Juice: Carbon Currency & Crusades

By Published On: April 27, 2012

When the bank hands me $10, $20, or a Benjamin, I put them in my wallet with the belief that the paper has value. The perceived value of the state’s carbon market will determine its success. Faith in auctioned allowances representing invisible tons of carbon dioxide emissions is as essential as believing in “God We Trust.” Losing faith in currency leads to wheelbarrows of paper being traded for a loaf of bread. A shortage of faith in California’s emerging carbon currency will leave it hanging on the cross. Outside the Golden State, carbon market proponents’ belief system has been sorely tested. Bogus allowances have been traded and the price of legitimate allowances plummeted to single digits in the European Union. At the state carbon market altar are mainstream environmental organizations, traders, and Democratic lawmakers. This golden calf is expected to produce annual auction revenue between $600 million and $3 billion. Free market proponents--large business organizations, anti-tax groups, and many Republican legislators--consider the law opening the way for a carbon market as a curse to their purse. They rail against the carbon market although Republican Gov. Arnold Schwarzenegger required it as a precondition to baptizing AB 32, the state’s climate protection law. As a recovering Catholic, I watched with bemused detachment auction atheists and believers rehash the pros and cons of the market scheme at an Assembly Natural Resources Committee hearing. Two of the six bills laying out spending parameters for revenues from the sale of carbon emissions allowances were passed by the committee April 23. A sister panel the same day passed the first of the auction revenue bills by Sen. Fran Pavley (D-Santa Monica), the author of AB 32 passed in 2006. The Natural Resources Defense Council, Nature Conservancy, the Audubon Society, and Ella Baker Center for Human Rights are among those praying the auction market reduces greenhouse gases and increases green energy development and jobs. The California Manufacturers &Technology Association, California Chamber of Commerce, and California Taxpayers Association label the auction an illegal tax. They insist that the California Air Resources Board’s upcoming auction this November was not blessed by a two-thirds vote. They have repeated that complaint since the greenhouse gas reduction law and market was first proposed. “I assume the market will play a constructive role,” said Assembly Speaker John Pérez (D-Los Angeles) of his AB 1532. He also noted holes in the opponents’ dogma as to “what puts California businesses at a disadvantage.” Pérez’s measure directs the California Air Resources Board to develop a detailed investment plan for the auction revenue. The plan is to be approved by the Legislature, which also is to appropriate any revenue deposited in an Air Board account. Auction pilgrims refuted opponents’ arguments that the legislation counts the auction revenue before it arrives. It is a process for determining how to rank cost-effective program expenditures that meet AB 32’s goals and thwart legal challenges, according to auction proponents. The Speaker said the mix of projects to be evaluated for possible funding under his AB 1532 include clean and efficient energy projects, low-carbon transportation fuels and vehicles, in-state job creation, public transportation and sustainable development, and natural resources protection. The other approved bill was by Assemblymember Felipe Fuentes (D-Arleta). It likely will be folded into Pérez’s bill. The list of eligible carbon reduction strategies under AB 2404 is similar to those in AB 1532, but the revenue is to be directed to local and regional governments. It is touted as way to help convert local and regional governments to the carbon market sect. Four other carbon auction bills are in the works. In addition to Pavley’s SB 1572 that aims to establish an “open and thoughtful process” for developing an expenditure plan, are: -SB 1066 by Sen. Ted Lieu (D-Redondo Beach) gives the California Coastal Commission the authority to develop projects to mitigate coastal climate change impacts. The measure passed the Senate Appropriations Committee April 10, but was referred back to the committee. -Assemblymember Brian Nestande’s (R-Riverside) AB 1906 directs auction revenues be used to lower the rates of private and public utility customers. -SB 535 by Sen. Kevin de León (D-Los Angeles) directs the auction revenues to improving the air quality of polluted and disadvantaged communities. The success of the carbon trading religion is based on greenback faith. Or as Puff Daddy raps, “It is all about Benjamins baby.”

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