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EU Carbon Posts Biggest Weekly Drop After Rescue Plan Rejected

By Mathew Carr – Apr 19, 2013 9:53 AM PT European Union carbon permits for December had their biggest-ever weekly decline after lawmakers voted against a plan to ease a supply glut and resuscitate prices in the world’s biggest cap-and-trade emissions market. The allowances dropped 34 percent this week and closed at 3.16 euros ($4.13) a metric ton […]

California Considering 25 Projects for Carbon Offset Credits

By Lynn Doan – Mar 8, 2013 4:27 PM MT California, the second-largest carbon-polluting state in the U.S. behind Texas, will decide whether to award its first carbon offset credits for 25 projects designed to cut greenhouse-gas emissions. The candidates for offset credits include a project to improve forest management practices to avoid emissions related to timber harvesting and […]

A New Path on Emissions

By JOHN M. BRODER World Resources InstituteUnder a “go-getter” regulatory scenario, the nation’s greenhouse gas emissions could be reduced by 17 percent from 2005 levels by 2020, a new analysis suggests. In his second inaugural address, President Obama promised to take on climate change as a priority in his second term. “We will respond to the threat […]

States’ Group Calls for 45% Cut in Amount of Carbon Emissions Allowed

By FELICITY BARRINGER The regional group proposed a 45 percent reduction next year in the total carbon dioxide emissions allowed. The cut is not as draconian as that number suggests, however, because the new total of 91 million tons reflects the current emissions level after five years of a slumping economy and increases in renewable energy […]

California Law Tests Response of Companies to Carbon Costs

LOS BANOS, Calif. — The Morning Star Company’s three plants in California emit roughly 200,000 metric tons of carbon dioxide into the atmosphere each year — about the same amount as the Pacific Island nation of Palau — as they turn tomatoes into ketchup, spaghetti sauce and juice used by millions of consumers around the world.   Ramin Rahimian […]

A Challenge to Europe’s Airline Emissions Curbs

By JAMES KANTER

In another challenge to the European Union’s plan to regulate emissions from the world’s airlines, 26 countries including China and the United States are backing a resolution urging that non-European airlines be exempted.

A debate on the resolution is anticipated on Wednesday at a meeting of theInternational Civil Aviation Organization, an arm of the United Nations, in Montreal.

A draft of the resolution viewed this week by The International Herald Tribune argues that European plan “poses major challenges and risks for aircraft operators.” It warns that other countries could introduce retaliatory rival measures, “bringing about a chaotic situation adversely affecting the sustainability of air transport.”

Under a law approved by the European Union three years ago, airlines landing at or taking off from any airport within a member nation starting on Jan. 1, 2012, must obtain a sufficient number of pollution permits under the union’s cap and trade system, the world’s largest.

The union says its law is justified because the I.C.A.O., the United Nations body, has taken too long to come up with a global system for reining in the greenhouse gas emissions that contribute to climate change. But the plan has met with fierce opposition from airlines, many of them based outside of Europe.

The airlines say that the union has no right to charge for emissions on routes that are mostly outside European airspace.

The Europeans won an important preliminary ruling last month, when the advocate general at the European Court of Justice strongly endorsed the European Union’s push.

The court usually follows recommendations of the advocate general. Still, theAir Transport Association of America, which brought the legal challenge in concert with three major airlines, said it was important to wait for the final opinion.

Attention has turned to the United Nations aviation arm. If the resolution goes to a vote and is approved on Wednesday, which appears likely, it could put more pressure on the Europeans to negotiate a system that would be acceptable to the airlines or even change the law.

A vote in favor of the resolution would not be binding.

European Union officials, in preparatory notes that were viewed this week by The International Herald Tribune, have acknowledged that passage of the resolution “would constitute an important political statement.” In the notes, officials said that the “most benign outcome” of the meeting on Wednesday would be to prevent a vote from taking place.

In the worst-case scenario, the dispute could turn into a full-blown trade war between Europe and countries including the United States.

