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California a barometer for US cap & trade

Source:  Copyright 2010, Carbon Positive
Date:  April 5, 2010
Original URL: Status DEAD

California, the US’s largest state in economic terms and a long-time pioneer in environmental regulation, is now a barometer for the future of carbon cap and trade in North America as various emissions trading moves hang in the balance. Doubts over whether a far-reaching emissions cap and trade programme proposed by Republican governor Arnold Schwarzenegger will now come to pass have implications for the chances of a wider regional scheme taking off and federal moves to get a nation-wide energy and climate bill through Congress.

A tough recession in the US has bitten extra hard in California, boosting the stocks of opponents to the cap and trade scheme, set to begin in 2012. A coalition of forces led by oil companies are looking to petition a ballot question on stopping the scheme for the upcoming state election in November. The argument being put is that now is the wrong time to impose new cost burdens on industry that is already suffering hard economic time which sees unemployment above 12 per cent.

The cap and trade bill, AB 32, is set apply across a similar array of heavy emitting industries as now covered under the EU ETS. It would require California cut greenhouse gas emissions back to 1990 levels by 2020, or about 30 per cent below projected business as usual levels at that time.

If enough signatures are gathered by petition, then California voters will be asked whether the cap and trade bill should be suspended until the state's unemployment rate falls back to 5.5 per cent or less for four consecutive quarters. This would likely push back any chance of emissions caps by some years beyond 2012.

Already, the leading Republican candidate to succeed Schwarzenegger when he steps down in November, Meg Whitman, says she would suspend the law temporarily if elected to office, using a safety-valve clause it contains. Her Republican rival Steve Poizner supports the ballot initiative call for suspension until unemployment is halved.

California is the pivotal state in the Western Climate Initiative (WCI) aimed at establishing a linked cap-and-trade market across up to eleven US and Canadian states and provinces. Already, this regional plan is at risk of unravelling with Arizona opting out, New Mexico facing a legal challenge to its participation and other states and provinces unlikely to have their laws in place in time for a 2012 start. Suspension in California will only make it more difficult to move forward in the other smaller WCI states.

In Washington DC, Senators Kerry, Graham and Lieberman are working hard to win support for a cross-party climate and energy bill that would start capping emissions sector by sector. But the same arguments about cost to industry in hard times is likewise a major obstacle.

Some believe the ultimate goal of the California ballot supporters, which include Texas oil companies, is nationally-focused. "This could very well be an effort to focus on California with the goal of delaying federal legislation," said state Democrat Senator Fran Pavley one of the law's authors.

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