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Calif. to officially launch greenhouse gas system

Associated Press Modified: November 12, 2012 at 3:16 pm •  Published: November 12, 2012

SAN FRANCISCO (AP) — California's largest greenhouse gas emitters will begin buying permits in a landmark "cap-and-trade" system designed to control emissions of heat-trapping gases and to spur investment in clean technologies.

The program is the most wide-ranging of its kind in the nation and a key part of California's 2006 climate-change law that dictates standards for cleaner-burning fuels, more efficient automobiles, and increased use of renewable energy.

Under the plan, the California Air Resources Board will auction off pollution permits on Wednesday called "allowances" to more than 350 businesses, including electric companies, food processors and refineries.

In essence, the auction will put a price on carbon emissions.

The program also places a cap on emissions spewed by individual polluters. Businesses are required to either cut emissions to the cap levels or buy allowances from other companies for each metric ton of carbon discharged over the cap each year.

Businesses can satisfy up to 8 percent of emissions reductions through the purchase of carbon credits from forestry and other certified projects.

"It is entirely in line with the notion ... that competitive economics in the 21st century is built upon clean and more efficient ways of generating energy, making products and doing business," Mary Nichols, the air board's chairman, wrote in an email.

However, some of the businesses regulated under the plan say the extra costs will result in higher electricity rates and job losses in an economy already struggling to recover. A coalition of business groups has petitioned Gov. Jerry Brown to delay the program — a request he has refused.

"The auction will take place," said Evan Westrup, a spokesman for the governor. "We will be monitoring the program very closely and the Air Resources Board will make modifications as appropriate."

For the first two years of the program, large industrial emitters will receive 90 percent of their allowances for free in a soft start meant to give companies time to reduce emissions through new technologies or other means. The cap, or number of allowances, will decline over time in an effort to drastically reduce greenhouse gas emissions by 2050.

The board has estimated that businesses will pay a total of $964 million for allowances in fiscal year 2012-2013. About 23 million allowances will be sold for 2013 emissions, and 39.5 million allowances are being pre-sold Wednesday for 2015 emissions.

The state is still unclear about how the money will be used, but California law dictates it go into a greenhouse gas reduction account, and any programs that use the funds be consistent with the goals of AB32, the climate change law.

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