California's cap and trade regulations decided

• 12 years ago (2011-10-25)
• Junior Isles

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The California Air Resources Board (ARB) has decided on its final regulations for its cap-and-trade system, the second largest in the world, despite continuing concerns over allowance allocations, buyer liability for offsets and the size of the overall market.

Representatives from steel manufacturers and oil refineries have said that they view the benchmarking to determine allocations of allowances is inadequate; though they are the states largest greenhouse gas emitters.

Stationary sources that emit more than 25 000 tonnes of carbon dioxide (CO2) annually and electric utilities are to be allocated 90 per cent of their allowances for free from 2013. But that level will decline at 2 per cent a year, starting from an initial cap of 162.8 million tonnes of CO2 equivalent of emissions.

Ralph Moran, director of BP’s climate change issues for US west coast, said: “As it’s currently designed, it stands a good chance of not working and inflicting pain on California business. Our most immediate concern is with this 10 per cent reduction in allocation to industry.”

Allan Bedwell of San Francisco-based BGC Environmental Brokerage Services told ARB staff that buyer liability would drive up the cost of compliance. “The ARB is having a chilling effect on companies being able to cost-effectively comply with this regulation,” he said.

The limited liquidity in California’s, relatively, small market has also raised cause for concern. ARB staff said that they would return next year with recommendations on how to link with the Western Climate Initiative, potentially expanding the programme to seven US states and four Canadian provinces.

In September, the Supreme Court in California ruled that the ARB could continue to implement its cap and trade system. Environmental activist group the Association of Irritated Residents has appealed the decision and indicated that it will launch a fresh legal challenge.