AB 32 Cap and trade hearings high on speculation, low on details

May 3, 2012

By Katy Grimes

SACRAMENTO — A recent poll about the implementation of AB 32 shows that California voters and taxpayers aren’t real crazy about cap and trade or regulatory reporting regulations. Cap and trade programs mandate reduced emissions, while providing a trading mechanism for emissions “credits.”

Despite the entire program being speculative, and the dismal poll results, the California Air Resources Board is moving ahead with a cap and trade program and its first carbon auction in November.

Additionally, a strange informational hearing about cap and trade took place Wednesday in the Senate Select Committee on California and Mexico Cooperation. More of a dog-and-pony show to gin-up interest in cap and trade, the hearing was supposed to be about California and Mexico becoming carbon trading partners.

But Mexico does not have a cap and trade program, does not have a climate change law in place like AB 32, and pulled out of the Western Climate Initiative.

AB 32 Poll

The poll, authored by the AB 32 Implementation Group, submitted the polling information to the CARB, but it appears that CARB has turned a deaf ear on Californians.

The poll found:

* Support for AB 32 has declined since 2008, with a slim majority of voters still in favor. 

*California voters are unwilling to pay more for energy and other essentials in order to fund GHG reduction policies.
* Nearly two-thirds of voters oppose CARB’s proposed cap and trade auction and less than a majority of informed voters support cap and trade in general as currently planned.
* Two‐thirds of voters think California is seriously on the wrong track.
* Only about a third of voters have a favorable view of the Legislature.

And once California starts down the path of carbon trading, there is no going back.

Cap and Trade and Mexico

Currently, the cap and trade program can’t support itself. Despite this, Gov. Jerry Brown, state legislators and CARB are trying to push this aggressive and untested program alone, despite a shaky economy.

Yet the hearing was held as if California and Mexico are forging ahead as part of the Western Climate Initiative.

WCI Inc.

As I reported last month, the California Air Resources Board has created a stealthy new corporation in Delaware. The Western Climate Initiative Inc., which will manage cap-and-trade programs, even has its own form of currency.

WCI Inc. states that it exists “to perform administrative and technical services to support the carbon trading market, including market monitoring of allowance auctions, and market trading of compliance instruments.”

Initially, California was to unite with other Western states to reduce carbon emissions and put an end to global warming. “However, the partners determined that they would prefer not to tackle the issue during a recession,” Assemblywoman Diane Harkey, R-Dana Point, recently explained to me. “The cost of making their states less competitive in a tough business environment outweighed the benefit.”

Harkey has been trying to get her legislative colleagues to understand that setting a goal to reduce greenhouse gas emissions to 1990 levels, with California’s increasing population, is guaranteed to cost employers and everyday people more for the electricity and products they need. That’s also one reason why so many businesses are already leaving the state.

Last November, New Mexico, Arizona, Washington, Oregon, Montana and Utah all pulled out of the Western Climate Initiative. Despite the exodus, California formally launched its own cap and trade system on January 1, 2012, with a very ambitious target of carbon emissions reductions of 80 percent by 2050.

California’s only remaining partner in the Western Climate Initiative is the Canadian province of Quebec. The province is expected to launch its own scheme in 2013, which is said to link with California.

And this is where things start to get sticky. Once California links with another carbon trader, we can no longer make changes to the plan. It has to be right the first time.

If our trading partners offer more carbon allowances to their businesses and industries than California does, it will hurt our competitive advantage, similar to the way higher in-state taxes already hurt California businesses competing against businesses in other states.

And it is important to note that the California-Quebec relationship is not trading apples-to-apples. Quebec gets 97 percent of its energy from hydroelectric sources. California is trying to reduce traditional electricity production, including hydroelectric power, and instead replace it with as much “renewable” energy as possible from wind and solar, algae and ethanol. Energy experts have been saying in recent months that California’s energy demand is too much for the alternative energy and lower usage standards.

Additionally, Quebec has only 80 regulated industries. California regulates more than 300 industries.

