California regulators seek to fashion a carbon cap-and-trade market program. Among the issues the state continues to grapple with is whether voluntary actions by utilities and other large carbon polluters to reduce their greenhouse gases should fall within the carbon cap and be credited towards required emission reductions--or if those reduction measures should fall outside the cap. The California Air Resources Board sought input during a March 10 workshop on strategies for encouraging voluntary emission reductions before the state’s climate protection law goes into effect in 2012. Careful resolution of whether early reduction shall count towards a utility’s or other entity’s emissions baseline can help avoid a “serious over allocation” of carbon offsets, noted Kevin Kennedy, Air Board climate change program director. The European Union, which launched a carbon trading market, allocated too many carbon credits at the get go, flooding the market with offsets and causing the price to plunge. One environmental representative suggested the Air Board set up a pilot offset trading market before 2012 to see the price they fetch. If the price is too low, that reflects an excess in carbon offset allocations, said Jaime Fine Environmental Defense Fund economist. The Western Climate Initiative, which is attempting to establish a regional trading regime, is expected to allow voluntary carbon reductions to count against the cap. It is similar to the difference between a tax credit and deduction from income. The former is worth more because it’s a reduction in one’s tax liability, while the latter only reduces the total amount of taxable income. WCI members include California, six other western states, and four Canadian provinces. However, two member states--Arizona and Utah--may bolt the organization because of concerns about a carbon market’s costs (Circuit, Feb. 20, 2009). Also unresolved at the Air Board is how long the reduction offsets should be counted, and by what means. The agency plans to tackle quantification and verification of voluntary carbon reductions later this year. It also expects to circulate a draft blueprint on a carbon trading market in the middle of next year. Adoption of the cap-and-trade program is expected by the end of 2010. Kennedy said the board was keeping track of federal efforts to create a nationwide cap-and-trade program. California is playing an important role pushing the national effort “and ensuring it works at the federal level and for the California economy,” he said * * * * Nineteen Republican members of the House and Senate voiced skepticism about the Western Climate Initiative’s proposed regional carbon cap-and-trade program March 10 in a letter to western governors. “This plan creates more problems for the West than it solves,” said Senator John Barrasso (R-WY), announcing the letter. “Any plan that appears to exclude 24-hour power like clean coal, nuclear, natural gas, and hydropower will not even come close to powering the West.” The federal lawmakers asked the governors of WCI member states to respond to a number of questions related to the economic impacts of the plan, particularly whether it would create “a transfer of wealth from some western states to others.” They also questioned whether the plan would have any significant impact on future global temperatures. * * * * The federal Environmental Protection Agency proposed greenhouse gas reporting requirements March 10 that would cover power generators and other large sources of carbon dioxide, as well as suppliers of fossil fuels. Under the proposed reporting requirements, 13,000 facilities would have to annually report their emissions of carbon dioxide and other greenhouse gas emissions to U.S. EPA beginning in 2011. The first reports would cover emissions in 2010. The rule also would apply to vehicle and engine manufacturers. They, however, would not have to begin reporting emissions from their products until 2012. “Our efforts to confront climate change must be guided by the best possible information,” said EPA administrator Lisa Jackson announcing the proposed reporting requirements. “Through this new reporting, we will have comprehensive and accurate data about the production of greenhouse gases.” U.S. EPA plans to require the emissions reports under the federal Clean Air Act. The reports--which are expected to cost U.S. businesses a total of $127 million a year to develop and file--would cover an estimated 85 to 90 percent of the nation’s greenhouse gas emissions, EPA said. * * * * You’ve heard of cool roofs. How about cool cars? Air Board regulators have rolled out a rule to require automakers to use highly reflective coatings and materials on cars beginning with 2012 models that cut the amount of solar energy transmitted into the passenger cabin by 20 percent. This could cut the use of air conditioning, saving an average of about 11 gallons of gas a year for the average motorist and the resulting greenhouse gas emissions, according to at least one study by the National Renewable Energy Laboratory. The Air Board discussed the proposed rule at a March 12 meeting in Sacramento. It plans to adopt the rule to help carry out AB 32, the state’s climate protection law. * * * * Just as California environmental regulators said last week that corn-based ethanol is not a low carbon fuel and could even increase greenhouse gases (Circuit, March 6, 2009), the ethanol industry asked the federal Environmental Protection Agency March 10 to raise the cap on the amount of ethanol blended into gasoline from 10 to 15 percent. Midwest lawmakers, Democrats and Republicans alike, lauded increasing the amount of ethanol allowed in gasoline. House Speaker Nancy Pelosi (D-CA) told the National Farmers Union she supported a higher blend of ethanol too. Their remarks came in response to a petition to the EPA in which Growth Energy, a trade group, claimed that ethanol cuts greenhouse gas emissions by as much as 59 percent. “Increasing the ethanol blend up to E15 [15 percent] is a common sense solution to our economic, energy, and environmental challenges,” said General Wesley Clark, Growth Energy co-chair, announcing the petition. The group billed its request to U.S. EPA as a “green jobs” waiver, saying a 15 percent ethanol blend would create 260,000 jobs. The request comes after industry executives told a House panel last week that the ethanol industry has the capacity to make 13 billion gallons a year of ethanol--with more capacity under construction--but sold only 9 billion gallons of the biofuel last year (Circuit, March 6, 2009).