Manufacturers catch a break with new cap and trade proposal

By CMTA Staff

Capitol Update, July 18, 2013 Share this on FacebookTweet thisEmail this to a friend

The California Air Resources Board (CARB) wants to delay imposition of stringent requirements for manufacturers covered by the cap and trade program. The proposal to provide free carbon allowances up to the industry "benchmark" for the next compliance period (2015 to 2017) will be discussed at a public workshop on July 18. The original plan would have reduced by 25 percent or more the volume of free carbon allowances for industry sectors that CARB believes are not energy intensive and are not highly vulnerable to price pressures from out of state competitors. 

In the first compliance period (2013 to 2014), every large manufacturer received free allowances up to the industry benchmark. The benchmark for each industry reflects the average efficiency level for the participating companies, less a 10 percent adjustment. The combination of the 10 percent “haircut” and the declining cap between now and 2020 puts cost pressure on all manufacturers even without the additional reduction that would have gone into effect starting in 2015. 

Instead, CARB plans to impose the reduction in the third compliance period (2018 to 2020) but this may also be adjusted. The announcement states:

    ARB is making this change in order to provide additional certainty and time to industry to successfully transition to lower-carbon production methods. In addition, ARB is awaiting new research results that will improve the data, measurement, and metrics of economic leakage risk and will provide additional insights into the potential leakage risk posed by the long-term implementation of the Program on industrial sectors. This research will inform ARB’s evaluation of leakage risk factors for the third compliance period.

CMTA will comment in support of the proposed change. We believe that CARB does not have legal authority to reduce the level of free allowances as was originally proposed. Also, we will review the analysis to make sure it reflects the actual impact of higher costs on California manufacturers. We will advocate for maintaining the level of free allowances in future compliance periods to protect manufacturing jobs and the broader California economy.

Link to proposed cap and trade regulation changes:

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