California Construction Trucking Association (CCTA)

The state’s controversial Cap-and-Trade carbon trading program has been delayed after the only other participant in the scheme—Canadian Province Quebec—announced it could not begin participation until 2013 at the earliest.

So, on June 29, Mary Nichols, chair of the California Air Resources Board (CARB), announced that the state will delay enforcement of California’s cap-and-trade program until 2013.
The announcement was made at a Board hearing on the status of California’s cap-and-trade system, which had been called to explore the implications of a law suit brought by environmental justice groups advocating policies other than cap-and-trade to reduce greenhouse gas emissions. In that law suit, a judge ruled in March that CARB had not sufficiently analyzed alternatives to cap-and-trade as required under the state’s Environmental Quality Act. CARB has appealed the decision and an appeals court ruled recently that officials could continue working on cap-and-trade regulations pending the court’s decision.

Nichols said that the law suit was not a deciding factor in her decision to delay the first carbon trading program in the U.S. The delay in the cap-and-trade program, which was originally scheduled to come into force on January 1, 2012, was proposed because of the need for “all necessary elements to be in place and fully functional”.

In particular, Ms. Nichols cited the need to protect the cap-and-trade system from potential market manipulation. The decision came after Ms. Nichols conferred with the state attorney general’s office as well as experts on California’s ill-fated foray into deregulated electricity sales which led to widespread fraud and rolling blackouts in 2000 and 2001.
However, Ms. Nichols said that the postponement “would not affect the stringency of the program or the amount of greenhouse gas reductions required to be made by industries.”
 Under the cap-and-trade program, 600 industrial facilities (including cement manufacturers, power plants and oil refineries) would be required to cap their emissions in 2012, with that limit gradually decreasing over eight years.

The one-year delay will enable CARB to test the system and carry out simulation models. Ms. Nichols said that quarterly auctions of emissions allowances that each regulated emitter must turn in would begin in the second half of 2012, rather than February 2012 as originally planned. Entities emitting more than 25,000 metric tons of carbon dioxide equivalent per year will begin trading credits at the end of 2012 to cover their emission reduction obligations for 2012 and later. Hence, the first three-year compliance period, which originally covered the years 2012 to 2014, will be shortened to two years.

CARB said it will release draft regulations covering allowance distribution and details on offset protocols in July. In addition, CARB has said that it is still on track to finish its cap-and-trade regulations by the end of October 2012.