CARB not ready for cap and trade

By CMTA Staff

Capitol Update, Oct. 18, 2012 Share this on FacebookTweet thisEmail this to a friend

On Thursday CMTA commented at the California Air Resources Board about the upcoming auction of allowances in the AB 32 cap and trade program:

“We are disappointed that CARB is moving forward without fixing the serious flaw of auctioning allowances to raise revenue in the cap and trade program.   CARB’s plan will kill manufacturing  jobs is not necessary to achieve AB 32 goals. There is still time before the auction for the board make a firm commitment to provide free allowances for all the compliance periods between now and 2020."

We are not the only group concerned about CARB moving forward with the auction while important issues remain unresolved. The Emissions Market Assessment Committee met in September and identified a few more issues that CARB should resolve before the first auction.  The EMAC economists said that CARB should define what constitutes ‘resource shuffling’ – at this time electric power utilities and traders throughout the west do not know what is illegal ‘resource shuffling’ and what is normal power trading behavior.  Yet CARB’s regulation makes resource shuffling illegal and subject to penalties, also uncertain, starting in January 3013. This isn’t just an academic concern. EMAC said “uncertain liabilities associated with imports to California could discourage, and therefore raise the cost of, power imports into the state.”

Another risk of moving forward at this time is EMACs belief that the price containment reserve may not protect companies from high prices especially in the final years of the program. They note we could have a market failure similar to the energy crisis when prices skyrocketed and politicians stepped in to stop the market. EMAC suggests the price containment reserve should “be strengthened and clarified before market operations commence”.

The precautionary principle is often cited as a reason to justify environmental policies to protect public health.  If precaution is a good idea, we should exercise it when considering economic impacts, and for all the reasons above the auction should be stopped until CARB finishes the regulation to address these crucial problems.

The cap and trade auction is scheduled for November 14.

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