California Delays Carbon Fee Decision

June 26, 2009

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California has delayed a decision on whether to implement the nation’s first statewide carbon fee on utilities, oil refineries and other industries as a way to pay for the state’s landmark greenhouse gas emissions law, reports the Washington Examiner (via AP). A vote on the carbon fee will be held at the board’s meeting in July.

The decision came after several electricity providers expressed concerns that California might inadvertently level a charge on energy that would violate federal energy laws, reports the newspaper.

Mary Nichols, who chairs the California Air Resources Board, told the news agency that regulators still favor a carbon fee to raise the money to implement the 2006 global warming law, but they want to ensure they do so legally.

The move to impose a carbon fee comes at a time of rising unemployment, at 11.5 percent, and great economic uncertainty prompting concerns that the regulatory fee will impose another burden on California’s struggling business climate, reports Mercury News (via AP).

If approved, the fee would raise $51.2 million annually for the next three years, dropping to $36.2 million by the fifth year, to fund the regulatory bureaucracy needed to implement California’s 2006 global warming law, reports the news agency.

Industry groups say the proposal by the California Air Resources Board unfairly singles them out to pay for the law. About 250 businesses in California starting in 2010 that make, sell, distribute or import gasoline, diesel, natural gas and coal as well as cement manufacturers would be charged roughly 12 cents per metric ton of carbon dioxide that both they and their customers emit into the atmosphere.

The charge would drop to 9 cents per ton of carbon dioxide in 2014 because loans approved in past years by the Legislature to run the $36.2 million program would be paid, reports Mercury news.

The air board has justified the fee by saying that targeted industries represent the starting point for roughly 85 percent of California’s greenhouse gas emissions with refineries and utility plants as the first handlers of the fuel and electricity that Californians consume every year, says Mercury News. The remaining 15 percent comes from dairy farms, aviation and biodiesel, which are not subject to a fee.

A few local government entities have adopted similar fees. Last year, air regulators in the San Francisco Bay area imposed a 4.4 cent per-ton carbon fee on businesses that emit greenhouse gasses. In 2006, voters in Boulder, Colo., approved a carbon tax on own their energy use.

Most likely the fees would be passed along to consumers. Jon Costantino, manager of the climate change planning section at the air board, told the news agency that the average chain restaurant would see about a $14 annual increase in its electricity and natural gas costs, and the cost to each Californian would amount to between $1 and $1.50 a year.

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