In a salute to the power of the market, the California Air Resources Board reaffirmed its support for a carbon cap-and-trade program as a key way to carry out the state\u2019s climate protection law, AB 32. Board members rejected a carbon tax. They also dismissed relying solely on direct regulations as infeasible in the current political climate. When \u201cdealing with the economy, there\u2019s no way you can\u2019t have market instruments,\u201d said Air Board member Dan Sperling. \u201cMarket signals,\u201d he said, are needed to spur investments to transform the economy. The board voted unanimously to retain carbon trading after a nearly seven-hour-long hearing Aug. 24. The cap-and-trade program is to put a ceiling on greenhouse gases and gradually reduce emissions from power plants and other major industries in the state. Air Board chair Mary Nichols said that the goal of the law is to transform the state\u2019s economy from relying on carbon-based fuels to relying on renewable energy. Before the vote, dozens of environmental justice advocates and some other activists lined up to denounce the strategy as ineffective and easily circumvented. In counterpoint, many business and environmental groups applauded the market-based approach to cutting greenhouse gas emissions to 1990 levels by 2020, as AB 32 requires. They said it\u2019s the most economically efficient policy. Regulators did grant one concession to environmental justice groups and others concerned about possible cap-and-trade inadequacies. Alongside the market-based system, the Air Board agreed to implement an adaptive management program under which it plans to address any unanticipated side effects of emissions trading and offsets under cap-and-trade. These could include buildups of local pollution when facility managers buy emissions credits instead of actually cutting emissions--a key concern of environmental justice advocates--or failures of forestry projects that may disrupt local economies, whether in the U.S. or abroad, for instance by displacing people from land. Under the adaptive management strategy the agency would keep a lookout for such problems and figure out how to change course to solve them. Air Board member John Balmes urged the agency to make sure that offsets--in lieu of direct emissions reductions at facilities subject to the rules--be only a short-term compliance option. As time proceeds, he urged phasing out offsets and insisting that California businesses invest in clean energy technologies and other measures that reduce emissions in their operations. Air Board member Ron Roberts also urged caution on offsets. He suggested that the Air Board recognize offset credits generated only in nations that have programs similar to those in California and not where governments are unreliable. The board\u2019s reaffirmation of a cap-and-trade market system to decrease greenhouse gas emissions came as part of its approval of a supplementary alternatives analysis ordered by a state court earlier this year. The court called for the new analysis in response to a suit mounted by environmental justice advocates who claimed the agency\u2019s original plan for carrying out AB 32 failed to fully examine a broad range of alternatives to the market-based approach. The court found the initial analysis focused too heavily on cap-and-trade, giving short shrift to other strategies. The Air Board\u2019s revised analysis, approved this week, outlined a fuller range of alternatives for cutting greenhouses gases, not only including cap-and-trade, but also direct regulation, a carbon tax, and a combination of all of the measures. In its final analysis, though, the Air Board opted to go full speed ahead with cap-and-trade. Under the revised AB 32 plan, cap-and-trade is to play a partial role in achieving AB 32\u2019s 2020 emissions goal. It is positioned to reduce emissions by 22 million tons a year, while direct regulations calling for low emissions cars, more energy efficiency, and producing 33 percent of the state\u2019s electricity with renewable energy are to cut emissions by 58 million tons. The Air Board\u2019s action this week is not the final word. The Air Board plans to adopt the final amendments to its cap-and-trade program Oct. 20, said Edie Chang, Air Board staff member. Then the rules must be approved by the state Office of Administrative Law before they can take effect. The Air Board does not plan to enforce the cap-and-trade program until 2013.