Hearing from the players

The requisite climate change supporters spoke at the hearing. One was Gary Gero, with Climate Action Reserve, formerly known as the Climate Action Registry. He said Climate Action Reserve is the largest offsets registry in North America, with nearly 500 offset projects in four U.S. states and Mexico, and has certified more than 24 million metric tons of greenhouse gas emission reductions.

Gero called for forest protocols, livestock protocols and ozone protocols, and is looking to be “the largest liquid North American carbon market.”

Jim Gonzales with the Renewable Energy Accountability Project, a national environmental organization, said he thinks a California-Mexico offset program is in the cards. However, many question the validity of this since Mexican industry is currently much less regulated than California businesses and industry, and Mexico does not have the strict pollution standards California is famous for.

California Air Resources Board

No hearing about climate change would be complete without testimony from CARB. Much of this hearing centered around CARB’s mandates and future implementation policies.

Richard Corey with CARB gave his usual song-and-dance about CARB’s great work. Corey gave an overview on the implementation of AB 32, California’s Global Warming Solutions Act of 2006, as well as the 2008 scoping plan, and the Renewable Portfolio Standard of 2011.

“Cap and trade acts as an economy-wide backstop,” Corey said. “We will work with other greenhouse gas emission markets and can trade allowances with each other.”

But the most important point Corey made is that CARB sets all of the carbon allowances.

With the upcoming first carbon auction in November, committee members wanted to know how this was going to impact industries within their districts, suddenly faced with being forced to implement new programs or fined for carbon emissions.

Corey said that CARB is allowing free emissions for the first period, but in the second trading period, emissions will be charged.

“A lot of industries in my district have already spent millions of dollars to clean up their act to lower emissions, and pushed it as far as the science will go,” Sen. Anthony Cannella, R-Ceres, told Corey.

Cannella was concerned that businesses have already made substantial reductions on their own, and will be punished by CARB with even stricter emission reductions. And if that is the case, the fear is that businesses will continue to flee the state.

Sen. Bob Dutton, R-Rancho Cucamonga, expressed concerned with the Mexico and California relationship, and why Mexico is no longer an “observer” of WCI Inc.

Corey couldn’t answer why Mexico left the WCI, but talked about the law just passed by the Mexican Legislature, similar to AB 32. Mexican President Felipe Calderon has not signed the bill yet.

Dutton grilled Corey about the purpose of WCI Inc., and why CARB incorporated WCI in Delaware.

Corey insisted that WCI Inc. is just an administrative function for the cap and trade program, but did not specifically address why it is incorporated in Delaware and not in California. However, he did admit that WCI Inc. will be facilitating the carbon auctions, proceeds of which will go to California.

Dutton wanted to know under what authority WCI Inc. was created. Corey said that embedded in AB 32 was authorization for CARB to create WCI Inc, and offered to provide Dutton more information after the hearing.

Cap and Trade

California’s new cap and trade program places a limit on greenhouse gas emissions from the businesses and entities responsible for approximately 80 percent of the state’s greenhouse gas emissions.  CARB will issue carbon allowances to these businesses and entities, which will be able to turn around and sell them to other businesses on the open market.

The “cap” is the state-imposed limit on businesses that emit greenhouse gasses, and the “trade” is the sale of carbon credits to other businesses. Only the businesses chosen by CARB get to sell carbon credits to polluters, and profit from doing so.

Businesses will be limited on how many credits they can purchase. If a business produces more carbon emissions than the state allotted, CARB will issue stiff fines and penalties. Or the business can just reduce their production output and lose money instead.

Mexico Cap and Trade

Dr. Luis Farias, the president of Mexico’s Sustainability Commission, testified that in Mexico, it will be the private sector which makes the investment needed into alternative energy. Farias said that there are 431 projects currently under way in Mexico.

But in what sounded like a warning to California, Farias said that we need to find a way to increase rather than retard business growth. “All offsets are not created equal,” Farias said. “Standards and protocols are one thing, implementation is another.”

