Mary Nichols, chairwoman of the California Air Resources Board, says the… (Robert Galbraith / Reuters )
Facing continued litigation, California officials will delay enforcement of the state's carbon-trading program until 2013, state Air Resources Board Chairwoman Mary Nichols announced Wednesday.
The delay in the cap-and-trade program, slated to take effect in January, is proposed because of the "need for all necessary elements to be in place and fully functional," she said.
But in testimony before a state Senate committee,Nichols said the postponement would not affect the stringency of the program or the amount of greenhouse gases that industries will be forced to cut by the end of the decade.
Carbon-market executives mostly shrugged at the news.
The air board "has given firms a breather, not a pass," said Josh Margolis, chief executive of CantorCO2e, an emissions-trading company. "Companies will need to make the same reductions, but they will face a steeper slope."
Ricardo Bayon, a carbon-market expert with San Francisco-based EKO Asset Management Partners, said, "This is still a green light on cap-and-trade. The program still begins in 2012, but regulated entities would not need to prove compliance until 2013. It is like giving students more days to turn in their homework for the year."
The cap-and-trade program, championed by former Gov. Arnold Schwarzenegger, is a centerpiece of the state's landmark effort to cut planet-warming gases to 1990 levels by 2020. It accounts for a fifth of the planned cuts under the state's 2006 Global Warming Solutions Act.
Under the program, 600 industrial facilities, including cement manufacturers, electrical plants and oil refineries, would cap their emissions in 2012, with that limit gradually decreasing over eight years.
Several neighborhood organizations and environmental justice groups that focus on local pollution are fighting the program in court, saying it would allow industrial plants to avoid installing the strictest pollution controls.
A San Francisco judge ruled in March that the air board had not sufficiently analyzed alternatives to the trading program, as required under California's Environmental Quality Act. The agency appealed the decision, and an appeals court ruled last week that officials could continue working on the regulation pending the court decision.
The board is drafting an analysis of alternatives, which is to be considered for adoption Aug. 24, Nichols said.
Bill Gallegos, executive director of Communities for a Better Environment, one of the plaintiffs in the lawsuit against the carbon-trading program, said environmental justice groups will press Gov. Jerry Brown to reject the program.
"Cap-and-trade is the wrong way to achieve greenhouse gas reductions," he said. "It can easily be subject to fraud."
In the wake of the failure of national climate legislation in Congress last year, California's program would be North America's biggest carbon market, three times larger than a utility-only system in the northeastern U.S.
By 2016, about $10 billion in carbon allowances are expected to be traded through the California market, which is slated to link to similar markets in several Canadian provinces.
"We cannot afford to let up in our efforts," Nichols said, adding that Congress' failure to pass a national carbon-trading bill "squandered the opportunity to reap major public health, air quality and economic benefits."
State Sen. Fran Pavley (D-Agoura Hills), author of the original California climate legislation, said, "This modest delay in implementation is prudent. The one-year period will allow us to road test market mechanisms to see how they work while ensuring that the greenhouse gas pollution reductions required by the program remain intact. By getting this right, California can serve as a model for other states and countries."
Scientists say that carbon dioxide and other gases, mainly from burning fossil fuels, are trapping heat in Earth's atmosphere, leading to dangerous climate change, including rising sea levels, longer droughts, floods and melting glaciers.