(March 2, 2012) The California Chamber of Commerce voiced concerns this week about the California Air Resources Board (ARB) plan to raise revenues as part of enforcing the AB 32 greenhouse gas emissions regulation program.
Through the “cap and trade” auction, the ARB plans to permit regulated companies to meet greenhouse gas emission reduction goals by buying emission credits if need be to meet the required cap.
CalChamber President and CEO Allan Zaremberg equates the cap-and-trade auction plan to placing additional taxes on energy.
“How can legislators even be thinking about putting new taxes on gasoline at a time when higher energy costs are having a negative impact upon our economic recovery?” Zaremberg asked. “These new taxes on gas won’t even be used on improving streets and roads.”
ARB Authority?
At the Assembly budget subcommittee hearing February 29 on “Cap and Trade Auction Revenues,” CalChamber Vice President of Government Relations Marc Burgat questioned whether the ARB even has legal authority to implement a revenue-raising auction.
He pointed out that AB 32, the climate change control law enacted in 2006, does not require a revenue-raising auction. The goals of AB 32 can be achieved without an auction, Burgat noted.
AB 32 calls for California to reduce its greenhouse gas emissions to 1990 levels by 2020. It also establishes mandatory reporting requirements and caps greenhouse gas emissions produced by industries categorized as significant sources.
Burgat also noted:
AB 32 specifically requires the plan to “facilitate the achievement of the maximum feasible and cost-effective reductions.” An auction is not the most cost-effective way to achieve the reductions.
The bill also indicates reduction measures should “maximize benefits for California’s economy.” The cap-and-trade proposal does not do this.
In fact, the state would be removing $650 million to $3 billion directly from the economy, not to mention the significant risk of leakage, due to the fact that California is moving forward alone on this experiment. The cost would total $20 billion between now and 2020.
The author of AB 32, then-Assembly Speaker Fabian Núñez (D-Los Angeles), specifically stated in a letter that fees are to be used only for the costs of administering the program.
SB 31 from 2009–10 authored by AB 32 coauthor Fran Pavley (D-Agoura Hills) sought to allow fees collected above the administrative costs to be appropriated by the Legislature. This bill failed passage.
Imposing an auction would exceed the reasonable cost of regulation, is damaging to the California economy and insensitive to the pressures of increased energy prices, especially compared to competing states.
Burgat concluded by voicing concern about the comments of ARB representatives at the budget subcommittee hearing that they are designing the program from the perspective that every allocation given away freely is money that does not flow to the state. “This speaks to a goal of AB 32 other than one of reducing global greenhouse gases,” he said.
Upcoming Senate Hearing
The constitutional constraints on spending AB 32 allowance auction revenue will be the subject of a March 7 informational hearing of the Senate Select Committee on the Environment, the Economy, and Climate Change.
Staff Contact: Marc Burgat