Questions about the impact on natural gas volumes/prices and potential legal challenges lingered last week after California Gov. Arnold Schwarzenegger signed several landmark global warming laws. Pressure on already tight natural gas supplies and wholesale prices could result from the new law, according to the head of the Industrial Energy Consumers of America (IECA).
“AB 32 is yet another mandate that will accelerate consumption of natural gas without any consideration to our nation’s failing natural gas supply,” said IECA President Paul Cicio, adding that his association of major industrial energy users calls upon California’s two U.S. senators, Dianne Feinstein and Barbara Boxer, to “become proactive national leaders to increase natural gas supply in California and across the nation.”
Cicio said California already consumes 7.5 times more natural gas than it produces, and the total does not include the volumes of gas consumed out-of-state to generate power imported by California (however, the bulk of the state’s imported power currently comes from coal, nuclear and hydroelectric sources).
At the same time, Schwarzenegger and environmental leaders both vowed to go further with the mandated GHG emissions reductions in the future. They talked about pushing for a future mandate to reduce current global warming gas emissions by 80% by the mid-century.
In the meantime, backers of California’s primary global warming legislation (AB 32) on Friday would not rule out the possibility of legal action against the Global Warming Solutions Act. No legal action has been taken so far, however. The California Manufacturers and Technology Association, which strongly opposed all the global warming bills, said it currently has no plans to go to court over the legislation.
Even without lawsuits, the job of making AB 32 a reality will take years, falling principally on state air emissions regulators and the major energy agencies. A first step will be establishment by the end of 2007 of a GHG emissions limit based on the GHG emissions recorded in 1990. The limit will have to be met by 2020.
AB 32 requires the California Air Resources Board (CARB) by 2012 to develop regulations and market mechanisms that will ultimately reduce California’s GHG emissions by 25% by 2020. Mandatory limits for electric generation plants, refineries and other large industrial operations will begin in 2012.
In signing AB 32 and several other related global warming/emissions-reduction measures, Schwarzenegger said his aim since assuming office in a recall election in late 2003 has been “to make California No. 1 in the fight against global warming.” Schwarzenegger said that he and the state’s other political leaders owe “our children and grandchildren” this commitment.
“I say unquestionably [this new law] is good for business — not only large, well-established businesses, but small businesses that will harness their entrepreneurial spirit to help us achieve our climate goals,” Schwarzenegger said. “Using market-based incentives, we will reduce carbon emissions to 1990 levels by the year 2020.”
In that regard, AB 32 will require the following:
On Sept. 26, Schwarzenegger signed three other GHG emissions measures into law and a fourth environmental measure (SB 1368). The laws set renewable energy goals, target industrial carbon capturing, and affect forest management to reduce GHG emissions.
SB 107 officially establishes in law the renewable portfolio standard goal of 20% by 2010. AB 1925 requires the California Energy Commission (CEC) to study and make recommendations on future capturing/storing of industrial carbon dioxide. And SB 1686 authorizes the state Wildlife Conservation Board to take account of the potential that forests hold for reducing or sequestering GHG emissions.
While AB 32 has commanded all of the attention nationally and internationally, another bill, SB 1368, sets emissions limits for all new or extended power plants and supply contracts and could have more immediate and long-term impacts on the electricity industry in the state and more broadly throughout the West where public- and private-sector utilities currently obtain large amounts of coal-fired electric generation through ownership/operating interests and purchased power agreements (PPA).
SB 1368 directs the CEC in collaboration with the state air emission regulatory agencies to establish by June 30, 2007 performance standards for all baseload generation (owned locally or purchased). The standard can be “no higher than the rate of GHG emissions for a combined-cycle natural gas baseload generating plant.” It applies the new CEC-created standard to all the local load-serving entities — public and private sector — in the state.
“Enforcement of the GHG emission performance standard shall begin immediately upon the establishment of the [CEC] standard,” the new law states. “All combined-cycle natural gas power plants that are in operation, or that have a CEC final permit decision to operate as of June 30, 2007, shall be deemed to be in compliance with the GHG emission performance standard.”
Repeating his conclusions expressed almost 18 months ago that the “science is clear,” Schwarzenegger repeated his often-used statement that “the global warming debate is over.” Now, he said, the state has “the responsibility to act.”
Despite big business interests lining up against the measure, and some critics nationally calling it “eco-suicide,” Schwarzenegger has backed the bill since provisions for the eventual creation of a competitive emissions credit trading market were included in the legislation.
Schwarzenegger noted that because of California’s massive and growing economy, the state is the twelfth largest emitter of carbon in the world, even with the most advanced energy efficiency standards and a long-term leading role in environmental protection.
The two major environmental groups backing the global warming law, Natural Resources Defense Council (NRDC) and Environmental Defense, cited a University of California, Berkeley study released Aug. 16 that projects $74 billion added to California’s Gross State Product (GSP) and 89,000 new jobs by 2020 as an offshoot of the new law mandating the reporting, capping and trading of GHG emissions on a phased basis between now and 2012.
“Eventually, even our federal government will follow us [on the global warming issue] — trust me,” the governor said. “Nothing is more important than protecting our planet.”
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