Last month the House of Representatives approved a measure that would make it illegal for American airlines to comply with the European Union law. If the American bill were to become law, airlines would be unable to fly to and from Europe without breaking either a federal law in the United States or a European Union law. For now, that seems highly far-fetched.

Although the system is due to take effect next year, airlines would not have to hand over the first batches of permits until the spring of 2013 to compensate for flights made in 2012. That could leave room for a compromise over the next year.

The European Union could exempt all incoming flights from the rules, although that seems unlikely to allay the concerns of countries like the United States and China because their airlines would still need to pay for the emissions tied to outgoing flights.

The airlines could also seek a compromise with Europe where they would pledge to speed up work on a global airline-emissions system while remaining exempt from paying for their pollution outside of European Union airspace.

Many airlines probably will face little pain to begin with, and some may even profit.

Airlines will receive about 85 percent of their permits at no charge. Most should be able to pass along the costs by charging passengers a few dollars more for their tickets. Estimates of the cost to the industry for the first year of the system range from $825 million to $1.5 billion.

The more serious concern for airlines is that they are looking at the thin end of an enormous wedge. The sums could grow substantially in coming years if governments decide to auction a larger proportion of permits and if demand for the permits rises.

California’s CO2 Now Has a Price, but a Low One

By FELICITY BARRINGER

A free-market auction has established a price for pollution in California: for each metric ton of carbon dioxide emitted, businesses, utilities and industries that bought allowances last week will pay just $10.09.

The results of the first auction, announced on Monday, came as both a relief and a bit of a disappointment, although state officials put the best face of it. In a statement, Mary D. Nichols, chairwoman of the California Air Resources Board, said, the auction was “a success and an important milestone for California as a leader in the global clean-tech market.” She added, “By putting a price on carbon, we can break our unhealthy dependence on fossil fuels.”

Among traders and regulators, there was relief that all of the 23.1 million allowances covering 2013 emissions that were up for auction were sold. The number of bids exceeded the total allowances by about 3 to 1. Polluters do not have to submit the allowances to cover their emissions until November 2014.

“Given the lack of short-term requirements to purchase anything, I would say market participants that we spoke to were surprised that the full volume cleared and that it was three times oversubscribed,” said Lenny Hochschild, the managing director of global carbon markets for the advisory and brokerage firm Evolution Markets.

And Thad Huetteman, the president of Power and Energy Analytic Resources, said: “It closed close to the minimum, but clearly there was demand for the allowances. Since we defeated that expectation — that the market would be undersubscribed — that caused a sigh of relief.”

But some analysts had expected a higher final price — at least between $11 and $12, not a bare nine cents above the $10 floor.

Mr. Hochschild suggested that the outstanding legal challenges to the cap and trade program, one of which was filed by the Chamber of Commerce on the eve of the Nov. 14 auction, made investors skittish about the program’s long-term viability and thus depressed the price.

While proponents of the new market feel that it will become more robust once financial firms actively take part, the overwhelming majority — 97 percent — of the allowances sold in California’s first auction went to what the air regulators refer to as “compliance entities” — the companies that must account for their greenhouse gas emissions.

Most of the nearly $300 million in auction proceeds is likely go back to investor-owned utilities in the state like Southern California Edison and Pacific Gas & Electric Company, to be directed back to their customers. On Friday, the California Public Utilities Commission announced a proposed division of these spoils: 85 percent to households, which would receive a “climate dividend” of $30 on their bills twice a year; 10 percent to small businesses; and 5 percent to help industries whose out-of-state competitors do not have to pay for the pollution they generate.

On the other side of the country, the Regional Greenhouse Gas Initiative, a coalition of Northeastern states that has imposed a cap and trade system on the electric utility sector, has so far had 17 auctions of emissions permits. The administrator for that program recently told Point Carbon that the system has lowered electricity bills overall in the Northeast by $1.3 billion since 2009.

