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Businesses complain about greenhouse gas allowance auction

September 20, 2012|By Marc Lifsher | This post has been corrected, as indicated below.
  • Then-Gov. Arnold Schwarzenegger signs California's global warning reduction law in 2007. Regulators are about to start a greenhouse gas credit auction.
Then-Gov. Arnold Schwarzenegger signs California's global warning… (Ken Hively / Los Angeles…)

SACRAMENTO -- Corporate executives and workers from dozens of refineries, glass-makers and other business groups bombarded members of the California Air Resources Board with complaints about an upcoming auction of credits allowing them to release greenhouse gases.

The first auction Nov. 14 will be the cornerstone of the country's most extensive, market-based, cap-and-trade program for reducing carbon dioxide and other pollutants that contribute to global warming.

Critics, including the California Chamber of Commerce, the California Manufacturers & Technology Assn. and the Western States Petroleum Assn., complained about the potential cost of cap-and-trade. At a daylong hearing Thursday, they asked that all of the credits needed to stay below the cap be provided to them at no cost.

The board's chairwoman, however, made it clear at the start of the hearing that her agency has been working on cap-and-trade for three years and isn't about to make substantive changes in the state's plan for combating global warming.

"Any change to that basic policy decision would send its own signal of instability to the many businesses who have moved here and invested here in reliance on the opportunity they saw in AB 32," said Air Board Chairwoman Mary Nichols.

She stressed, however, that some fine tuning of the system could happen over the next few months.

Industry contended that a subsidy in the form of all-free emission credits would help prevent "leakage," the bureaucratic term for companies fleeing the state to avoid costly regulation.

"We're concerned that out-of-state refiners will have an unfair advantage" under California's AB 32 Global Warming Reduction Act of 2007, said Lisa Bowman, a member of the United Steel Workers and an employee of a Phillips Petroleum refinery. Bowman said she supported current AB 32 regulations but sought changes to keep in-state refiners competitive with out-of-state fuel producers.

Bowman and a couple dozen colleagues wore red T-shirts in support of Wisconsin union members.

Other critics noted that AB 32's goal of reducing greenhouse gas pollution to 1990 levels in eight years can be done without forcing businesses to buy potentially expensive credits at quarterly state auctions.

"As it stands today, this program is far from flexible and far from cost effective as it seeks to impose a multibillion-dollar energy tax," said Brenda Coleman, a policy analyst for the California Chamber of Commerce.

Cap-and-trade auctions are expected to raise about $1 billion a year in new state revenues next year, the state Department of Finance estimated.

The cap-and-trade program takes effect Jan. 1.

[Updated 11:07 a.m. Sept. 21: This article was revised to clarify Lisa Bowman's position on AB 32 regulations and in-state refiners. Also, an earlier version said her colleagues' red T-shirts said "Save Our Jobs." The T-shirts had language supporting Wisconsin union members but did not say “Save Our Jobs.”]

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