Alfonso Lanseros, president of CO2 Solutions in Mexico, gave a lengthy, highly technical presentation about the opportunities for California’s technology and labor in Mexico’s renewable energy development.

Wrapping up the hearing was Dorothy Rothrock with the California Manufacturers and Technology Association. Rothrock acknowledged that California has already passed AB 32 and now we must deal with it. But she said that there is a “great tension” in the implementation process, which does not have to be there.

Rothrock warned that, as California heads for the carbon auctions, it is important to keep in mind the necessity for our businesses and industries to remain competitive. If they cannot, less capital will be available, and it is likely that other states will not join us as trading partners.

However, if California does this right, we could be the leader. “We’ve a great history of imposing requirements on ourselves. We can help others get up to our standards, rather than continue to hammer on ourselves,” Rothrock said.

And Rothrock warned that linking with Quebec is a problem. “They are distant, and not a trade partner of California,” she said. “We can’t make changes after linking with anyone.”

As the hearing ended, Sen. Lou Correa, D-Santa Ana, said he had more questions, not fewer, after hearing all of the testimony. He said much more research was needed before California moves forward with a cap and trade program.

Assemblywoman Harkey opined that, if California starts to bleed more businesses, then create more carbon certificates, we will create inflation and the carbon certificates will be devalued. “I would hope that the Senate and Assembly hold banking and finance hearings to tell us how this would work,” Harkey said. “Who will be in charge behind WCI Inc.? We need to move slowly so we don’t get hosed in the meantime.”


Write a comment
  1. queeg
    queeg 3 May, 2012, 10:13

    California is developing sinister subset economies….cap and cry….government union masters, punk greedy globalists, nonproducer anti-heros, Indian gaming, water water everywhere but for you, underground economy due to onerous taxes and regulation, the education administrative aristocracy……

    These propped economies extract and suck huge amounts out the general economy….the pickings left go to Belzee’s usual suspects, perhaps….

    And guess what….there is nothing you can do about it!!!

    Reply this comment
  2. larry 62
    larry 62 3 May, 2012, 13:12

    Wouldn’t it be great if Ca. business’s just did not participate in this scheme and then CARB could fine them and shut them all down after they refused to pay the fines. With no one left to pay the taxes and fees Ca. would cease to exist. Only works in my warped mind.

    Reply this comment
  3. LGMike
    LGMike 3 May, 2012, 13:29

    All of the scientific and government double speak and pronouncements does NOT change the fact that CAP AND TRADE does absolutely NOTHING to improve our environment. IT doesn’t remove anything as the Climate Action Reserve has stated (has certified more than 24 million metric tons of greenhouse gas emission reductions) but rather move from left hand to right hand. Reduce means to eliminate or otherwise lower the amount of an product. It does not mean to move from west coast to east coast or any other location. The only net reduction is in money being paid to a government agency for the “paper” move the product. Talk about a SCAM, this is a certifiable definition of same. The biggest losers as usual are the people of California. Higher energy costs, higher fuel costs, higher food costs, and of course less employment because business WILL leave. It appears the proponents of Cap and Trade should go back to school to learn not only how to read, but to learn basic math. Not to mention the public now knows and polling shows this is not worth the negative impacts to society and business.

    Reply this comment
  4. Joe Sullivan
    Joe Sullivan 3 May, 2012, 13:45

    There is disagreement all over the world among scientists and climatologists about global climate change. The Intergovernmental Panel on Climate Change concluded global warming results mainly from Carbon Dioxide (CO2) in the atmosphere. Others disagree, considering the conclusion a hoax. I am one of 31,478 scientists, a Geological Engineer for over a half century, registered in the Global Warming Petition Project, which advised the government we oppose plans to force expenditure of billions of dollars trying to reduce carbon dioxide. Notwithstanding that, laws and regulations have been passed to reduce CO2. Such actions caused Harold Lewis, famous Professor of Physics Emeritus at the University of California to recently resigned from the top professional association for physicists saying “the money flood” has corrupted science and calls global warming a ‘scam’ with the trillions of dollars driving it that has corrupted so many scientists.” “It is the greatest and most successful pseudoscientific fraud I have ever seen in my long life as a physicist.”

