By Catherine Reheis-Boyd
California’s non-partisan Legislative Analyst’s Office has concluded the California Air Resources Board’s planned auction of emission allowances is costly and not necessary for the state to achieve the greenhouse gas emission reduction goals established by AB 32, the Global Warming Solutions Act.
In response to a request by Democratic Assemblyman Henry Perea of Fresno and Sen. Michael Rubio of Hanford, the LAO’s Mac Taylor wrote that eliminating entirely an auction of emission allowances planned for November will reduce the program’s cost burden on California businesses and employers but won’t reduce its effectiveness.
“Freely allocating 100 percent of available allowances can reduce the cost of compliance, as well as the overall economic impacts of achieving the goal of AB 32,” Taylor wrote.
Taylor said the program’s cap on emissions that declines over time is the feature of the cap and trade program that will result in reduced emissions and that will achieve the AB 32 targets.
“It is the declining cap on emissions that will reduce the state’s overall level of GHGs, not the manner in which allowances are introduced into the market. Thus, an allowance auction is not necessary to meet the AB 32 goal of reducing GHG emissions statewide to 1990 levels by 2020,” he said.
The November auction will require major industries like food processors, cement and glass manufacturers and refineries to purchase emission allowances as a condition of continuing to do business in California. Business groups have noted the initial auction will do nothing to reduce greenhouse gas emissions but require up to $3 billion in payments to the state of California merely for the right to continue doing business in the state.
WSPA supports the goals established by AB 32 and believes a well-designed cap and trade program is an effective and appropriate means of achieving those goals. But Sen. Rubio is right when he says, “”We need to make sure we are exploring all alternatives to reducing greenhouse gas emissions in our state while minimizing potential economic impacts on California businesses and the jobs they create.”