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Calif debuts landmark program to cap emissions

Associated Press Modified: November 14, 2012 at 4:01 pm •  Published: November 14, 2012

Some businesses targeted by the program have argued the increased costs will drive jobs out of California. Executives also argue it could result in increased emissions by businesses in neighboring states that boost production to grab business.

"Raising costs in California will allow out-of-state firms to lower prices and take market share," said Shelly Sullivan of the AB32 Implementation Group, a business coalition that supports greenhouse gas reductions but opposes the auctioning of allowances.

"As it stands now the auction equates to a tax for these businesses to continue to operate in the state," Sullivan said. "Those costs will be passed through to consumers."

The California Chamber of Commerce has filed a lawsuit challenging the air board's authority to sell the allowances to generate revenue for the state. It claims the sale of allowances is an illegal tax because taxes need a two-thirds vote by the Legislature.

Stanley Young, a board spokesman, said cap-and-trade will withstand legal scrutiny.

"This market-based approach to cutting greenhouse emissions gives businesses the flexibility to best decide how to reduce their emissions," Young said.

The board estimates that about $1 billion could be raised from the sale of allowances in fiscal year 2012-13. About 23 million allowances will be sold for 2013 emissions, and 39.5 million allowances were being pre-sold Wednesday for 2015 emissions.

There is some uncertainty about how the money will be used. California law dictates only that it go into a special greenhouse gas reduction account, and any programs that use the funds be consistent with the goals of AB32.

California officials hope a successful rollout of the cap-and-trade system will embolden other states to follow suit and spur economic growth by strengthening the clean technology business sector.

Not all businesses are opposed to the plan. Mike Mielke of the Silicon Valley Leadership Group — which has 375 members, including tech titans IBM, Apple, and Cisco — said lots of technology firms see opportunity in the new carbon market.

"Cap-and-trade sends a clear market signal with a price on carbon," Mielke said. "A growing portion of our membership is clean technology, and that's a growing sector because of AB32."