Employers and taxpayers ask Gov. Brown to halt cap and trade

March 15, 2013

By Katy Grimes

A group of employers and taxpayers have sent a letter to Gov. Jerry Brown asking that he halt cap and trade “and policies to achieve greenhouse gas emission reductions.” Cap and trade is the state’s fledgling system of trading carbon credits to reduce greenhouse gases under AB 32, the Global Warming Solutions Act of 2006.

The AB 32 Implementation Group is a coalition of employers and taxpayer groups forced into compliance with AB 32. But their plea has been ignored by the California Air Resources Board and its director, Mary Nichols, over concerns that AB 32 implementation could bankrupt businesses and harm the state’s own finances.

The group now is asking Brown and CARB to make state policy more cost-effective, better administered and responsive to public concerns. Under AB 32, the governor has the authority to suspend the legislation’s implementation for one year.

But if you read between the lines of the carefully worded letter, it is clear that these employers and taxpayer organizations really fear that CARB has no idea what it is doing as it forges ahead with cap and trade in the brave new world of curbing global warming emissions.

The letter reads:

“The AB 32 Implementation Group would like to highlight that over the past five years, and in particular in the last year, business and industry have submitted numerous public comments on the overall policy aspects of linking with other jurisdictions and on the details of the program to link Quebec in particular, yet we do not see any movement to make linking more cost-effective and more administratively effective (see industry comments on holding limits for example). It is imperative that CARB come down from its ‘full speed ahead’ vision and move to make the reasonable, rational changes to make the linking regulation more cost-effective and more administratively workable.”

That makes sense. Especially since the AB 32 Implementation Group consistently says, “We support climate change policy for California that is coordinated with other western states and ultimately the federal government.”

Higher costs

Numerous studies have shown that California’s cap-and-trade auctions will lead to significantly higher energy costs. California already suffers under high energy costs — piling on even higher costs likely will spur more businesses to leave state.

As the letter hints, an oddity of cap and trade is that Nichols and CARB have fixated on linking with Quebec, the Canadian province.

The letter pointed out: “Linkage with Quebec without first assuring that the market functions properly and that market manipulation protections actually work poses new and unnecessary risks and complications.” No other Canadian province or American state is involved.

The AB 32 Implementation Group explained California’s cap-and-trade program is six times as large as Quebec’s, but Quebec’s carbon price is more than twice as high as California’s. According to the letter, “Linking with Quebec will only make the cost of offsets higher as Quebec industry will have twice the incentive to go after the limited number of offsets, thereby increasing the cost of offsets.”

But AB 32 unequivocally instructs CARB to implement AB 32 in the most cost-effective, technologically feasible manner.

Global market

CARB has withheld some of the carbon emission allowances, thereby forcing California businesses to compete for carbon allowances in a global market.

This proved what many have been saying all along about AB 32 and Nichols: She wants to play in an international arena, and AB 32 implementation gets her there.

It also goes a long way in explaining why CARB registered its new corporation, Western Climate Initiative Inc., in Delaware, not California, as I was the first to report here on CalWatchdog.com. Doing so exempts CARB from closer scrutiny back home in the sun.

Meanwhile, California businesses are pleading for relief from the governor.