    The hoax has also been exposed by the recent release by the Met Office, the UK’s National Weather Service, whose new figures show there has been no planet warming in 15 years. The figures suggest we may be headed for a mini ice age. The figures show that the rising trend in world temperatures ended in 1997. Leading climate scientists contend after emitting unusually high levels of energy throughout the 20th Century, the sun is now heading minimum output threatening cold summers and bitter winters. Sunspot numbers are running at less than half that seen during peaks in the 20th Century.

    The Earth warms and cools in 100,000 year cycles. We’ are coming out of the latest Ice Age. The same thing happened many times before. Continents have cooled and heated many times, and oceans have been lower, and higher than present. The Earth is dynamic, and tectonic plates supporting our major continental masses, have collided and parted many times over billions of years. About 450 million years ago glaciers covered nearly the entire western continental masses. About 404 million years ago the Earth became devoid of ice. Between 144 and 66 million years ago dinosaurs reigned. The earth’s temperature then was warm to mild, and polar-regions were free of ice. The next onset of major glaciation began 40 million years ago. About 30 million years ago our six continents drifted to the positions they now hold. They are still moving, as horrendous earthquakes and tsunamis throughout the world demonstrate. Ice Ages occurred often. About 3 million years ago glaciers developed in Antarctica and 2 million years ago major glaciation occurred, and the northern hemisphere was covered by ice sheets. The Era was termed the Great Ice Age. During this period mankind was becoming widespread. The Era ended 10,000 years ago as a general warming trend occurred that was periodically interrupted by short relatively cool periods. One such cool period, from about 1500 A.D. to the late 1800s, was characterized by expansion of glaciers and persistence of sea ice for longer periods than had occurred previously. This Era, termed the Little Ice Age, is the Era from which we are presently emerging. Recognize that the earth began its latest warming before the first internal combustion engine was ever conceived.

    Our planet has mostly been much hotter and humid than today, with far more carbon dioxide (CO2) than today. Earth’s atmosphere now contains about 380 ppm CO2 (0.038%). Compared to former geological times, our present atmosphere is CO2 impoverished. In the last 600 million years only one other geological period witnessed CO2 levels less than 400 ppm. To the consternation of global warming proponents, the late Ordovician Period 550 million ago was an Ice Age while at the same time CO2 concentrations were nearly 12 times higher than today, 4400 ppm. According to the greenhouse theory, it should have been exceedingly hot. The argument that reducing CO2 will help control our climate is a hoax, perpetrated by those who will benefit financially worldwide from expenditures of many billions of dollars on schemes to reduce CO2. They depend on the ignorance of the general public regarding historical geology and climatology to foster their hoax.

    Reply this comment
  5. Rogue Elephant
    Rogue Elephant 3 May, 2012, 16:36

    What is this, some kind of sinister plot by the state’s ruling progressive elites to rid themselves of the the illegal alien population by making living here so unaffordable that they are forced to flee?

    After all, they only care about the poor and minorities in the abstract. They certainly don’t want the unwashed anywhere near their enclaves.

    Reply this comment
  6. queeg
    queeg 3 May, 2012, 16:55

    Santa Barbara and Marin County are perfect places for increased diversity increase in the population…..perfect…….

    Reply this comment
  7. Beelzebub
    Beelzebub 3 May, 2012, 21:34

    I’ve been telling you folks it’s over – to look out for yourselves and your families – and don’t worry so much about being a ‘good citizen’ anymore. That’s for chumps. They’ll just use and abuse you and feed you to the wolves. If you buy into the patriotic pap they’ll just taking advantage of your naivete. All the cards are stacked against good middle class American citizens trying to make a go of it.

