California ARB Issues "Preliminary Draft" Cap-and-Trade Regulation
The California Air Resources Board has released a preliminary draft of California's greenhouse gas cap-and-trade regulation. Release of the preliminary draft regulation marks the beginning of the state's cap-and-trade rulemaking, with consideration of a final proposed draft regulation targeted for the summer of 2010.
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Comments on the preliminary draft regulation are due by January 11, 2010.
Would Start in 2012 and Affect Stationary Sources, Imported Electricity, Fuel
ARB states that the cap-and-trade program is one of the major building blocks of California's plan to address the state's contribution to climate change, and the preliminary draft regulation reflects the approach to cap-and-trade ARB approved in its Assembly Bill 32 Scoping Plan1. This approach includes:
GHG emissions cap - requiring sources of greenhouse gas (GHG) emissions to manage their emissions under an aggregate declining emissions cap that supports achieving the 2020 emissions target mandated by Assembly Bill 32.
Stationary sources and electricity imports - starting the program in 2012 with about 600 of the state's largest GHG-emitting stationary sources (primarily industrial sources and electricity generators), along with electricity imports.
Transportation fuel - including emissions from transportation fuel combustion (e.g., gasoline, diesel, ethanol), and from fuel combustion at stationary sources that fall below the threshold for direct inclusion in the program (e.g. residential and commercial natural gas combustion) by covering the suppliers of fuel to these sources.
Auctioned allowances - requiring a minimum number of allowances to be auctioned at program start.
Offsets - allowing limited use of high quality offsets outside of capped sectors to cover a portion of the overall emissions reductions.
Rules - establishing clear rules for emissions trading, monitoring, and enforcement.
Would Eventually Link with Regional Initiatives, Cover 85% of CA Emissions
Once adopted, a California cap-and-trade program would link with similarly rigorous programs implemented by partners of the Western Climate Initiative2 and, when fully implemented, cover 85% of California's GHG emissions, including emissions from electricity generation, large industrial sources, transportation fuels, and residential and commercial use of natural gas.
1Assembly Bill 32 requires California to reduce GHG emissions to 1990 levels by 2020. In December 2008, ARB approved its "AB 32 Scoping Plan" containing the main strategies it will use to meet AB 32's requirements. These strategies include market-based mechanisms such as a cap-and-trade system, direct regulations, alternative compliance mechanisms, monetary and non-monetary incentives, voluntary actions, and a cost of implementation fee regulation to fund the program.
2The Western Climate Initiative includes the following U.S., Canadian, and Mexican partner states and provinces: Washington, Oregon, California, Arizona, New Mexico, Utah, Montana, British Columbia, Manitoba, Ontario, and Quebec; and the following observer states and provinces: Nevada, Idaho, Wyoming, Colorado, Kansas, Saskatchewan, Nova Scotia, Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas.
CARB press release (dated 11/24/09) available at http://www.arb.ca.gov/newsrel/nr112409b.htm
Overview and text of preliminary draft regulation (dated 11/24/09) available at http://www.arb.ca.gov/cc/capandtrade/meetings/121409/pdr.pdf