Cap-and-trade critics had always warned that as soon as programs were introduced, there would be aggressive efforts to game and/or cheat the rules to make money. With these warnings reinforced by the EU scandal, California officials in early 2013 said they’d learned their lesson. Greenbiz.com reported that …

California, with the advantage of advanced warning, has taken the EU market’s lessons to heart. It has recognized the crucial need to tightly control — and extensively oversee — who can participate in the carbon market and how. With the help of the state Attorney General’s office, California has adopted more stringent rules than the EU ETS [Emissions Trading Scheme].

State tax credits for payments to indigenous communities?

Now, however, the Brown administration is pondering relaxing these rules by allowing companies to get pollution credits by paying for preservation of forest lands in Brazil.

The idea has been discussed for years but has picked up momentum of late. According to recent reports, state regulators are closer than ever to formally expanding the cap-and-trade program by allowing polluting industries to offset their carbon emissions by paying indigenous communities in the Amazon to preserve the rain forests in their region. 

This idea has won praise from environmental groups, who have long depicted preservation of the rain forests in the Amazon delta as a global priority. They call it a great way for Brown to burnish his environmental legacy.

The Western States Petroleum Association has also been supportive, saying industries need options to meet their commitments under AB32 and related laws.

Brazil’s huge corruption scandal bodes poorly for CA program

But the initial coverage of Brown’s trial balloon omitted mention of two key issues: Gaming and cheating of cap-and-trade programs remains a huge problem around the world, and Brazil has both a long history of corruption and a lack of transparency.

In early 2015, Foreign Policy magazine reported how the European Union’s program had become a “playground for gangsters, international crime syndicates, and even two-bit crooks — who stole hundreds of millions of dollars in pollution credits.”

In October, Forbes magazine reported on a slew of new scandals, starting with schemers in Russia and Ukraine being accused of using the EU cap-and-trade market to sells counterfeit credits for 600 million tons worth of carbon dioxide emissions. The account noted that the less sophisticated a nation’s law-enforcement system, the more likely cap-and-trade scams were to be — and that some of the world’s richest people and companies were taking advantage.

“The cap-and-trade system of emissions trading is very difficult to control and its effects are diluted. … It is precisely because I am a market practitioner that I know the flaws in the system,” Forbes quoted financier-investor George Soros as saying.

Meanwhile, in January, Transparency International reported that over the previous year, Brazil’s corruption problems were growing worse at a faster rate than in any nation on the planet. Agence France Presse reported last week that a scandal involving billions of dollars of missing revenue from state oil giant Petrobras continued to grow, with dozens of government and business leaders implicated.

Efforts to remove President Dilma Rousseff from office have been complicated by the fact it is hard to find many credible critics of Rousseff within the Brazilian government, given how many prominent Brazilian politicians are either directly tied to the scandal or indirectly tied through close political alliances.

According to Calmatters, state air board officials said they would look to avoid problems caused by Western nations’ cap-and-trade programs in another tropical nation: Nigeria. But the issues there involved indigenous communities being denied use of forest lands they relied on because of restrictions under new conservation agreements — not necessarily the problems that California could risk if it counts on Brazil as a partner in a cap-and-trade pact. 

This account is from the Riverside Press-Enterprise:

The operators of a Mojave Desert solar power plant at the center of the Obama administration’s push to reduce carbon emissions faced an unusual task [earlier this month]. They had to prove to state air quality officials that they were complying with California’s cap-and-trade program to get carbon polluters to reduce their emissions.

 

The Ivanpah solar plant off Interstate 15 in northeast San Bernardino County makes electricity by focusing heat from thousands of mirrors onto water boilers mounted on top of three towers. Steam from the water then turns turbines that generate power.

 

But the plant also needs to burn significant amounts of carbon-emitting natural gas to operate and thus is required to be in the state’s cap-and-trade program.

 

The plant burns natural gas to heat water after sundown so that steam can be generated more quickly when the plant starts up in the morning, its operators have said. It also uses natural gas to keep electricity production up during cloudy days.

Controversial ‘offsets’ used to avoid CARB hit

The air board says the Ivanpah plant emitted 50,145 metric tons of carbon dioxide in 2013. The P-E says that is about twice the threshold for forced participation in cap and trade. But because Ivanpah managed to cut net emissions by 10 percent in 2014 — to approximately 46,000 tons — plant operator NRG Energy is telling reporters that it is in compliance. The net emissions is key, because NRG confirmed that Ivanpah complied not just by reducing emissions but by buying greenhouse gas “offsets” from companies which do projects in various states and countries that reduce greenhouse emissions.

The markets for such offsets are huge and growing. But they are controversial given that they don’t necessarily provide pollution relief to affected communities.

The California air board policy adopted in 2013 allows offsets to be purchased in any state in the nation but with emission credits applying to how much companies are polluting in the Golden State. That drew sharp fire from some environmentalists.

The revelation that the mammoth Ivanpah uses so much fossil fuel perhaps shouldn’t be a surprise, given its size and complexity — it relies on 346,000 computer-synced mirrors spread over 5.6 square miles — and because solar power can be irregular.

But advocates of renewable energy say the conundrum of clean-energy plants relying on fossil fuels for their operational needs won’t last forever. They predict advances in battery technology will allow solar plants to store energy for use at night and on cloudy days.

The Santa Clarita-based BioSolar start-up firm is working with UC Santa Barbara researchers on such advanced batteries. In June, it issued a press release claiming it had made a huge breakthrough, prompting its stock price to surge. But since then its stock price has plunged, suggesting analysts have grown skeptical of the company’s claims.