Cap & Trade for Greenhouse Gases on the Horizon?

By CMTA Staff

Capitol Update, Oct. 27, 2005 Share this on FacebookTweet thisEmail this to a friend

On October 24, the Governor’s Climate Action Team, chaired by Dr. Alan Lloyd, held a public meeting at the California Environmental Protection Agency (Cal/EPA) concerning "Cap and Trade", a proposed strategy for the reduction of California’s greenhouse gases (GHG) to meet the parameters of the Governor’s executive order issued on June 1, 2005.  The executive order calls for a reduction by 2010 to 2000 emission levels, by 2020 to 1990 levels and by 2050 to 80 percent below 1990 levels.

A Cap and Trade system would limit the amount of emissions allowed a company and further require reductions in line with the executive order.  Businesses would either have to conserve, become more energy efficient, install new technologies, use less carbon dioxide emitting fuels, or they would be required to buy offset credits from other emitters who have exceeded goal requirements and "banked" those excess reductions as credits.  Business expansion or new businesses would require credits as well as have the best available control technology (BACT) to limit GHG emissions.

Testimony at the meeting concerned:
1.    Should a Cap and Trade system be implemented?
2.    What sectors or sources should be included in a Cap and Trade Program?
3.    How should allowances be distributed (grandfathered, auction, etc.)?
4.    How should offsets be handled?  
5.    Who should be the repository for GHG records, etc.

While a number of environmental groups spoke in favor of a mandated, all-inclusive Cap and Trade system, only CMTA and a couple other businesses were there to caution against it.  

CMTA stated that the targets for GHG reductions appeared to be leading to burdensome regulations on California manufacturers and that any plan needs to incorporate some flexibility.  The threat of new regulations or mandates could have a chilling effect on new investment, plant expansions, etc.  There are other concerns as well:
  • California manufacturers face extremely high operating costs in the state, nearly 30 percent above the national average.  In order to remain competitive, they have become the most productive and efficient manufacturers in the world.  That means they produce more goods, with less inputs, including energy, than any other region.  In this way, they are already helping to limit GHG emissions.
  • Regulations that would cap existing emissions and force purchasing of emission credits would limit growth of manufacturers in the future. Competition is global, and adding new costs in California is not an option. California could lose high-paying, high-benefit manufacturing jobs to other, less restrictive, states or countries.
  • Policies to address global issues should be the purview of the federal government. This would ensure that California companies are not disadvantaged compared to other companies in other states who do not have to comply with California rules. The federal government is also in the position to coordinate targets, compliance enforcement and regulations with other countries to protect the national economy.
During the meeting, graphs were shown which reflect that California is one of the lowest emitters of GHG per capita in the country among industrialized states (Graph 1) – and not even in the "same ballpark" with the less industrialized states.  While California’s gross state product grew between 1990 and 2000 by an average of five percent, GHG emissions increased by an average of only 1.6 percent (Graph 2).

CMTA’s Environmental Quality Committee is presently working on a draft of CMTA Global Climate Change Principles.  These principles are expected to be ready for review by CMTA’s Board of Directors by the first of the year.

CMTA has been invited by the Climate Action Team to an "invitation only" meeting of businesses and industry associations on November 17 to discuss the Team’s strategy, implementation options, scenario analysis and Cap and Trade.  If you are interested in being present at that meeting and making a statement, please contact our environmental policy director Mike Rogge at and he will attempt to get you included on the agenda.
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