Calif debuts landmark program to cap emissions

Associated Press Modified: November 14, 2012 at 4:01 pm •  Published: November 14, 2012
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SAN FRANCISCO (AP) — California began auctioning permits Wednesday for greenhouse gas emissions, launching one of the world's most ambitious efforts to cut heat-trapping gases from industrial sources.

The California Air Resources Board said it began selling the pollution "allowances" in a closed, online auction expected to create the world's second-largest marketplace for carbon emissions.

Under the program, the state sets a limit, or cap, on emissions from individual polluters. Businesses are required to either cut emissions to cap levels or buy allowances through the auction from other companies for each extra ton of pollution discharged annually.

The board said the results of the auction — what price is paid for a ton of carbon, and how many companies participated — would be released Nov. 19.

The cap-and-trade plan is a central piece of AB32, the state's landmark 2006 global warming regulations.

The auction was being closely watched nationally, as the world's ninth-largest economy institutes a program that has eluded lawmakers in Washington.

Only the European Union has implemented a similar plan in terms of scope, and it currently operates the world's largest carbon marketplace. A much less inclusive cap-and-trade scheme covers only electricity producers in the northeastern United States.

Failure of the California program would be a devastating blow to carbon control efforts nationally, said Severin Borenstein, a professor at the University of California, Berkeley, an expert on energy economics.

"Cap and trade is still probably the most likely way we eventually could get to a national carbon mitigation program," Borenstein said.

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 reduce greenhouse gas emissions year-by-year.

If a business cuts emissions below its cap, it could profit by selling its extra allowances at a later auction.

Firms can also generate credits by investing in forestry and other projects that remove carbon from the atmosphere. Those credits can satisfy up to 8 percent of a company's mandated emissions reductions

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