Now is no time for Gov. Arnold Schwarzenegger to go all wobbly on his landmark achievement – the AB 32 law that aims to reduce greenhouse gas emissions to 1990 levels by 2020.
The centerpiece is creation of a cap-and-trade program that would allow power plants, industries and other major producers of greenhouse gases to purchase permits for carbon emissions. Companies that reduce emissions below their allotment (the cap) can sell them on the open market (the trade).
California would be part of a market with six other states (Arizona, Montana, New Mexico, Oregon, Utah, Washington) and four Canadian provinces (British Columbia, Manitoba, Ontario, Quebec) in the Western Climate Initiative.
The key question is how to distribute the emissions allowances – by auction or for free?
The governor, until recently, favored an auction – and he should stand by that. An advisory committee to the California Air Resources Board also supports auctioning because it is transparent and creates incentives for companies to reduce emissions.
California would not be alone – or first – in doing this. Ten Northeastern and mid-Atlantic states that make up 20 percent of the nation’s economy already auction allowances (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island and Vermont). The Regional Greenhouse Gas Initiative just completed its seventh auction March 10. At $2.07 per ton of emissions, the price is not onerous.
Proceeds from auctions to date, more than $582 million, have gone back to the states to improve energy efficiency and accelerate renewable energy technologies. Schwarzenegger now worries that auctioning may be “too abrupt a transition” for California. Wrong. Giving away emissions allowances is what hobbled Europe’s initial cap-and-trade program. California shouldn’t repeat that mistake.