CLIMATE CHANGE ROUNDUP: Air Board Considers Fuels in Cap & Trade

By Published On: December 18, 2009

In a surprise move, the California Air Resources Board may include transportation fuels in its planned carbon cap-and-trade program when it is set to start up in 2012, according to agency economist Sam Wade. Previously, the plan was to not fold emissions from mobile sources into the program before 2015. The move would be a game changer in the California carbon market. It would more than double allowances that potentially could be traded in the market initially. Without fuels, the market would cover about 200 million tons of emissions in 2012. With fuels it would cover some 450 million tons of emissions. Wade and other Air Board staff members revealed the potential plan at a meeting on the agency’s proposed carbon cap-and-trade rules December 14. The change was music to the ears of at least some utilities. Sacramento Municipal Utility District government affairs representative Tim Tutt backed early inclusion of transportation fuels on grounds it would create a bigger pool of allowances that could be traded. That could result in a more liquid carbon market. Tutt also urged the Air Board to provide emissions allowances to local power distribution companies and agencies free of charge. The Air Board plans to adopt final rules for a carbon cap-and-trade program in fall of 2010 and hold the first emissions allowance auction in the first half of 2011. The rules would become enforceable in 2012. The Air Board has long said it would not include transportation fuels under an economy wide cap-and-trade program until 2015. Under its plan, major fuel processors and distributors, like oil companies, would have to obtain enough emissions allowances to cover the greenhouse gas emissions produced from burning their gasoline, diesel, and other fuels. One oil industry representative said that petroleum companies can’t control carbon emissions from driving other than by adding lower carbon constituents to their fuels or raising the price at the pump. Air Board staff released a draft version of the rules late last month that included many blank placeholders on key details pending the recommendations of a high-level advisory committee appointed by the California Environmental Protection Agency and announced by the governor (Circuit, Dec. 4, 2009). That committee released draft recommendations this week and is expected to issue its final advice next month. * * * * * Twenty-seven major power plants and five cogeneration facilities would have to conduct energy efficiency audits, with an eye toward cutting both carbon dioxide emissions and releases of smog-forming pollutants, under draft rules the California Air Resources Board released December 15. The plant operators would have to file the audit reports with the Air Board in summer of 2011. The Air Board would examine the documents and release a summary of the audit findings. No action necessarily would be required of facility operators, however. The rules, which would apply to 70 major facilities statewide--also including refineries, cement plants, and other industries--come under the state’s climate protection law, AB 32. * * * * * The California Air Resources Board announced December 15 that it has received an updated report from its Economic & Technology Advancement Advisory Committee, formed under AB 32, the state’s climate protection law. The report, available at the Air Board’s web site, outlines a strategy for developing and financing zero emissions cars, energy efficient technologies, and renewable energy to help the state cut its carbon footprint. * * * * * The California Air Resources Board is laying the groundwork for studies to support the development of a 33 percent renewable energy standard for state power utilities. CARB staff members said December 14 they would draw on studies and information from other agencies, including the California Public Utilities Commission and California Independent System Operator, in weighing the economic and technical feasibility of its rules, considering such factors as the need for transmission lines. Meanwhile, Air Board energy section manager Dave Mehl said the agency has not yet fully closed the door on placing the Department of Water Resources and Western Area Power Administration under the standard. WAPA provides some power to the state and the DWR runs power plants to operate the state’s water project, which moves water to Southern California. DWR director Lester Snow thinks including the agency would duplicate much of what it already is doing to cut greenhouse gases. In a letter earlier this month, he wrote that the Air Board could not effectively regulate DWR under rules primarily aimed at utilities, meaning the air agency would have to write entirely different rules for the water agency. Snow said that would be unwarranted since the department’s emissions already are below their 1990 level and further steps that will cut emissions more are underway. They include upgrading hydro projects to squeeze out more power and reducing water usage statewide by 20 percent, which will cut the energy required for pumping. * * * * * U.S. Senator Lisa Murkowski (R-AK) announced December 14 that she opposes the U.S. Environmental Protection Agency regulating greenhouse gases under the federal Clean Air Act, calling it a “backdoor” approach to curbing emissions. EPA is moving forward with greenhouse gas standards for cars and new or modified major industrial facilities, like power plants, after issuing a final endangerment finding on greenhouse gases earlier this month (Circuit, Dec. 11, 2009). Murkowski’s objection to EPA’s move is to be detailed in a formal Senate disapproval resolution. Once filed, it goes to the Senate Environment and Public Works Committee, which has 20 days to act on it. If committee chair Senator Barbara Boxer (D-CA) fails to bring it to a vote, all Murkowski needs to do is get thirty senators to sign a discharge petition, which would move the resolution to the Senate floor for an up or down vote. This would put Senate Democrats in the position of having to either oppose the petition, in effect approving of EPA regulation of greenhouse gas emissions, or oppose EPA. “The Republican proposal to overturn EPA’s global warming finding is a threat to America’s families, said Boxer. “I am urging my colleagues not to interfere with the independent work of scientists and public health experts from both the Bush and Obama administrations.” * * * * * Energy Secretary Steven Chu announced in Copenhagen December 14 the launch of an initiative to promote renewable energy and energy efficiency technologies in developing countries. The administration’s Renewables and Efficiency Deployment Initiative aims to reduce greenhouse gas emissions and improve public health of women and children. The United States intends to contribute $85 million to the international programs under the initiative, which include financing and technical assistance to accelerate “affordable solar home systems” and LED lanterns to those without access to electricity. Another program seeks to promote highly efficient appliances. There would also be an exchange of technical resources, policy, and experience. The program’s budget is $350 million over five years. That is a drop in the clean energy bucket, particularly given the $10 billion a year estimated by the head United Nations climate change official as the amount needed to move developing countries to low carbon technologies.

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