No need for carbon auction says California's most independent voicePosted by Gino DiCaro, Vice President, Communications on Aug. 24, 2012
This week the most independent voice in California policy analysis said the following in a letter: a cap-and-trade "allowance auction is not necessary to meet the AB 32 goal of reducing GHG emissions statewide to 1990 levels by 2020."
The impartial Legislative Analyst (LAO) responded in a decisive letter to Sen. Henry Perea who had asked three formal, basic and highly appropriate questions:
The LAO's four-page response outlined that the advantages of 100 percent free allocation (up to the cap) far outweigh the disadvantages and that "it would significantly offset more of the marginal cost increase."
In a state where a manufacturer's operating costs are already more than 20 percent higher than the rest of the country, including 50 percent higher electricity rates, that's a very big deal.
The LAO concluded that, should the legislature choose to go this route, they simply need to direct the California Air Resources Board in statute to freely allocate allowances before its planned auction this November.
Dear Legislature. Please HELP!
Time is running out. Billions of dollars are at stake over the next eight years. Will California turn AB 32 implementation into a government money-grab without regard for our economy or the plausibility of the country following us on greenhouse gas reductions? Or will the state see that everyone's goals are in fact achieved with a free allocation of credits?
Manufacturers are growing outside of California. If the state sticks with its plan to charge for a majority of the carbon allowances and make California an even less competitive place to manufacture, the original bold and economy-cautious AB 32 greenhouse gas plan from 2006 will have morphed into a cash cow for government and an insurmountable burden for many of our leading employers.
You can read the LAO letter here
You can read Sen. Henry Perea's release here.
0 comments | Post your comment
When manufacturers leave, you won't hear a howlPosted by Gino DiCaro, Vice President, Communications on May 16, 2012
The California Business Alliance for a Greener Economy recently retorted in Fox and Hounds that the California manufacturers "continue to cry wolf", after we wrote a piece on the needless employer costs being built in to the California Air Resources Board's carbon cap-and-trade auction. The group's response did not substantiate any miscalculations in our $3 billion cost estimates on refineries and food processors, they are just annoyed with our positions on AB 32.
Below is their piece with our responses in bold.
CMTA response: We are looking forward to learning where our numbers are wrong or misinformed.
Let’s take a look back: CMTA hated AB 32 when it was first developed. They formed the so-called AB 32 Implementation Group to pushback progress each step of the way. They supported Proposition 23 to avoid the standards and kill competition. And they’re still at it, dreaming up worse case scenarios to keep California addicted to the old, dirty, dying fuels of the past.
CMTA response: You must not have been around California for very long. By 2006 California manufacturers were already the most energy efficient in the country and paid electricity rates 50 percent higher than the rest of the country. Added costs from AB 32 will cause production and emissions to “leak” to less regulated states and countries, hurting the environment. To minimize leakage, we advocate that AB 32 be implemented in a cost effective and technologically feasible manner, and any true environmentalist would agree. Still waiting for information that proves us wrong that there are billions in needless costs.
But poll [after] poll shows broad public support for AB 32 for a reason: it’s an economic engine for California, attracting $3.5 billion in private clean-tech investments. Since AB 32 was passed more than five years ago, it has propelled clean energy into the spotlight and ensured its place as a bright spot in our economy.
CMTA response: Actually, clean-tech investment was high even before AB 32 passed. Too bad clean-tech investments in California are not translating into manufacturing jobs for the middle class, and green jobs are not any higher here than Texas. Our polling shows that the public generally supports AB 32 but are not willing to pay higher energy or gasoline costs. Hoping to see something soon about where we are wrong on the billions of dollars!
Let’s face it, big business groups have a long history of claiming that any given regulation will drive them out of business and/or create an economic slowdown. These predictions of gloom are seldom realized.
CMTA response: It’s actually pretty gloomy in the manufacturing sector. Lost over 630,000 jobs in the last 10 years, more than the national average. California is among the worst in the last five years for new manufacturing facilities and expansions per capita. Starting to think there isn’t going to be any credible argument that we are wrong about the billions of dollars.
And by putting a price on carbon, AB 32 invests polluter fees into the transition to cleaner and less expensive energy sources.
CMTA response: Now we are getting somewhere! But you are confused – the “polluter fees” are not necessary to “put a price on carbon” - that is accomplished by freely distributing permits under a declining cap and allowing trading of permits. The sale of permits simply imposes a huge new tax. You seem reluctant to put a dollar figure on the “polluter fees”. Billions of dollars perhaps?
I represent thousands of California businesses and they understand that market-based solutions – like a cap and trade program – are the most effective ways to send clear signals to companies and investors. Those signals create a financial incentive for reducing pollution, and a profit motive for developing clean technologies.
CMTA response: Right! A cap and trade program will accomplish AB 32 goals. We don’t need “polluter fees” to raise extra revenue that comes from imposing a multi-billion new tax on manufacturers. We might be getting somewhere here!
But don’t take my (or California’s) word for it. Look at cap and trade in the northeast. The Regional Greenhouse Gas Initiative generated $1.6 billion in net economic benefits to the region with the average industrial consumer saving $2,500 per year.
CMTA response: Apples and oranges. RGGI is electric generation only, it doesn’t directly regulate manufacturing, natural gas and gasoline as we are doing in California. California has been doing energy efficiency in the electric sector for decades. We have lost track of the billions of dollars, could we get back to that?
AB 32 is not just one policy, and it’s about more than the proceeds of one auction. It’s a portfolio of strategies to transition California to a clean energy economy.
CMTA response: Sorry, ignoring the multi-billion dollar tax from multiple auctions and surrounding it with other policies won’t make it go away.
Yet, after being proven wrong time and again, CMTA continues to cry wolf. But I’ve never heard a howl.
CMTA response: You won’t hear a howl. Manufacturers will leave the state silently, without a word, 630,000 jobs and counting.
0 comments | Post your comment
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)
0 comments | Post your comment
California's cap-and-trade needs to be well-designed to protect manufacturersPosted by Gino DiCaro, Vice President, Communications on Aug. 17, 2011
California has lost a third of its manufacturing sector and the California Air Resources Board (CARB) continues to try to implement the state's AB 32 carbon reduction program in a cost-effective manner. The rest of the country has lost a large portion of its manufacturing as well, but at least temporarily given up on mandatory carbon reductions.
0 comments | Post your comment