California’s Market Advisory Committee June 29 released its final report outlining recommendations on how the state should set up a carbon emissions trading market. The California Air Resources Board is to consider the recommendations as it develops a regulatory program to carry out the state’s climate protection law, AB 32. “To meet California’s aggressive greenhouse gas targets, we’re going to need a comprehensive approach to get the most reductions in the quickest timeframe and at the lowest cost,” said Winston Hickox, committee chair. As expected, the final report recommends that the state establish a carbon trading market that eventually will include all major sectors of the economy that contribute to global warming. “A greenhouse gas cap-and-trade program can be an important part of the complete set of greenhouse gas mitigation strategies,” said Lawrence Goulder, committee vice chair. Under that approach, company emissions are capped at the start of the program. The cap then declines each year. Companies that keep emissions under their annual caps can sell the remainder of their emissions allowances, or credits, to others that emit more than their caps. As long as all emissions are covered by credits, collective emissions fall over time. The final report also recommends that the electric power sector be included in a cap-and-trade market through a first-seller approach. Such a strategy would regulate in-state generators and wholesale importers of electricity rather than primarily load-serving entities. In other recommendations, the report advocated that: -Emissions allowances be distributed through a mix of free allocation and auctioning; -Offsets, both from in and out-of-state carbon sequestration and emission reduction projects, be allowed to substitute for actual emissions reductions by businesses and organizations covered by the California market program; and that -Regulators seek to link any California cap-and-trade program to other emissions trading programs in the U.S. and around the world. With issuance of the report, the committee is expected to disband. Appointment of the panel under a gubernatorial order sparked controversy last year. Democratic lawmakers saw it as a signal the Schwarzenegger Administration favored market-based regulations over traditional command-and-control rules to cut greenhouse gas emissions (Circuit, Oct. 27, 2006). The report is at: climatechange.ca.gov.
