California Wants to Up the Ante On Cap-and-Trade Program. Will it Fly?
Setting out to be a national example, California nows say it wants to extend its cap-and-trade program through 2050. Both the implicit and explicit message is that the free market program to limit carbon emissions in the state has been working but that more needs to be done. The new goal is to reduce carbon emissions by 40 percent below their 1990 levels by 2031.
The aim of such a program is to permit industries — oil companies, manufacturers, among others — to trade credits with one another and to gradually lower the ceiling for the allowable releases. For those companies unable to achieve reductions at certain plants, they can buy credits from those businesses that have attained proper emissions cuts.
But the price of a credit for a ton of carbon has to be high enough to encourage companies to buy modern equipment or to switch to cleaner burning fuels — not to just buy credits. That’s been an issue with similar global plans.
California’s cap-and-trade was initially implemented in 2006 and had required 30 percent carbon cuts by 2020 from 1990 levels. Here in the United States, only the northeastern states have a similar initiative — one that takes the money from selling credits and reinvest those proceeds into new technologies.
While Gov. Jerry Brown has said that his state’s program is a major success, others have said that the expected revenues from selling credits have fallen short of where they need to be. If the cost of credits rises, though, it could push businesses away.
The California Air Resources Board will consider the proposal in September. However, news accounts have said that the proposal amounts to a tax on businesses. As such, any implementation would require a vote of the state legislature, where it must receive two-thirds support.
“Despite California’s marked progress, greater innovation and effort is needed to avoid the worst consequences of climate change,” said a report issued by the air board.
The nine signatories to the northeastern plan are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. New Jersey, meanwhile, pulled out in 2011.
The results, according to the Analysis Group: Not only have carbon dioxide emissions nosedived but the regional economy has also grown by more than $1.6 billion in economic value. Consumers, meanwhile, have saved $1.1 billion in electricity bills, and 16,000 new jobs have been created region-wide.
Critics, however, are saying that the trading schemes are nothing more than a tax on electricity. That hurts everyone, especially businesses — with some fearing that critical California companies could move across state lines.
Skeptics point to Europe, which began its emissions trading scheme in January 2005 with 27 participating nations. There, the low carbon credit prices nearly killed the market. Such a small cost means that industry has little incentive to wean themselves from dirtier sources or buy new technologies.
Here in this country, carbon dioxide emissions are falling mainly because of the switch from coal-fired electricity to natural gas-fueled power. But the technologies to burn more green energy are also improving, and those prices are dropping.
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