Rethinking cap and trade

Of all the tools in California’s toolbox to fight global warming, “cap and trade” is probably the most controversial. The complicated carbon-trading scheme is set to begin at the beginning of next year.

It’s aimed at reducing carbon dioxide and other greenhouse-gas emissions from power plants and large industrial facilities, but a lawsuit from environmental-justice groups has put the program into legal limbo.

They claim the program—based on buying and selling carbon-pollution credits—would let polluters off the hook for befouling low-income neighborhoods.

Cap and trade was a favorite of former Gov. Arnold Schwarzenegger, and he is a big part of the reason the California Air Resources Board pursued the strategy in the first place. But with its legal woes and a new governor in charge, California’s carbon-trading scheme could be amended, or suspended.

“Why should we be acting as if Schwarzenegger were still governor?” said Bill Magavern, executive director of the Sierra Club California.

The Sierra Club is strongly supportive of Assembly Bill 32, the Global Warming Solutions Act, which in 2006 set California on the path toward reducing its emissions of carbon dioxide and other greenhouse gases to 1990 levels by 2020.

But cap and trade is just one part of that plan, and Magavern and others have been skeptical of it. Last month he sent a letter encouraging Gov. Brown to re-evaluate the carbon-trading system. He echoed the concern that cap and trade allows polluters to buy credits and keep polluting poor neighborhoods.

And the Sierra Club is particularly concerned with portions of the rule that would give credits to timber companies who plant large tree plantations and engage in clear-cutting.

About 20 percent of the carbon reductions contemplated under A.B. 32 are supposed to come from cap and trade. Among the state’s other carbon killers: rules requiring electricity generators to use 33 percent renewable energy by 2020, low-carbon fuel standards for new cars sold in the state, and dozens of other regulations.

Earlier this year, a San Francisco Superior Court judge found that the California Air Resources Board did not adequately study alternatives to cap and trade—but said that other parts A.B. 32 should go forward.

CARB has promised to go back and perform the additional environmental review, but is still planning to appeal the Superior Court’s decision.

“We’ve encouraged them to provide the robust set of alternatives that they did not provide the first time,” said Alex Jackson, an attorney with the Natural Resources Defense Council.

But other environmentalists are more supportive of cap and trade. “CARB continues to perform a thorough update to the analysis of policy alternatives. We are confident that the tremendous benefits associated with cap and trade will be even clearer once it is complete,” said Derek Walker, with the Environmental Defense Fund.

Last week, the Legislative Analyst’s Office sent a detailed letter to legislative leaders outlining some of those alternatives to cap and trade.

For example, CARB could do away with the “trade” part of cap and trade, and simply set limits on greenhouse pollution for industrial sources. This is often referred to as the “command and control” approach.

Or CARB could push forward on strategies that so far haven’t been part of the official “scoping plan” to reduce greenhouse gases. A new green-building policy—with energy-efficiency standards for new construction—could go a long way toward reducing the state’s greenhouse-gas burden.

The state has already backed off somewhat on its greenhouse-gas-reduction goals—because of the lousy economy—though the change in policy didn’t get much attention.

When the scoping plan was released in 2008, regulators assumed that California would have to cut its emissions by a whopping 174 million metric tons a year to get back to 1990 levels.

For comparison, it’s believed the state produced 474 million metric tons, or MMT, in 1990. Without regulation, that number was expected to grow to about 596 MMT by the year 2020.

But thanks to the recession, and the reduced level of economic activity, the California Air Resources Board now says that the state will only have to reduce 80 million metric tons of CO2 from its diet.

Accordingly, CARB set new, somewhat less aggressive targets for several of its greenhouse-gas policies. Alternatively, the LAO says the state could simply put cap and trade on hold and rely more heavily on those other measures.

Whereas the previous administration was committed to cap and trade, Magavern says he hopes Brown will give the program a hard look.

“If this were being done under Schwarzenegger, they would just show that they jumped through all the right hoops,” said Magavern. “It’s really up to what Gov. Brown wants to do.”