go further than the minimum standards agreed to in the WCI process. The plan should limit offsets to a small fraction of reductions instead of up to 49 percent," Busch said. He pointed out that an economic analysis by CARB and the University of California Berkeley found that a strong set of climate policies including a cap-and-trade system without any reliance on offsets would boost the economy. "We should be fully capitalizing on the innovative energy and capacity in California to create new clean technologies that can help reduce global warming pollution here and around the world instead of outsourcing the effort through offsets," he said.
AUCTIONING
The WCI leaves states and provinces to decide how many pollution permits under a cap-and-trade system it would auction or give away to polluters for free. The WCI set a minimum of 10 percent auctioning at the start of the program, increasing to 25 percent in 2020. CARB's draft implementation plan says that achieving 100 percent auctioning is a "worthwhile goal."
The WCI leaves states and provinces to decide how many pollution permits under a cap-and-trade system it would auction or give away to polluters for free. The WCI set a minimum of 10 percent auctioning at the start of the program, increasing to 25 percent in 2020. CARB's draft implementation plan says that achieving 100 percent auctioning is a "worthwhile goal."
"Auctioning pollution allowances is the simplest, most fair and effective choice," Busch said. "It's unfortunate that CARB's implementation plan doesn't commit to 100 percent auctioning, even without a specific timeframe. Polluting industries should receive a clear signal that this is the direction the system is headed."
Busch noted that all of the Northeastern and Mid-Atlantic states involved in the Regional Greenhouse Gas Initiative (RGGI) decided to auction nearly or fully 100 percent of their allowances, even though a much lower minimum was set earlier in the RGGI process. He said auctioning allowances raises money that can be used to benefit consumers and invest in clean energy and other green investments. Just two weeks ago, the RGGI states raised $38.6 million in the first U.S. auction for global warming pollution permits.
"Giving away pollution permits for free," Busch said, "would generate windfall profits for polluters and enrich out-of-state corporate shareholders at the expense of Californians."
PROPOSITION 7 THREATENS PLAN'S RENEWABLE ENERGY PROVISIONS
CARB's plan firmly establishes its commitment to requiring a third of the state's electricity to come from clean, renewable sources of energy, such as wind and solar energy. The plan suggests that CARB will work with the state Legislature and the governor in 2009 to pass legislation increasing the state's renewable portfolio standard to 33 percent by 2020 and expanding the law to include municipally owned utilities. This approach, along with strengthened energy-efficiency and green-building standards, would put the state firmly on an aggressive path toward a carbon-free energy future, UCS said.
CARB's plan firmly establishes its commitment to requiring a third of the state's electricity to come from clean, renewable sources of energy, such as wind and solar energy. The plan suggests that CARB will work with the state Legislature and the governor in 2009 to pass legislation increasing the state's renewable portfolio standard to 33 percent by 2020 and expanding the law to include municipally owned utilities. This approach, along with strengthened energy-efficiency and green-building standards, would put the state firmly on an aggressive path toward a carbon-free energy future, UCS said.
The Proposition 7 ballot measure, meanwhile, could delay new renewable energy development in California, according to UCS experts. The proposition has lofty goals, but opponents -- including renewable energy entrepreneurs, environmental and science groups, labor organizations and electric utilities -- object to what they view as flawed language in the proposition that would make it easier for utilities to avoid complying with the law and create confusion in the permitting and siting of new renewable energy transmission lines. They also point out that the proposition's language would make it extremely difficult for lawmakers to address its deficiencies. It would require a two-thirds vote in the Legislature to change any of its provisions.
"If Proposition 7 passes, it would stall progress on creating more renewable electricity in the state," said Dan Kalb, UCS's California policy coordinator. "The CARB global warming action plan is more evidence that Californians who care about renewable energy should reject Prop 7 and pressure the Legislature to act."
TAILPIPE EMISSIONS FROM CARS AND TRUCKS
CARB's plan includes a commitment to strengthen California's landmark global warming standards for cars and trucks. Thirteen other states have adopted them, but they have not been able to implement the standards because of automakers lawsuits and the Environmental Protection Agency's refusal to grant California a waiver under the Clean Air Act. It is the first time that the EPA has ever denied California such a waiver.
CARB's plan recommends that the state evaluate and possibly implement a "feebates" program, a system of one-time rebates and surcharges on new passenger cars and light trucks based on the amount of global warming pollution they emit. A feebates program could complement California's tailpipe standards if both were implemented. According to a University of Michigan study, implementing a clean car discount program would deliver an additional 21 percent reduction in global warming pollution beyond the tailpipe standards.
"A feebate program would make cleaner cars more affordable for everyone," said Spencer Quong, a UCS senior vehicles engineer. "Cleaner cars cost less to operate, so people would save money on gas with this program, too. This is groundbreaking policy that would give automakers an added incentive to produce cleaner vehicles."
"A feebate program would make cleaner cars more affordable for everyone," said Spencer Quong, a UCS senior vehicles engineer. "Cleaner cars cost less to operate, so people would save money on gas with this program, too. This is groundbreaking policy that would give automakers an added incentive to produce cleaner vehicles."
More than 1.5 million new vehicles are sold in California each year, representing about 10 percent of the new vehicle market in the United States and more than a quarter of California's global warming pollution comes from cars, according to UCS.
In addition, the CARB plan includes policies to reduce emissions from heavy-duty trucks with hybrid engine technology and other efficiency improvements. Like many of CARB's proposals, the heavy-duty truck provisions could improve public health by reducing smog-forming pollution. CARB's first action to address global warming pollution from heavy-duty trucks is scheduled to occur at the December 11 board hearing, when it will take up a measure to reduce emissions from tractor-trailers operating in the state.
The Union of Concerned Scientists puts rigorous, independent science to work to solve our planet's most pressing problems. Joining with citizens across the country, we combine technical analysis and effective advocacy to create innovative, practical solutions for a healthy, safe, and sustainable future.
