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Comment 105 for Design Comments for the GHG Scoping Plan (sp-design-ws) - 1st Workshop.


First Name: Patrick
Last Name: Griffith
Email Address: pgriffith@lacsd.org
Affiliation: Los Angeles County Sanitation Districts

Subject: LACSD Comments on the AB 32 Program Design
Comment:
The following are our detailed comments on the Cap and Trade
discussion in the Draft Scoping Plan and Appendicies, and other
related topics:


1.	Many stationary sources in California are already at BACT or
BARCT levels and little room remains to do better.  In SCAQMD’s
2007 AQMP, for example, Multiple Component Sources Control Measure
MCS-01 will move most combustion sources in the South Coast Air
Basin from BARCT to BACT during the 2010-2023 timeframe.  Hence
there will be very little opportunity for further in-plant
emissions reductions given that BACT is the best that can be done.
 Most stationary sources therefore, very early into the Scoping
Plan regulatory cycle, will be forced to rely heavily on offsets
to meet declining caps under a cap-and-trade (C&T) program.  The
use of offsets will be critical to survive the early stages of a
C&T environment.  These offsets must not be arbitrarily limited
either numerically or geographically.


2.	Implementation should start slowly, akin to putting one’s big
toe into a tub of hot water before jumping in, so as not to cause
irreversible effects by a rush to action.  No justification has
been offered for the need to “quickly transition” (Page 18) from a
system where the state provides some free allowances to a system
where the majority of the allowances are auctioned in the trading
market.  This is especially true if an auction system is
implemented.  At the outset of a program this large and with such
potential financial impacts, only a small amount of allocations
should be auctioned initially and then gradually increased until
the regulators and the regulated entities become acclimated, and
the market matures.


3.	Superposing C & T atop command and control rules for the same
source categories could increase the overall program cost. Command
and control strategies should be used as backstops, to be phased in
only if C & T doesn’t achieve the required targets within a
specific period of time.


4.	Preliminary Recommendations, Part B, Section 1, Cap and Trade
Program, Pages 15-20: Although the Draft discusses on how the cap
and trade system would work, there is little discussion on the
advantages the program would bring.  We realize that ARB is under
pressures to opt for a carbon tax instead or command and control
regulation.  To better support cap and trade, the ARB should
expand its arguments beyond those mentioned briefly on p. 19 in
the Scoping Plan text.  These advantages include:

o	Causes less economic disruption than direct regulation or carbon
taxes
o	Clear incentive for over-performance
o	Strong driver for technological innovation to achieve that over
- compliance
o	Can stimulate emissions reductions in non-covered sectors
o	Achieve emissions certainty – ensures that the targets are met
o	Widely accepted
o	Guarantees that the covered sectors pay for their emissions
o	Still retains many regulatory aspects such as permits for
emissions, verification and penalties for non-compliance

ARB should also make mention of the success of the EU-ETS,
specifically pointing out that emissions reductions from this
program are expected to exceed 200 million metric tons of CO2 per
year – equivalent to erasing ALL of California’s transportation
emissions.  Bear in mind that the EU program faced many structural
hurdles including getting cooperation from over 20 countries with
different cultures and languages. If the EU could overcome those
obstacles to effect real and significant emissions reductions,
there is no reason why California can’t do better.

An effective cap and trade system is the only market mechanism
considered that will encourage the technology development needed
to take California past its 2020 goals and onto 2050.  We ask that
the state more clearly spell out the advantages of this program if
only to better support its own efforts.

5.	Page 18: Regardless of their status in the inventories
resulting from the mandatory reporting rule, essential public
services such as schools, hospitals, sanitation, LFG systems,
police, fire, etc., should not be included in C&T programs.
Taxpayers should not be indirect speculators in the marketplace
and be held hostage to market whims.  In the event that local
governments own facilities that are captured under C&T, with the
exception of municipal utilities, they should be given free
allocations.  This avoids unnecessary competition between
government and the business community.  Local governments,
competing for allocations, only raise the cost of the allocations
for everyone.

6.	Page 19: The limit on offsets is without basis and
counter-productive to the larger goal of emissions reduction. 
Certainly, at a minimum, there should be no limit on offsets
generated within the WCI as these would most likely meet the most
stringent standards of verifiability, additionality, etc.  To
place a cap on offsets will restrict innovation and place a
further burden on all businesses in the WCI.


