Theory meets reality on California's carbon cap-and-trade program

Posted by Gino DiCaro, Vice President, Communications on Aug. 16, 2012

Theory met reality on Tuesday at a Senate informational hearing on California's carbon cap-and-trade program that is set to start with an auction in November 2012. Craig Anderson from Solar Turbines, an industrial gas turbine manufacturer with 4,000 employees in San Diego, testified that the soon-to-be-fully-implemented cap-and-trade program is the most significant threat to his company's growth.

"I can say without hesitation that AB 32 is viewed by our company leaders as not only the most significant environmental regulation we have faced in California, but also the greatest threat to the growth of our business in California," said Anderson.

You can view Anderson's full testimony here (5:45 min).

Following are more real world impacts from employer testimony on Tuesday. These are companies that, as you'll see in their video remarks, are already some of the cleanest and most efficient in the world.

Mona Schuman with Pacific Coast Producers

"Our costs over the life of this program will be at a minimum $1.5 million to $2 million dollars."

"If cost of allowances go to high for us, our option is to reduce production. Reducing production means reducing jobs, reducing our growers crops and all the suppliers and vendors that supply our growers. "

View testimony here (5:49)

Ryan Modlin with Owens-Illinois

"It costs us 30 percent more already for us to do business in California than anywhere else in the United States. Under this program, it will add a couple million dollars at $20 per ton."

View testimony here (8:49)

Rob Joyce with Guardian Industries

"Compliance costs associated with cap-and-trade regulation will likely erode the competitiveness of flat glass manufacturers in California without providing a meaningful incentive to reduce greenhouse gas emissions."

View testimony here (7:49)

Key questioning and testimony also came from Sen. Rod Wright (Committee chairman), Sen. Michael Rubio, Sen. Bob Dutton, LAO's Tiffany Roberts, CMTA's Dorothy Rothrock, Insulation Manufacturers' Angus Crane, WSPA's Cathy Reheis-Boyd, NFIB's John Kabateck, CLFP's John Larrea, and a Gallo glass worker and representative. (click names for video).

Collectively the hearing's appeal to the California Air Resources Board was to freely allocate emission allowances up to the cap, for all industries, for all eight years of the program. There is no reason to do otherwise. California will still reach its goals and companies will still be forced to reduce to their capped benchmark. (Here is a chart to show how the current auction will charge the food processing industry beyond the cap over the next eight years).

The cap-and-trade concerns reached far beyond employers and workers this month too. The Federal Energy Regulatory Commissioner Philip Moeller wrote a letter last week to Gov. Jerry Brown asking him to

“suspend enforcement of the prohibition of resource shuffling until such a time that ARB clarifies rules surrounding compliance with, and enforcement of, the provisions. Suggested guidance documents are not sufficient, as these do not provide the certainty needed by market participants."

“I am now, however, extremely concerned about the potential disruption to California's electricity market that may arise from the California Air Resources Board's (ARB) implementation of California's greenhouse gas trading plan...."

View the complete letter here.

It's now CARB's turn, before it is too late, to get realistic about making this program work for California's economy and environment.

0 comments | Post your comment

California's cap-and-trade auction creates billions in needless costs

Posted by Gino DiCaro, Vice President, Communications on April 25, 2012

The California Air Resources Board's (CARB) cap-and-trade auction will create needless costs for employers at a time when our state must compete, scrap, wrangle, advocate and fight for every high-wage job we can get.

These costs will seriously hamstring our ability to grow. What most people don't know is that CARB is asking employers to pay for far more emission credits than are needed to reach our goals. California will reach it's 1990-level greenhouse gas emissions without the economy-debilitating cap-and-trade auction, but CARB continues to move forward.

In the charts below, the red zone represents the amount that two particularly critical sectors -- refiners and food processors -- will have to pay to purchase emission credits in CARB's auction over the next eight years. Those credits will be purchased even though the particular sector will already be on track for 1990 levels, with annual 2 percent reductions.

This punitive energy tax equals $2.96 billion in California-only costs on the refining industry and $163 million on the food processing sector. Remember too, while this auction raises a windfall of money, the 2006 AB 32 legislation prohibited revenue collection beyond the administration of the program.

(click images for larger pdf)

Refineries

Food processors

The high price of the proposed cap-and-trade system was also highlighted in the following Sacramento Bee piece authored by CMTA President Jack M. Stewart:

ARB twisted cap-and-trade into a job killer
by Jack Stewart, placed in Sacramento Bee April 15, 2012
The line is now forming for those who want a say in how to spend billions of dollars from the Assembly Bill 32 cap-and-trade program. But first, how is this revenue "created"? For the answer, look in the mirror. Every consumer, public agency, manufacturer and small business will be paying higher prices for electricity, natural gas, gasoline and other products to fill the coffers of cap-and-trade as designed by the California Air Resources Board ... READ ON

0 comments | Post your comment

AB 32 was not intended to be a revenue raiser

Posted by Gino DiCaro, Vice President, Communications on Jan. 30, 2012

This weekend, Gov. Jerry Brown proclaimed that revenue from the cap-and-trade system under AB 32 will go toward the construction of California's High Speed Rail project.

AB 32 was not intended to be a revenue raiser for the state of California. We dug up then-Assembly Speaker Fabian Nunez' 2006 letter of legislative intent before the bill was passed, which made it unequivocally clear that revenues raised under the regulations were not to go beyond the administration of the AB 32 program. Have a look:

Click image for full pdf

While more than 500 facilities struggle to pay for a costly cap-and-trade system in just the first year of the program, the State of California is already finding other ways to spend the money they weren't supposed to collect in the first place.

0 comments | Post your comment

Poll: AB 32's glaring weakness -- CA-only costs

Posted by Gino DiCaro, Vice President, Communications on Jan. 21, 2010

EMC Research released a follow-up poll today to the one they did a year ago on Californian's attitudes toward AB 32 and the state's desire to go it alone.

There were two major take-aways from the poll. Overall, the public is more sensitive than ever to cost issues (with strong support for AB 32 dropping from 31% to 15% since EMC's 2008 poll), and a large majority (66%) of the public says California should not go it alone on greenhouse gas reductions regulations. A month before a long awaited second economic analysis by the California Air Resources Board, it is clear that costs must drive AB 32 policies and regulations.

The state's greenhouse reduction program is not a freebie. Large costs foisted on an unemployment-riddled state economy and increased industry electricity rates already 95 percent higher than western competitor states are not affordable at this time, if ever. The above poll numbers, 600,000 lost manufacturing jobs since 2001, 12.3% unemployment, and the electricity rates below provide some of the most rational context for the AB 32 policy debate. In other words, how can we implement the program so it doesn't hurt the state's economy and jobs, and in a manner that gets the whole country to help reduce global warming emissions?

1 comments | Post your comment

Fox News and Valero explain California's potential cap and trade costs

Posted by Gino DiCaro, Vice President, Communications on Dec. 10, 2009

This week, Fox News tried to explain what California cap-and-trade costs might look like in an attempt to predict what a national program would cost. Valero energy indicated that California's program would force them to pay $7 billion annually -- an amount they simply can't absorb and must pass on to consumers.

CARB Chairwoman is also on record in the Fox News piece saying that "we expect there will either be a modest cost or a savings". This just weeks after CARB's own cap and trade proposal conservatively predicted $143 billion in costs by 2020.

0 comments | Post your comment

View next 5 entries