First Name | Ann |
---|---|
Last Name | Hancock |
Email Address | ann@climateprotectioncampaign.org |
Affiliation | Climate Protection Campaign |
Subject | Comments on Proposed Cap and Trade Regulations |
Comment | Date: December 6, 2010 To: California Air Resources Board From: Climate Protection Campaign Re: Proposed Cap and Trade Regulations The Climate Protection Campaign (CPC) has participated in the discussion of cap and trade in California for several years now through the Market Advisory Committee, the Scoping Plan, and more recently with the Economic and Allocations Advisory Committee (EAAC). CPC has consistently submitted comments calling for the following design elements in a capped system: - An upstream system - 100% auction of permits - Compensating consumers with a dividend - Carbon fees to fund important programs - A price floor on allowances We commend CARB staff for including a price floor of $10/ton into the proposed regulation. We support the transportation fuels sector’s upstream point of regulation and auctions close to 100% of permits. We note that consumer compensation is recognized in the language for use of allowance value, and that utilities are required to protect ratepayers. The proposed Cap & Trade regulation creates different rules for the industrial, transportation and utility sectors. We are disappointed by the amount of free allowances given to the industrial sector emitters, and by the delayed move towards auctioning. We are concerned that the utility sector will not return the allowance value to ratepayers in the most direct way. We urge CARB to ensure that the five recommendations in bold above are fully implemented in the final regulation. The discourse is much more advanced now than it was in 2006. After several years of studying this subject, staff is now well-versed in the concepts of free allocation and auctioning, and use of allowance value. CARB has had time to learn the lessons from the EU ETS, and to hear from dozens of experts. We believe that the recommendations described below will make for an effective and smooth implementation of AB 32 that is equitable for all Californians. Reduce free allocations to industrial sector emitters We agree with other groups such as the Union of Concerned Scientists that 100 percent free allocation to 1st tier industrial emitters is excessive. We urge CARB to reduce the free allocations to the minimum amount suggested by the EAAC. The Regulation should also include monitoring procedures and an adaptive management process to assess the impact of free allocation on industries and leakage over time. Another option would be to tax the resulting windfall profits so that a portion of that allowance value is recaptured and can be used for public purposes. Industry-specific benchmarks encourage manufacturers using current technologies to add some moderate efficiencies to their processes, but may disadvantage out-of-the-box innovators that produce carbon negative cement products (for example, Calera, Inc.) and shield current technologies which would otherwise become less economical due to the carbon price. Utility sector should send rebate checks to residential customers For the utility sector, CARB has proposed a combination of free allowance giveaways and (secondary) auctions. The allowances are given for free to utilities that deliver electricity. Investor-owned utilities would sell the allowances to the generators when they buy electricity from them. Publicly-owned utilities that produce their own generation would need the allowances themselves. After the allowances are “monetized,” the utilities are to use the billions of dollars in allowance value “to reduce the costs of AB 32 policies on their ratepayers,” for “ratepayer benefit” (section 95892) and “for protection of electricity customers and for other AB 32 purposes.” In the final regulation, CARB must provide a more specific definition of “ratepayer benefit” to utilities. CARB wants the utilities to pass along the subsidy to consumers in a way that encourages conservation. The EAAC report did a great job explaining the flaws in the PUC/CEC recommendation to allocate to utilities. The EAAC recognized that providing a rebate through utilities (showing up only as a line item on electricity bills) shields consumers from the price signal and discourages changed behavior. Separating the return of money from the utility bill is critical for sending any price signal at all to residential customers. There is no environmental benefit from keeping people’s utility bills low. We support the proposed regulation’s inclusion of consumer refunds as a use of allowance value. We believe the most direct approach to this is a “lump-sum transfer” which could be implemented through a dividend check. The customer would still receive the carbon price signal on their utility bill, but would receive a rebate check to help buffer them from the regressive impact of increased electricity prices. Dividends: Not just another use of allowance value, but rather a structural foundation for the entire program The EAAC was clear that dividends should be a majority use of allowance value, not just another use of allowance value comparable to any other. Dividend checks to every California household do help with the costs that will be passed down to consumers (i.e. Cap & Dividend).1 But they also recognize the shared ownership of the commons, and that the first priority is to return the value of this commons back to the people. AB 32 requires that the regulations that your board approves “ensure low‐income communities are not disproportionately impacted.” Without a dividend or rebate low and middle income citizens will be disproportionately impacted by increased energy prices creating an economic and political obstacle for the smooth implementation of the law. If dividends are included in the first compliance period, they may be used as a feature to sell the program to the public up front. The proposed regulation requires the collected revenues from the auction of transportation sector allowances be used for public purposes. There are many possible uses of auction revenue: government programs and investments, a Community Benefits Fund, and more. We urge CARB to strongly recommend to the governor and legislature to use the funds as the State’s Economic and Allocations Committee recommended: 75% dividends and 25% other uses including a Community Benefits Fund. Such an approach would mirror the federal legislation introduced by Senators Cantwell and Collins, the CLEAR Act. 2 Offsets and other issues The current maximum offsets level, 8 percent, is too high. By some calculations, this amount would allow emitters to continue with business as usual emissions levels until 2017. It may be better to run a separate program for uncapped sectors which is not linked to the permits market. More information on the “supplementary reductions concept” may be found in the Cantwell-Collins CLEAR Act, available at U.S. Senator Maria Cantwell’s website. Thank you for your hard work, and for making California a global bright spot for climate action. Sincerely, Ann Hancock Executive Director 1. www.capanddividend.org 2. http://cantwell.senate.gov/issues/CLEARAct.cfm |
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Date and Time Comment Was Submitted | 2010-12-06 12:56:26 |
If you have any questions or comments please contact Clerk of the Board at (916) 322-5594.