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newsrel -- California Air Resources Board adopts key element of state climate plan

Posted: 20 Oct 2011 17:08:53
Cap-and-trade will work with other climate programs to drive
innovation and jobs and promote efficiency, clean energy. 

Release #:11-44

ARB PIO: (916) 322-2990

Stanley Young

California Air Resources Board adopts key element of state
climate plan

Cap-and-trade will work with other climate programs to drive
innovation and jobs and promote efficiency, clean energy

SACRAMENTO - The California Air Resources Board today adopted the
final cap-and-trade regulation, putting into place another key
element of the state’s pioneering climate plan.
The cap-and-trade program will now join a suite of other major
measures including standards for ultra-clean cars, low-carbon
fuels and renewable electricity. The program also complements and
supports California’s existing efforts to reduce smog-forming and
toxic air pollutants and improve energy efficiency in homes and

“Cap-and-trade is another important building block in
California’s effort to create a clean and vibrant economy,” said
ARB Chairman Mary D. Nichols.  “It sends the right policy signal
to the market, and guarantees that California will continue to
attract the lion’s share of investment in clean technology.  When
the nation addresses the growing danger of climate change, as I
believe it must and will, California’s climate plan will serve as
the model for a national program.”

The Board also approved an adaptive management plan to closely
monitor the effect of the program on localized air quality and
forests, in particular.

The regulation sets a statewide limit on sources responsible for
85 percent of California’s greenhouse gas emissions and
establishes a price signal needed to drive long-term investment
in cleaner fuels and more efficient use of energy.  The program
is designed to provide covered entities the flexibility to seek
out and implement the lowest-cost options to reduce emissions.

The regulation will cover 360 businesses representing 600
facilities and is divided into two phases: the first, beginning
in 2013, will include all major industrial sources along with
electricity utilities; the second, starting in 2015, brings in
distributors of transportation fuels, natural gas and other

Companies are not given a specific limit on their greenhouse gas
emissions but must supply a sufficient number of allowances (each
the equivalent of one ton of carbon dioxide) to cover their
annual emissions.  As the cap declines each year, the total
number of allowances issued in the state drops, requiring
companies to find the most cost-effective and efficient
approaches to reducing their emissions.  The first compliance
year when covered sources will have to turn in allowances is

By 2020 the state will reach the equivalent of the 1990-level of
greenhouse emissions, as required under AB 32, California’s
climate change legislation. This is a 15 percent reduction
compared to what the emissions would be in 2020 without any
programs in place—the so-called ‘business-as-usual’ level.

To ensure a gradual transition, ARB will provide the majority of
allowances to all industrial sources during the initial period
(2013-2014), using a calculation that rewards the most efficient
companies. Those that need additional allowances to cover their
emissions can purchase them at regular quarterly auctions ARB
will conduct, or buy them on the market. The first auctions of
allowances (for 2013 allowances) are slated for August and
November 2012.

Electric utilities will also be given allowances to be sold at
auction for the benefit of their ratepayers and to help achieve
AB 32 goals.

Eight percent of a company’s emissions can be covered using
credits from ARB-certified  offset projects, promoting the
development of beneficial environmental projects in uncapped
sectors such as forestry and agriculture. Included in the
regulation are four protocols, or systems of rules for
quantifying offset credits: in forestry management; urban
forestry; dairy methane digesters; and, the destruction of
existing stores of ozone-depleting substances in the U.S. (mostly
in the form of refrigerants in older refrigeration and
air-conditioning equipment).

The regulation includes rigorous oversight and enforcement
provisions, and is designed so that California may link up with
programs in other states or provinces within the Western Climate
Initiative, including British Columbia, Ontario and Quebec.  

The regulation has been in development for the past three years. 
 ARB staff held dozens of public workshops on every aspect of the
cap-and-trade program design, and hundreds of meetings with
stakeholders.  ARB staff also benefited from the analysis of a
blue ribbon committee of economic advisers, consultation with
world-renowned institutions that specialize in climate issues,
and advice from experts with experience from other cap-and-trade
programs elsewhere in the world.

ARB's mission is to promote and protect public health, welfare,
and ecological resources through effective reduction of air
pollutants while recognizing and considering effects on the
economy. The ARB oversees all air pollution control efforts in
California to attain and maintain health based air quality

Office of Communications 1001 I Street, Sacramento CA 95814. Ph:
(916) 322-2990

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