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.

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California's cap-and-trade needs to be well-designed to protect manufacturers

Posted 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.

Cap-and trade is the policy with which CARB intends to produce about 20 percent of the state's carbon reductions but it is targeted at about 600 facilities during the first three years. Under the program cap, a facility will either have to pay for more expensive equipment to produce less carbon, pay for an offset, or purchase credits in a market.

California industry is famously efficient due to decades of higher than average energy costs, including 50 percent higher electricity rates than the rest of the country.

This is why it is so important that California creates a well-designed cap-and-trade system. It must be tested, proven, and refined (and not rushed) to minimize any more leakage of high wage jobs out of California, and it must ensure competitive costs for consumers.

Last week marked a CARB deadline for public comments regarding their implementation of a cap-and-trade program. The manufacturing community issued a formal letter in its now 3-year effort to help CARB understand the impacts of developing AB 32 regulations.

Serious concerns remain regarding industry carbon benchmarks that penalize the superior energy efficiency of California industries, the lack of any qualified leakage risk analysis, the issue of CARB's sole authority for dispute resolution, and the stringent limit on the ability to purchase offsets.

CARB recently adjusted the start date for the state's cap-and-trade program from 2012 to 2013. This delay will help. We ask that CARB takes this time to address the serious concerns of our largest wealth creators. California's manufacturers and other potential California investors are holding out for a well-designed result.

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In closing hours of Governor's bill signing period, two economy-busters loom and require a veto

Posted by Gino DiCaro, Vice President, Communications on Sept. 30, 2010

Up against tonight's midnight deadline to sign or veto all bills, the outcome of two specific bills could make or break Schwarzenegger's legacy of commitment to our economy. If the bills become law, they stand to send big signals to private sector job creators that California is not interested in their ability to compete and grow jobs.

AB 569 provides special treatment for a few unionized industries and fixes 'meal and rest' regulations for only a select few, leaving a large majority of our private workforce and employers without help. Gov. Arnold Schwarzenegger's signature would likely end any chance for a comprehensive fix. On the flip side, his veto would signal the state's commitment to denying special treatment for unions and growing jobs in all industries. See recent CMTA opinion HERE.

AB 1405 directs an arbitrary 10 percent of revenues collected by the California Air Resources Board from a cap-and-trade carbon program for undetermined purposes in a community benefit trust fund. They haven't even implemented cap-and-trade and they are already working on a money grab. This is premature and will interfere with development of a potential cap and trade program. CARB must balance cost effectiveness, co-pollutant impacts, and technological feasibility as they develop regulations under AB 32. These criteria are vital to reduce greenhouse gas emissions and support the economy. See CMTA veto letter HERE

Come on, Gov. You can do this! Help California's economy and help grow our high wage private sector job base.

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'Cool Cars' embodies Sacramento's 'bumbling, well-intentioned, paternalistic nonsense'

Posted by Gino DiCaro, Vice President, Communications on Feb. 23, 2010

The California Air Resources Board (CARB) is looking to finalize its "Cool Cars" policy this Thursday, once again putting regulation before reason and imposing knee jerk command-and-control mandates with no regard for economic impacts and, in this case, public safety.

**** Since this blog was written I have been corrected by CARB that it is not on the agenda for Thursday. But no doubt folks are still showing up to testify in the public comment period on the issue *****

Here's the nickel tour:

CARB's "Cool Cars" policy was set up in 2009 as an AB 32 early action item to reduce the state’s greenhouse gas emissions by reflecting heat away from cars, thereby requiring less air conditioning and less fuel.

CARB originally tried to ban dark colored vehicles. That didn't fly with the public, auto dealers, manufacturers and anyone else who breathes in California. Whew.

CARB then focused on a policy that mandated a reflective layer in all car windshields by 2012 and all windows by 2016. They did this before any analysis on economic or safety impacts and without regard for alternatives with similar emission reductions.

Policies like this require extensive research to ensure proper benefit with the least amount of economic burden. Over the past few months important information and data on these two fronts has emerged from the Wireless Association and the Auto Alliance that prove that the proposed "Cool Cars" policy creates:

A substantial economic burden (costs 2 and a half times more than CARB reported)
A serious concern about public safety because of negative effects on GPS ankle mechanisms and less cell phone 911 call completion
Overall administrative nightmares for any system using toll road and bridge transponders

Even when presented with these problems and new information on better alternatives, CARB is still unwilling to budge and provide any flexibility or necessary changes in the regulation.

The ultimate absurdity of "Cool Cars" is that the policy discourages new green tech and innovation in our automobiles. Solar absorptive technology incorporated in windshields is an alternative approach and is 90 percent as effective in reducing the build-up of heat in a vehicle. This technology has none of the negative outcomes of the proposed "Cool Cars" regulations. Further, there is a decent chance this less costly and more efficient technology (along with other alternatives) could be adopted nationally or semi-nationally, meaning larger emission reductions countrywide.

CARB in the end wants it one way. Their way. CARB is going it alone, ignoring the studies and contributing to what the Orange County Register called in a November editorial, "Sacramento's caricature of bumbling, well-intentioned, paternalistic nonsense".

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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?

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