Carbon credit value of 393,000 Long Beach trees sinks to zero

Aug. 27, 2012

By Wayne Lusvardi

The value of 393,000 trees in the City of Long Beach in the state’s Cap and Trade pollution credit market dropped from about $1.7 million to zero on Aug. 24.

The reason: the California Legislative Analyst issued a letter saying a Cap and Trade “allowance auction is not necessary to meet the Assembly Bill 32 goal of reducing GHG (Greenhouse Gas) emissions statewide to 1990 levels by 2020.”

The city of Long Beach had been taking steps to determine the feasibility of using its trees to sell air pollution credits in the newly created California carbon market to start in November.

According to the U.S. Forest Service, each tree offsets about 0.09 of a ton of air pollution (4.5 million metric tons of air pollutants divided by 50 million trees = 0.09/ton per year).

Carbon credits are expected to sell for $50/ton in California.  So Long Beach’s 393,000 trees conceivably could generate about $1,768,500 in the state’s carbon market each year (393,000 x 0.09 x $50).

It costs Long Beach about $2.5 million per year to maintain the 93,000 street and park trees located on public property.

With all the hoopla and money spent on preparations to create a trading market in pollution credits in California, it has come down to being not necessary.  The four-page letter issued by the LAO was in response to an inquiry by California State Assemblyman Henry Perea, D-Fresno, who asked, “Is a cap and trade allowance auction necessary? What are the advantages and disadvantages? What are the steps the California legislature would have to take to stop the November auction?”

Political Grandstanding

However, Perea’s letter is pure political grandstanding. The California Air Resources Board had already planned to issue pollution credits at no cost.  It is not necessary to get the state Legislature to enact a bill to reduce the price of pollution credits.

Perea’s letter is just a way for him to appear to be pro-business while his political party is the main force behind California’s Cap and Trade Law in imposing $1 billion in taxes on large industries during a prolonged managed economic depression.

Perea’s duplicitous letter declared,  “Cap and Trade 100 Percent Free Allowance Auction Could Benefit Business and Environment.” With political friends like Assemblyman Perea, who needs enemies?

The whole scheme to impose Cap and Trade taxes is like a Rube Goldberg cartoon contraption.   Beginning in 2014, public utilities such as local municipal water departments and electric companies would also have to start paying pollution taxes or reduce air pollution.  So homeowners in Long Beach would be paying higher water and electricity bills to pay their share of pollution taxes.  But the city’s annual cost to maintain street trees might be greatly reduced by about $10 per housing unit per year ($1.768 million/176,032 housing units in Long Beach).

The California Manufacturers and Technology Association has estimated the higher cost of energy and transportation due to Cap and Trade taxes as $3,400 per average family per year.

As can be plainly seen, Cap and Trade is a taxing system as much as it is a way to reduce air pollution.  However, this question remains: Will imposing Cap and Trade taxes on industries and utilities be worth it if industries flee and those taxes are just passed through to utility ratepayers, consumers and those who commute to work by automobile through higher gasoline prices?

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