In the first eight RGGI (pronounced reggie) auctions, the subscription of current permits sold out. But that has only happened once more in the ensuing nine auctions held since the fall of 2010. The clearing price for an allowance after the most recent auction was $1.93.

All 23.1 million allowances sold in California's first cap and trade auction.California Air Resources BoardAll 23.1 million allowances in California’s first cap and trade auction found buyers.

Shell, Unilever Lead 100 Companies Calling for CO2 Price

By Alex Morales – Nov 19, 2012 4:30 AM MT

Royal Dutch Shell Plc (RDSA) joined Unilever NV (UNA) and more than 100 companies calling for lawmakers worldwide to put a “clear” price on carbon emissions in order to contain global warming.

Companies invest trillions of dollars in energy and infrastructure projects, and, in most cases, don’t consider goals to cut greenhouse gases, the companies said today in a statement that’s due to be presented to European Commissioner for Climate Action Connie Hedegaard in Brussels.

“A clear, stable, ambitious and cost-effective policy framework is essential to underpin the investment needed to deliver substantial greenhouse gas emissions reductions by mid- century,” the companies said in the e-mailed statement. “Putting a clear, transparent and unambiguous price on carbon emissions must be a core policy objective.”

The clarity is needed to channel spending into projects that reduce emissions and help the world meet the United Nations goal of containing global warming to 2 degrees Celsius (3.6 degrees Fahrenheit), according to the note. Climate envoys from more than 190 nations are due to gather next week in Doha for two weeks of UN negotiations on the issue.

Locked In

Almost 80 percent of the emissions allowable by 2035 under a 2-degree scenario are already locked in because of future gases from existing power plants, factories and buildings, the International Energy Agency said last week. By 2017, all the allowable emissions will be locked in if no action is taken, the agency said.

“Effective carbon pricing offers the potential to mobilize finance at a scale that can impact the climate challenge,” the companies wrote.

The letter was coordinated by Prince Charles’s Corporate Leaders Group on Climate Change, a club of companies brought together by the heir to the British throne and managed by the University of Cambridge. Other signatories included Alstom SA (ALO)Acciona SA (ANA)Electricite de France SA’s EDF Energy unit, Skanska AB (SKAB) and Aviva Plc. (AV/)

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

Carbon Fee From Obama Seen Viable With Backing From Exxon

By Mark Drajem – Nov 16, 2012 10:26 AM MT

Robert Nickelsberg/Getty Images
Exxon Mobil Corp. is part of a growing coalition backing a carbon tax as an alternative to costly regulation, giving newfound prominence to an idea once anathema in Washington.

(Corrects to say Environmental Defense Fund prefers a cap on carbon in ninth paragraph of story published Nov. 15.)

Obama Says Nation Can’t Afford Deadlock Over Debt

51:44

Nov. 14 (Bloomberg) — U.S. President Barack Obama talks about negotiations on steps to cut the federal budget deficit through a combination of tax increases for the wealthy and spending cuts. The president speaking at a White House news conference, also discusses the scandal that forced CIA Director David Petraeus to resign last week, the deadly attack on the U.S. consulate in Benghazi, Libya, and the chances for legislation to revamp the nation’s immigration laws. (Source: Bloomberg)

Exxon Mobil Corp. (XOM) is part of a growing coalition backing a carbon tax as an alternative to costly regulation, giving newfound prominence to an idea once anathema in Washington.

Conservative economists and fossil-fuel lobbyists united in 2009 to fend off climate-change legislation that would have established a cap-and-trade mechanism. They are now locked in a backroom debate over a tax on carbon-dioxide emissions that could raise an estimated $100 billion in its first year.

A carbon tax would force electricity producers, refiners and manufacturers to pay a fee for the greenhouse gases they emit. It is gaining interest as lawmakers and President Barack Obama pledge to simplify the corporate tax code and raise revenue to narrow the deficit. The devastation from superstorm Sandy following the wildfires and drought of this summer have also increased concern about global warming.

