Tuesday, April 9, 2013

Great Expectations

California passed its “Assembly Bill 32” law in 2006 that forced the state to reduce its greenhouse gas levels to 20% below its 1990 level of emissions by 2020. Since then, California has passed one of the nation’s most aggressive fuel emission standards, a renewable portfolio standard at 33% of total energy use, and the country’s first economy-wide cap and trade program. This cap and trade program is evolving even as initial auctions were held on November 14, 2012, and the second on Feb. 19, 2013.

The backstory on this issue is that the entire program is moving forward on a more or less contingent basis. A statewide organization called Communities for a Better Environment (CBE) is working against the AB 32 implementation. In 2010, it joined a coalition that sued the agency, claiming that cap and trade violated the intent of the law and that the ARB had charged ahead with the program before fully considering public comments and alternatives, as required by the California Environmental Quality Act. The plaintiffs won an injunction in March 2011. But an appeals court allowed cap and trade to proceed while the state revised its CEQA analysis. In September 2011, the California Supreme Court also ruled that cap and trade could move forward. In the summer of 2012, several of the same petitioners filed a civil rights complaint with the Environmental Protection Agency, arguing that cap and trade “disparately and adversely affects communities of color.” The EPA rejected the complaint in January of this year, stating that it’s too early to prove these claims.

The cap-and-trade rules came into effect on January 1, 2013 and apply to large electric power plants and large industrial plants(select "California" to get the EPA emissions in that state). In 2015, they will extend to fuel distributors (including distributors of heating and transportation fuels). At that stage, the program will encompass around 360 businesses throughout California and nearly 85 percent of the state’s total greenhouse gas emissions.The official site for California's cap-and-trade program is here.

At the same time, the State of California is holding public workshops to provide input on the development of an investment plan for the auction proceeds from the Cap-and-Trade program to reduce greenhouse gases. The Proposed State Budget for 2013-14 includes a brief discussion of Administration priorities for investment, emphasizing investments in the transportation and energy sectors from which large reductions in GHG emissions are possible. Offsets are not only covered instate, but are also being developed through oversight of foreign trading in carbon sinks. This oversight is potentially overseen by nonprofit entities that are registered by the state. For example, Climate Action Reserve’s role is that of an accredited offset project registry, which is an official recognition by the State of California, to review offset project documentation, oversee verification, and issue credits that ARB then converts into compliance offsets for use in the cap-and-trade program.

Carbon offset programs include three primary areas where emissions reductions can be had and can create offsets. One area, forestry, involves sequestering carbon. As trees grow, they take carbon out of the atmosphere, hold it in their roots, trunks, and limbs. Under the rules that have been drafted and that were adopted by ARB, there are a number of mechanisms to ensure the ongoing permanence of that sequestration (permanence here meaning holding it for 100 years). Then credit is generated that can be used to offset emissions at a covered entity like a power plant or refinery.

This carbon offset program is now being developed through symposiums in the state in order to establish the basis for these offsets in forests in foreign countries. Critics say the offsets are difficult to verify. According to Carbon Market Watch, it’s hard to prove that the European Union’s offset program is actually creating the kind of emission savings it alleges for a large number of wind, hydropower and biomass energy offset projects. And the offset market in the EU has generated several high-profile cases of fraud.

Under discussion are potential benefits and challenges of linking programs in foreign jurisdictions directed at Reducing Emissions from Deforestation and Forest Degradation (REDD) to California’s cap-and-trade program as sources of offsets.  The focus is on regulatory design elements and the legal and institutional mechanisms that would be required to enable California to recognize emissions reductions from jurisdictional REDD programs as offsets under California’s cap-and-trade program. There are legal and institutional mechanisms that are required to enable California to recognize international REDD-based emission offsets for compliance purposes. Unlike the U.N.’s costly and bureaucratic global offset program, the Clean Development Mechanism, California uses a “performance standard” to determine whether projects are “additional.” The most recent press release from the REDD Offset Working Group outlines the concerns of indigenous people in countries that would participate in the preservation of their forested lands.

These great expectations and ambitions will play out in ways unforseen today. Will these goals be attainable?