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California Holds Cap-Trade Auction Despite Lawsuit
With natural gas-fired power generation plants and refineries both in the crosshairs of state regulators, California held its first auction for carbon emissions trading on Thursday, despite the state’s major business association filing a lawsuit to block the auction a day earlier.
Natural gas-fired plants account for more than two-thirds of the state’s 50,341 MW of available capacity, the state grid operator has said. Power plants and refineries account for about 60% of all greenhouse gas (GHG) emissions in the state.
The California Air Resources Board (CARB) posted on its website Wednesday night that the auction results will be published on its website at 12 p.m. PST Monday (Nov. 19). “Once results are posted on the website, auction participants also will be notified by CARB’s auction administrator via e-mail of the availability of their auction results in the online auction platform, CARB said.
The auction is a move to begin implementation of the state’s sweeping 2006 global climate change law (AB 32), which will first fall on power plants and refineries to buy and sell carbon emission permits as part of what CARB has adopted as a market-based approach, which is something usually embraced by the business community.
In this case, however, the California Chamber of Commerce, representing the state’s largest businesses, filed a lawsuit Tuesday seeking to block the cap-and-trade program. Noting it was not opposing the implementation of AB 32 or any of its other programs, the state Chamber CEO Allan Zaremberg said the state climate law gives California “the opportunity to be the leader in reducing carbon emissions,” but that must include adopting only “the most cost-effective ways” to reduce emissions.
In the legal complaint filed in the California Superior Court in Sacramento, the Chamber asserted that AB 32 does not authorize CARB to impose fees other than ones needed to pay its administrative costs, and thus, it should not be taking a percentage of the annual statewide GHG emissions allowances to auction them off to the highest bidders.
The lawsuit alleges that the auction could ultimately take up to $70 billion or more for the state from the selling of the GHG emission allowances.
A CARB spokesperson said CARB’s board was reviewing the lawsuit, but it expected cap-and-trade to withstand legal challenges.
Nearly 40 million emission allowances were put on the sales block Wednesday for 2015 emissions, the CARB spokesperson told local news media. CARB has estimated that the initial emissions credits sale will raise up to $1 billion in the first fiscal year (2012-2013).
Sticking with the theme of providing a market-based approach, the CARB spokesperson said under the auction system, businesses, besides the gas-fired power plants and refineries, have the flexibility of how best to lower their individual carbon footprints.
State officials hope a successful launching of the auction and AB 32 implementation next year will encourage other states to follow suit. Zaremberg is skeptical, telling local news media the state needs to adopt more “cost-effective ways of reducing carbon emissions,” otherwise no other state will follow.
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