“It does fit with the Republican idea of cleaning up the tax code, and to have a clean instrument for addressing this problem,” John Reilly, co-director of the Massachusetts Institute of Technology’s Joint Program on the Science and Policy of Global Change, said in an interview. Given this year’s weather disasters, “it’s hard to stand up and say global warming is a hoax,” he said.

The idea still faces long odds. Oregon Democratic Senator Ron Wyden said in Washington today that rounding up support for a carbon tax “is going to be a big lift politically.” Asked about it yesterday, Obama said he doubted there was enough political agreement for the tax, though he warned against delay in combating climate change.

Storm Costs

“It’s important because, you know, one of the things that we don’t always factor in are the costs involved in these natural disasters,” Obama said at a White House press conference. “We just put them off as something that’s unconnected to our behavior.”

The Washington-based American Enterprise Institute, which says it advocates libertarian and conservative values, held a full-day discussion Nov. 13 to examine how best to implement a carbon tax, which its economists say could enable a cut in corporate taxes and head off regulation by the Environmental Protection Agency. The same day, an opponent of the idea, the Competitive Enterprise Institute, filed a lawsuit against the Treasury Department, seeking private e-mails it said would show the administration is secretly pushing for a carbon tax.

“They want new sources of revenues, and this is an enormous one,” Chris Horner, a senior fellow at the Washington- based CEI, said in an interview. “This thing is gaining steam. If successful, it would be disastrous.”

Environmentalist Support

Some environmentalists such as former Vice President Al Gore want to tax greenhouse-gasemissions, saying it’s a way to curb the use of fossil fuels such as coal and oil, and boostenergy efficiency and cleaner energy sources, such as wind power. The Environmental Defense Fund said it prefers a cap on carbon emissions to a tax.

The carbon tax also has had support among economists who have worked for Republican administrations, including Kevin Hassett, who is also at AEI, and Gregory Mankiw, an economist at Harvard University.

Exxon, which opposed legislation in 2009 that would have capped carbon emissions and allowed an auction to trade them, said at the time that a carbon tax would be easier to implement and more predictable.

Exxon’s Contributions

“Combined with further advances in energy efficiency and new technologies spurred by market innovation, a well-designed carbon tax could play a significant role in addressing the challenge of rising emissions,” Kimberly Brasington, a spokeswoman for the company, said in an e-mail. “A carbon tax should be made revenue neutral via tax offsets in other areas,” she added.

Exxon’s political action committee gave nearly $1.2 million to political candidates in the past two years, 93 percent of it to Republicans, according to the Center for Responsive Politics.

Exxon is the biggest U.S. natural-gas producer. A carbon tax could boost demand for natural gas in U.S. power plants, as gas emits half the carbon dioxide as coal when burned to make electricity. Natural gas futures fell 1.5 percent to $3.703 per million British thermal units today. Gas prices fell to a 10- year low in April after mild winter weather crimped demand for heating fuels while production rose to a record.

“The source hit hardest is coal,” David Kreutzer, a research fellow in energy economics at the Heritage Foundation in Washington who opposes the tax, said in an interview. “The biggest substitution for coal is going to be natural gas.”

Taxing greenhouse-gas emissions would help finance an overhaul of the convoluted corporate tax code and is a better way to address global warming than regulations from the EPA, according to Aparna Mathur, an economist at the American Enterprise Institute who hosted yesterday’s forum.

Carbon Conference

Exxon, the world’s largest energy company by market value, gave AEI $295,000 last year. Exxon played no part in Mathur’s research or the meeting, she said.

Some of Mathur’s fellow scholars at the Washington think tank say imposing a new tax is a mistake, and conservatives are getting duped into thinking it would be imposed in place of — not in addition to — other taxes and regulations.

“Conservatives are utterly naive to believe that they will get trade-offs in response to a carbon tax,” Kenneth Green, a resident scholar at AEI, said in an interview. “We’ve had some robust discussions over the lunch table about our differences.”

