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Calif. emissions plan hits snag

Regulators try to build consensus on cap-and-trade

By Adam Satariano
Bloomberg / November 11, 2008
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SAN FRANCISCO - California's blueprint to address global warming won't include details of an emissions-trading program as regulators try to build consensus on how best to organize the market-based system.

The California Air Resources Board will begin a rule-writing process after next month's approval of what is called a scoping plan and is seeking outside help from specialists to recommend ways to build a cap-and-trade system, said Mary Nichols, chairwoman of the rule-making panel. Under state law, the program must be ready to begin by 2012.

"It's very disappointing because it's another delay to the structure of the cap-and-trade system, and that's what everybody wants to know," said Alex Rau of Climate Wedge Ltd., an advisory firm in San Francisco focused on emissions markets. "They were a long way off at approaching consensus on the major design elements."

Nichols told venture capitalists and clean-energy executives last week in Mountain View, Calif., that she was "thinking of punting," saying the specifics of the emissions-trading program may not be ready for one to two more years.

"I think the cap-and-trade system needs to be thought through and I don't think that has been done yet," said Jerry Hill, a member of the Air Resources Board. "It would be a good idea to take our time to be sure what we do create is successful."

California's climate change plan is expected to be approved during a board meeting on Dec. 11.

The guidelines, two years in the making, are a road map for meeting the law signed by Governor Arnold Schwarzenegger in 2006 that requires California to cut greenhouse gas output to 1990 levels by 2020.

The rulemaking in California, the most populous US state, is being closely watched by fellow states, utilities such as PG&E Corp. and Edison International, and companies participating in the carbon-trading market.

A cap-and-trade system puts a price on emissions to encourage the use of technologies that pollute less.

The program allows companies that emit less than government-imposed targets to sell pollution credits to those who release more than their allotment.

Over time, the cap will be lowered to meet the state's goal.

"We will be inviting the nation's and world's experts in and be holding workshops to help us in the design of the system," Stanley Young, a spokesman for the air board, said in an e-mail.

Cap-and-trade programs are being used in the European Union and by the Regional Greenhouse Gas Initiative, composed of 10 Northeastern states that are the first US market for trading permits for greenhouse gases.

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