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California Delays Cap-and-Trade Until 2013

Legal challenges and other obstacles have caused California to postpone for one year the implementation of its proposed carbon emissions cap-and-trade program, which was scheduled to start Jan. 1. Although still "on track" to begin next year, it has been put off until 2013, the regulator responsible for implementing the 2006 climate change law (AB32) told a state Senate committee Wednesday.

AB 32's centerpiece is the first attempt at having electric generation plants, major industrial operators and refineries put limits on their greenhouse gas (GHG) emissions while allowing the trading of emissions credits over the next eight years as the limits are gradually tightened. Cap-and-trade is the key element to future success of the overall climate change program in the state, officials said.

In March a San Francisco Superior Court ruled that a full-blown environmental impact report (EIR) was needed before the program could be implemented (see Daily GPI, March 25). That is when the possibility of a delay beyond 2012 surfaced. The California Air Resources Board (CARB) is looking at alternatives in the wake of the court ruling and will consider those alternatives Aug. 24.

"The court did not rule in favor of any of the plaintiffs' arguments against cap-and-trade," CARB spokesperson Stanley Young told NGI at the time of the ruling. Allegations of environmental harm from the program have no basis, said Young, noting that the record leading up to the cap-and-trade program was not challenged in the lawsuit, nor were the findings of a health impacts analysis that was done as part of the case.

At the state Capitol Wednesday, Mary Nichols, CARB chairwoman and the state official who is charged with implementing AB 32, downplayed the significance of the delay, noting the one-year postponement would not affect the stringency of the GHG emissions limits. Companies established to trade carbon emissions under the program told news media the delay gives power plants and other large operators "a breather, but not a pass" from the regulations included in the state's 2006 Global Warming Solutions Act.

Nichols told state lawmakers that the delay was needed to make sure "all necessary elements would be in place and fully functional."

"We are proposing to initiate the program in 2012, but start the requirements for compliance in 2013," said Nichols, adding that in the next few weeks the CARB staff will hold public workshops to discuss and receive input on "this proposal and other elements needed to finalize the regulation."

In regard to the court ruling earlier this year, Nichols told lawmakers that CARB disagreed with the judge and the state's First District Court of Appeals subsequently has granted the state agency's request to continue working on developing the cap-trade regulation, pending a final outcome of the appeal.

Underscored in some of the news coverage of Nichols' announcement was the fact that advocates for alternatives to a cap-and-trade program will use the extra time to lobby Gov. Jerry Brown to reject the trading program, which critics contend can be easily manipulated. It was former Gov. Arnold Schwarzenegger who was the champion for cap-and-trade.

In the absence of any national climate change legislation and a growing skepticism toward cap-and-trade proposals in Congress, the California program when it is launched would be the largest of its kind in North America, estimated to be three times the utility-only program in New England. In California's program 600 industrial facilities, including cement plants, power plants and refineries would be required to cap their GHG emissions.

The proposed program is being fought in courts by several neighborhood and environmental justice groups in California.

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