7.	Preliminary Recommendations, Section C, Carbon Fees, Page 41:
Carbon fees should target strictly anthropogenic emissions from
fossil fuel combustion and exclude biogenic CO2 emissions from
carbon-neutral fuels like landfill gas and sewage or manure based
digester gas.  This treatment recognizes that the carbon-neutral
fuels add no new carbon to the atmosphere but rather complete the
natural, short-term carbon cycle of atmosphere-plant-human and
back to atmosphere.  Moreover, proceeds of carbon fees should only
be spent to further reduce GHGs.

8.	Preliminary Recommendations, Section C-3, Compliance Offsets,
Page 43: A lot of emissions reductions opportunities will be
forgone if we have to wait for the rigorous protocols called for
under the “Compliance Offsets” paragraph.  Perhaps certain
well-documented projects could get categorical or pre-approvals to
fast-track emissions reductions.  We ask that ARB find a way to
expedite the approval of offset projects so that emissions
reductions can occur now, when they are most needed.

9.	Preliminary Recommendations, Section C-3, Voluntary Offsets,
Page 45: ARB should do more than issue a supportive policy
statement encouraging early reductions of GHG emissions.  Such
actions need recognition and protection against potential federal
actions that might re-draw the baseline or not recognize state
programs.  Better support and protection would stimulate more
voluntary reductions.

10.	Preliminary Recommendations, Section C-4, Use of Possible
Revenues, Page 47, Direct emission reductions: ARB should purchase
CO2 reductions or allowances for the sole purpose of retirement
only as a last resort.  It is hard to justify taxpayer money for
this purpose as long as the state continues to face mounting
deficits and other critical needs are underfunded.  Any excess
monies should fund emissions reductions projects and
technologies.


11.	Page C-12: New facilities that begin operation in sectors
included in a cap-and-trade program should NOT need to purchase
allowances either through an auction or from other allowance
holders.  This is akin to South Coast’s RECLAIM “structural
buyers” provision that, in our opinion, is fundamentally unfair to
new entrants into the regulatory program.  A permanent set aside or
bank of allocations should be funded by CARB to allow new
businesses to be covered in the same fashion as the original
entrants to the program.  Without such a provision, new business
development is discouraged.  Earlier versions of the
Lieberman-Warner bill had such protective provisions.

12.	Page C-12: It is unclear how the cap-and-trade program will
cover 85% of California’s emission sources by 2020.  Please
provide a chart showing how sources will fall under C&T with time.
 The time-weighted average of emissions under the C&T program seems
much less than 85%.


13.	Page C-15: ARB may be adopting regulations to implement cap
and trade well before the other members of the WCI have
implemented inventory programs.  The European experience in Phase
I of their EU-ETS has shown how dangerous it is to implement cap
and trade without having a reliable emissions estimate.  We
suggest that the cap and trade program be voluntary until the
other parties in the WCI are ready to fully participate to
minimize the potential for market disruptions.

14.	Page C-17: The draft recommendation for the WCI calls for
allowance auctions in the first year to constitute between 25 to
75 percent of the total cap.  We feel that even the 25% number is
too high and will cause significant economic hardship.  We urge
the ARB to consider carefully the economic duress that may be
created if too high an auction percentage is chosen, or if free
allowances are too rapidly phased out.

15.	Page C-18: Exactly how will the auction process encourage
voluntary early reductions by firms, municipalities and individual
consumers? Free allowances should be distributed to entities that
undertake early actions. More importantly (see our general
comments) CARB must actively protect California early actions
under a federal climate change program.

16.	Page C-19: As we stated in our general comments, we do not
understand how the ARB can say with certainty that allowing
offsets outside of California would reduce co-benefits inside
California.  It is difficult to envision the type of projects that
would be offered up as offsets, and therefore this conclusion seems
speculative to us.  Take for example, the application of
biosolids-derived compost from California on agricultural land in
Arizona. This project could generate offsets by reducing nitrous
oxide emissions relative to the use of commercial fertilizer and
increased carbon retention in the soil. Any co-benefits analysis
would include too many variables (tillage and irrigations
practices, crop choice, soil conditions, etc.) to say for certain
that compost application in California is to be preferred over
that in Arizona.  ARB should not debit or otherwise discourage
offsets outside of California unless the co-benefits are clear and
overwhelming.

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Date and Time Comment Was Submitted: 2008-08-11 14:02:44



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