(June 15, 2010) The California Chamber of Commerce and a coalition of business and taxpayer groups have voiced appreciation for a state agency’s sensitivity to economic considerations as it develops rules to implement California’s landmark climate change law, AB 32.
The June 7 letter from the AB 32 Implementation Group, of which the CalChamber is a member, expressed support for the general direction outlined by the California Air Resources Board (ARB) staff at a May 17 workshop.
The goal of the implementation group is to serve as a constructive voice and ensure the state meets the greenhouse gas emission reductions required by AB 32 while maintaining the competitiveness of California businesses and protecting interests of consumers and workers.
The ARB is gathering comments on proposed rules for a cap-and-trade program that would set a maximum limit for greenhouse gas emissions while allowing regulated industries to buy or trade emissions credits to meet the goal of reducing greenhouse gas emissions as established by AB 32.
Competitiveness Concerns
The coalition’s letter included the following comments.
- Cost containment. The coalition has consistently urged that AB 32 incorporate cost containment mechanisms that may be needed to ensure California companies can remain competitive with those in other states and nations. The coalition is encouraged by the ARB staff presentation’s focus on addressing cost containment and leakage concerns.
- Leakage. Avoiding leakage also is important to maintain the environmental integrity of the program.
- Allocation of allowances. The coalition appreciates that ARB has recommended a free allocation of allowances as an important cost containment element. The proposed direction reflects sensitivity to current economic problems and one of the important recommendations made by Governor Arnold Schwarzenegger in a March 24 letter to ARB Chair Mary Nichols.
ARB staff has appropriately proposed limiting the use of an auction for allocating allowances in the early years of the program. An immediate auction for all allowances would impose very high and abrupt costs on public agencies AB 32 and companies subject to the program.
The same concern will apply later if California has not transitioned to a comprehensive national program and the state’s companies remain at a competitive disadvantage.
The ARB staff will be conducting an in-depth analysis of covered entities to determine an appropriate system for allocating permits.
In developing the allocation strategy, ARB should consider that California companies and other covered entities are much more energy efficient than competitors in other states and countries due to a decades-long history of high energy costs and aggressive energy efficiency programs. Investments and efficiencies already put in place by
California companies should be rewarded or at least recognized.
- Offsets. The state should be sending strong signals now that offset projects will play a significant role in providing cost-effective emission reduction strategies to contain allowance costs for companies that want to keep jobs and expand in California. Allowing a broad use of offsets to contain costs will be very important as the emissions cap declines in the years leading up to 2020.
Staff Contact: Brenda M. Coleman