CA Industry Prepares to Push AB 32 Offsets

An industry coalition plans to push for an early and expansive use of domestic and international greenhouse gas emissions offsets. The private companies’ offset plan claims to provide a means to minimize costs and curb emissions to help carry out California’s climate protection law, AB 32, for utilities and others with big carbon footprints. The coalition--which boasts in its membership “proven companies” in energy, renewable technology, transportation and other industrial sectors--is being led by the law firm Latham & Watkins. The firm was instrumental in devising the Los Angeles area smog emissions trading market fifteen years ago. “Offsets should be part of the program,” Robert Wyman, Latham & Watkins attorney, said during an April 4 meeting with California Air Resources Board staff members. “The focus of offsets should be on integrity, not their location or timing.” Wyman--who led the drive to create the Los Angeles area smog credit market--urged the Air Board to embrace offsets quickly as an AB 32 “cost minimization” strategy. He further advised air regulators to ignore calls for limiting the geographic source of the credits and for discounting their value when companies use them to meet compliance obligations under the law. “We are not a kingdom unto ourselves,” he said. “Discounts or limits don’t make any economic sense.” The Air Board is charged with devising a plan to carry out AB 32. The industry plan is expected to be launched in the weeks ahead. Private and public utilities agreed with expanding the use of offsets. Pointing out that most of the greenhouse gas emissions in the world remain unregulated, Mike Hertel, Southern California Edison environmental affairs manager, called offsets “the premier way to get at that problem.” Edison, he said, plans to seek approval from the Air Board under its AB 32 early actions policy for a program involving nine offset projects, six in state and three at unspecified locations outside of California. He urged the Air Board to allow offset projects at any location because restricting them to just California would raise their cost and cause a loss of jobs in the state. A coalition of munis called for using offsets both within a cap-and-trade program and as an alternative compliance option for operators of power plants and other facilities that may face emissions reductions under direct regulations. Environmental organizations acknowledged that offsets could help meet the law’s greenhouse gas emissions reduction target of 25 percent by 2020. Offsets are credits developed by cutting greenhouse gas emissions above and beyond any regulatory requirement. The credits could be traded in a carbon market under a cap-and-trade program, which would place California power producers and other businesses under an emissions limit. The cap would gradually lower but allow utilities and others to purchase offsets in lieu of cutting their own emissions. The offsets might also be used by companies facing direct regulations that require them to cut emissions at their own facilities in one fell swoop by a certain date. The Air Board’s staff said it backed offsets. Yet, Wyman advocated restricting use of offsets in some areas. Specifically, he said, offsets should not be allowed to substitute for emissions reductions required under the renewables portfolio standard for utilities, the low carbon fuel standard for transportation, and tailpipe emissions standards for automakers. Wyman and his coalition’s upcoming proposal for AB 32 appear to be aligned with the views of offset providers, such as the Offset Quality Initiative, a coalition of six non-profit organizations, including the California Climate Action Registry, The Climate Trust, The Climate Group, Environmental Resources Trust, Greenhouse Gas Experts Network, and Pew Center on Global Climate Change. Californians play prominent roles in at least three of the organizations. Editors’ note: For a more detailed version of this story, please see our sister publication E=MC2 – Energy Meets Climate Challenge. You can find it at www.energymeetsclimate.com

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CA Industry Prepares to Push AB 32 Offsets

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