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Business Groups Protest California’s Impending Cap-and-Trade Market

Industry groups as well as executives and workers from refineries and factories demanded the California Air Resources Board make changes to the state’s impending cap-and-trade carbon market, arguing the landmark emissions reduction scheme amounted to a $1 billion-a-year-tax increase that would stifle economic growth and drive companies out of the state.

The California Chamber of Commerce, the California Manufacturers & Technology Association and the Western States Petroleum Association squared off with CARB regulators at a hearing that gave businesses a final chance to be heard before the program’s carbon credit auction Nov. 14, the AP reported.

Business groups, complaining their input had been ignored, asked the state’s top air regulator to give away all of the carbon credits for free, a move they argue will keep refineries and other large industrial factories competitive with their out-of-state rivals.

Regulators held their ground and defended the cap-and-trade program, the central piece of the state climate change law AB 32.

CARB chair Mary Nichols opposed the associations’ request and said the carbon market won’t be overly burdensome to businesses. She said giving away all carbon allowances for free could give some companies undeserved windfall profits, reported Reuters.

The cap-and-trade plan was finalized in October 2011.  More than 400 major industrial users will have to adhere to an emissions cap as of January 1, under the state’s cap-and-trade scheme. The current plan gives oil refineries, manufacturers and other large emitters 90 percent of the permits they need to cover their emissions for free. The remaining allowances will be auctioned off quarterly, beginning in November. Each year, the total number of carbon credits will decline until 2020. Over this time, CARB expects the program to prevent 273 million metric tons of carbon emissions.

CARB has considered giving free carbon credits for its cap-and-trade program to companies deemed to be at risk of leaving the state. The regulator said last month it wanted to stem the tide of possible emissions “leakage,” a term describing companies leaving for other jurisdictions after the greenhouse gas reduction law kicks in.

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