The Climate Report - Winter 2011
On December 16, 2010, the California Air Resources Board
("CARB") approved a
resolution ordering its Executive Officer to finalize, with
certain changes, the
greenhouse gas
cap and trade regulations proposed by CARB on October 29, 2010.
Once published, CARB will allow 15 days for public comment on the
latest changes, and the Executive Officer will respond to any such
comments, make any other "conforming" modifications
deemed appropriate, and then finalize the cap and trade
regulations.
California's cap and trade program will serve as a U.S. test
case for mandatory, economy-wide greenhouse gas market systems.
Existing market-based programs, like the Regional Greenhouse Gas Initiative and the Climate Action Reserve, are either voluntary in nature or mandatory only for certain economic sectors. California's program, however, represents the first cap and trade program for greenhouse gas emissions that is mandatory for numerous sectors of the economy.
Although CARB has now approved the bulk of the cap and trade
program, several key decisions lie ahead. The Executive Officer
must evaluate the modifications called for by the resolution and
fill in a host of other details for the program. Some of these
remaining details will have a significant effect on the program.
For example, CARB has yet to propose a full methodology for
distributing emissions
allowances to electric utilities. For other industrial sectors,
CARB still must develop energy efficiency benchmarks that will
influence emissions allowance
allocations to those sectors. There are also uncertainties
surrounding the development of domestic offset protocols, linkage
to international
offset programs, and full linkage with programs in other
jurisdictions.
CARB plans to issue a follow-up report on a large portion of the
open issues, including a final allowance allocation system, no
later than July 31, 2011, and intends to move quickly to implement
the program. Entities that may be affected by the new cap and trade
program, either as mandatory covered entities or voluntary
participants, have little time to spare in developing plans to
comply with, or benefit from, the program.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.