Air Board Questions Energy Agency Cap & Trade Plan

By Published On: April 25, 2008

California Air Resources Board members meeting April 24 distanced themselves from a proposal by the state’s energy agencies to create a carbon cap-and-trade program for the power industry. Emphasizing that the Air Board will make the ultimate decision about how to control greenhouse gases from the sector, agency chair Mary Nichols said that the energy agencies’ recommendation has made them “tread into” unfamiliar territory. Other Air Board members questioned the equity of the joint California Public Utilities-California Energy Commission recommendation, as well as its potential environmental impacts and effectiveness. “It doesn’t pursue these questions of fair, equitable, or reasonable,” said Air Board member Ron Loveridge. “This is none of that.” Loveridge is mayor of Riverside, which operates a municipal power agency A medical doctor on the panel questioned the proposal on public health grounds. “I’m worried in a cap-and-trade system old coal-fired plants could chose to trade rather than control their emissions,” said Air Board member Dr. John Balmes. He said cap-and-trade could leave residents surrounding coal plants breathing air polluted with smog-forming pollutants that otherwise would have to be cleaned up if carbon emissions were directly regulated. Dorene D’Adamo questioned whether the proposal would effectively leverage advancements in energy efficiency and other technologies. She noted it would not cover investor-owned utilities, but instead generators and others who deliver power to the state’s grid, but have no relationship with utility customers who must employ energy efficiency measures or solar rooftops. However, CPUC director of strategic planning Julie Fitch defended the joint agency recommendation made last month. Fitch said that existing regulations mandating utilities to rely more on renewable resources and energy efficiency would create most of the emission reductions needed by 2020 under the state’s climate protection law, AB 32. Moreover, she said that the energy agencies intend to address equity issues under what is likely to be a limited cap-and-trade program for the power industry as they develop recommendations on how to allocate emissions rights. CEC climate change program liaison Pat Perez said complaints that the proposed cap-and-trade program would require coal-heavy utilities to make payments to utilities that use cleaner sources of power “stem from an earlier draft, not the March decision.” Fitch added that the CPUC still is analyzing the potential economic impacts of the proposal and would release projected cost data next month. The discussion at the Air Board meeting follows a recommendation by the CPUC and CEC last month in which the two energy agencies advised the Air Board to place first deliverers of power under a carbon cap-and-trade program. They further advised that at least some of the emission rights needed to operate in the market system be auctioned. In a cap-and-trade program, emissions levels are placed under a limit that declines each year until the goal of the law is met. Companies that stay under their limit can sell their excess emission rights to those that go over their limit. However, companies that exceed their limit must purchase enough credits to cover excess emissions or be found in violation of the law. The Air Board plans to release a draft plan for carrying out AB 32 in June and hold a series of public meetings on the blueprint during July. Editor’s 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

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