    Look, the latest is that the government is going to subsidize health care insurance for illegal restaurant workers – that, according to this LA Times article, number 75,000 in LA. All they pay is $25/mo out of pocket for coverage. So now there NO QUESTION of FULL COMPLICITY. To hell with the laws. There are americans who would work those jobs for minimum wage. But the business owners give the jobs to the illegals because they pay them SUB-minimum wage in violation of the law and treat them like slaves – they are the NEW slaves of America. The only difference is that these modern slaves don’t get whipped if they work too slow. These slaves lose their jobs so they can’t pay off their coyotes placing their families in danger. The government KNOWS there are illegal and are now offering them health insurance KNOWING that labor laws are being broken!!!

    Read the comments in this LA Times article. You think the liberals who read the LA Times are delighted with this??? heh. Think again. 95% of the comments spew venom at this latest program.


    Reply this comment
  8. queeg
    queeg 4 May, 2012, 07:04

    At least they have insurance and paying into the system into the system….it’s a start!

    If laws broken…..whistle blow.

    Very sour but informative article….should make every producer furious…

    Reply this comment
  9. Beelzebub
    Beelzebub 4 May, 2012, 08:45

    “At least they have insurance and paying into the system into the system….it’s a start!”

    You don’t get it, do you Stanley? They are legitimizing black letter violations of both federal immigration and state labor laws. It’s more selective anarchy where they choose which laws can be ignored and discarded. And where can a regular citizen who works his fingers to the bones get health insurance for $25/mo? Anyone collecting these subsidies should be bussed back across the southern border. There are many good american citizens who need those restaurant jobs. And, please, don’t feed us that lie “They’re here to do the jobs that Americans don’t want to do”. BS. The citizen underclass NEED those jobs. I know it’s early – but wake up.

    This is another fine mess you’ve gotten us into.

    Reply this comment
  10. queeg
    queeg 5 May, 2012, 16:05

    These people are human beings!

    Denegrating people with laborious unkind rants….an embarassment to this newsworthy and professional site.

    Reply this comment
  11. Bob
    Bob 5 May, 2012, 16:39

    Hey Queegster, how ya liking yer $4.50 plus a gallon gas?

    When AB 32 kicks in plus some surprises these DemoNcrats have in store and gas goes up even more you and the Steeley one wil be in hog heavan.

    Reply this comment
  12. Beelzebub
    Beelzebub 5 May, 2012, 20:46

    “These people are human beings!”

    How many of them do you invite to live in your home and voluntarily subsidize their living expenses like healthcare, education, etc…? Chances are good that you would certainly fight tooth and nail to avoid that. Yet you have no problem spreading the costs to all the citizen taxpayers. Funny how that works.

    “Denegrating people with laborious unkind rants…”

    I find it extremely distasteful when people can freely break the immigration laws and get rewarded for it while being allowed to hurt long-time citizens financially and sometimes even physically. I guess you and I are from different generations and have a differing point of view about what’s right and what’s wrong. I will stand up for my own brother and sister citzens before I stand up for illegal immigrants until they plant me 6 feet under. If you want to open up the borders at least have to courtesy to wait until I’m gone.

    Reply this comment
  13. Beelzebub
    Beelzebub 5 May, 2012, 20:56


    33% of the nation’s welfare population; 12% of the nation’s population.

    Let that sink in.

    Reply this comment
  14. queeg
    queeg 6 May, 2012, 07:47

    Sunday brings no relief from the ugly rants..

    Will it ever end…

    Reply this comment
  15. Beelzebub
    Beelzebub 6 May, 2012, 09:56

    “Sunday brings no relief from the ugly rants..

    Will it ever end…”

    Mirror, dude. Mirror.

    Reply this comment
  16. tim
    tim 2 July, 2012, 18:13

    severe right handedness of the watch “dog”. (appropriately named) more like junk yard dog. news with a hard right across the cheek. I’ll turn the other one quick! thank god some people see our future irrefutably tied to the planet we live on. Going green. Signed, Tree Hugger Tim. Peace 2 u. 😉

    Reply this comment

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