Moody's says climate change rules are emerging risk for California refinersPosted by Gino DiCaro, Vice President, Communications on March 23, 2012
Only time will tell how much AB 32 will actually cost California.
Since our landmark global warming bill passed in 2006 there has been no shortage of guessing about the costs and benefits of mandating greenhouse gas reductions on California's economy. Now all the rules are in place and experts are sharpening their pencils and assessing the outlook. The most recent regulation, cap and trade, requires manufacturing facilities, refineries, and large public agencies to hold “allowances” for their emissions starting in 2013. California is preparing for the first auction of allowances in August.
Cap-and-Trade joins one of the earliest regulations under AB 32, the Low Carbon Fuel Standard to require more biofuels and alternative transportation fuels in the mix. The third policy to purchase 33 percent of our electricity from renewable sources was adopted last year.
Now, instead of guessing, we can see early indicators of higher future costs. Last week the independent credit ratings company -- Moody's Investors Service -- reported that California's rules create an emerging risk to the operating costs, competitiveness and growth of the in-state refineries. This is information important to bankers and investors as they figure out how much risk is involved in loaning or investing dollars into a business.
And after paying almost $4.50 per gallon for gas this month (highest in the country, sans Alaska and Hawaii) every California consumer should be concerned about "emerging risks" on California refineries.
Here’s what Moody’s said:
Meanwhile New Mexico abandoned its cap-and-trade program last month, one of the last remaining holdouts in the United States. New Mexico Environmental Improvement Board Chairman Deborah Peacock said, "the intent was that all these states would be doing this cap and trading, and everyone’s dropped (out) except for California and New Mexico. That, to me, was very significant."
New Mexico saw early indicators of high costs that we have ignored, so far.
(You can purchase the Moody's report here)
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