Tax Receipts

Carbon-dioxide emissions since the Industrial Revolution have led to a warming of the Earth’s temperature, which threatens to cause extreme weather, drought and coastal flooding, according to the U.S. Global Change Research Program. Taxing a ton of carbon dioxide at $20 would raise more than $100 billion in the first year, according to research Mathur presented this week.

Mathur said she does not advocate a carbon tax in the abstract. She said it’s better than EPA regulation and is studying how it could be best implemented.

The National Journal reported that Grover Norquist, president of Americans for Tax Reform, said he would support a carbon tax that does just what Exxon said is necessary, offsetting the revenue gains with other tax cuts. The next day, Norquist issued a statement clarifying his remark, saying that the new tax would “inevitably lead to higher taxes.”

“In the real world, it’s not conceivable” that revenue from a carbon tax would be matched by cuts in other taxes, Norquist said in an interview. It would mean “higher taxes in the short and long run.”

Other opponents of cap-and-trade remain skeptical of a carbon tax.

Plan Opponents

The National Mining Association, which represents coal producers such as Peabody Energy Corp. (BTU), opposes “it unequivocally as it would damage growth,” Luke Popovich, a spokesman, said in an e-mail. It is a regressive tax that would “fall especially hard on those least able to afford it.”

And environmentalists are also skeptical of the trade-offs necessary to get Congress to approve any legislation. Obama’s regulatory efforts are bearing fruit, and that shouldn’t be discarded, they say.

“You hear a lot of talk about a carbon tax,” Ann Weeks, senior counsel of the Clean Air Task Force in Boston, said in an interview. “But EPA has made so much progress on the regulatory front,” she said. “I hope they don’t drop it for that promise of something else.”

To contact the reporter on this story: Mark Drajem in Washington atmdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

California Cap-and-Trade Program

Cap-and-Trade Program

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Welcome

This website provides information on implementing California’s greenhouse gas (GHG) cap-and-trade program.  The program is a central element of California’s Global Warming Solutions Act (AB 32) and covers major sources of GHG emissions in the State such as refineries, power plants, industrial facilities, and transportation fuels.  The regulation includes an enforceable GHG cap that will decline over time.  ARB will distribute allowances, which are tradable permits, equal to the emission allowed under the cap.

Quick Links

Implementation
Background

The AB 32 Scoping Plan identifies a cap-and-trade program as one of the strategies California will employ to reduce the greenhouse gas (GHG) emissions that cause climate change. This program will help put California on the path to meet its goal of reducing GHG emissions to 1990 levels by the year 2020, and ultimately achieving an 80% reduction from 1990 levels by 2050. Under cap-and-trade, an overall limit on GHG emissions from capped sectors will be established by the cap-and-trade program and facilities subject to the cap will be able to trade permits (allowances) to emit GHGs.

The California Air Resources Board (ARB) has designed a California cap-and-trade program that is enforceable and meets the requirements of AB 32. The development of this program included a multi-year stakeholder process and consideration of potential impacts on disproportionately impacted communities. The program starts on January 1, 2012, with an enforceable compliance obligation beginning with the 2013 GHG emissions.

California is working closely with British Columbia, Ontario, Quebec and Manitoba through the Western Climate Initiative to develop harmonized cap and trade programs that will deliver cost-effective emission reductions.  The WCI jurisdictions have formed a non-profit corporation, WCI, Inc. to provide coordinated and cost-effective administrative and technical support for its participating jurisdictions’ emissions trading programs.  Just as with other voluntary agreements that ARB establishes with local air districts, states, federal government, and contractors, ARB’s agreement with WCI, Inc. does not confer any decision making authority; decisions concerning the ARB’s cap-and-trade regulation are made by ARB at the direction of the Board. More details on the organization and operation of WCI, Inc., can be found at:  http://www.wci-inc.org/.

Contact Us

For questions, please contact the Stationary Source Division at (916) 322-2037.