CARB approves cap and trade after Schwarzenegger drops in

| 12/17/2010

Shortly after a surprise drop-in visit by Gov. Arnold Schwarzenegger, the California Air Resources Board voted Thursday to approve a major cap-and-trade regulation called the “capstone” of the state’s climate change programs.

Cap and trade creates a marketplace of emissions credits or allowances, which can be bought by businesses that need credits, or sold by businesses based on the government’s requirement that the businesses’ emissions be offset.

CARB’s cap-and-trade regulation sets a statewide limit on emissions from sources “responsible for 80 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,” CARB said in a statement issued shortly after the vote.

The new program covers 360 businesses that operate 600 facilities. It is being implemented in two phases. The first phase in 2012 will include all major industrial sources including utilities. A second phase is scheduled to begin in 2015 and will include distributors of diesel and other transportation fuels, natural gas and other fuels.

CARB’s system will provide free “allowances” from 2012 through 2014. Companies that need additional allowances to cover their emissions can purchase them at regularly scheduled quarterly auctions CARB conducts. They also can be purchased on the market, CARB said.

In 2006, Schwarzenegger signed California Assembly Bill 32 into law, which gave CARB authority to regulate many greenhouse gas emissions sources and prompted the agency’s foray into cap and trade. AB32 has a goal of bringing California’s emissions down to 1990 levels by the year 2020.

Board members were stunned when Gov. Arnold Schwarzenegger walked in to the meeting. They rose from their seats, which prompted the governor to tell them to “relax,” before he addressed the board for nearly 10 minutes.

“I just wanted to come by here and say thank you for the good job you do,” Schwarzenegger said. “We are very proud of you.”

Schwarzenegger said California can be known as an innovator for its green jobs and climate change ideas, as opposed to problems it has faced.

“This is what makes us this leader,” Schwarzenegger said. “Yes, California is known for having a budget crisis, for spending more than we’re taking in. But we’re also known for great things.”

CARB’s version of cap and trade is viewed by many as a potential template for other states, which may choose to adopt California’s regulation in lieu of a federal cap-and-trade program, which has not emerged despite multiple efforts in recent years.

The U.S. House of Representatives approved climate change legislation in summer 2009, although multiple proposals debated in the U.S. Senate never made it to a vote.

Afterward, the board appeared to be flabbergasted by Schwarzenegger’s appearance.

“That’s a first as far as I know,” Nichols said of his visit.