California businesses want changes to cap-and-trade market

The Sacramento BeeSeptember 20, 2012 

Heavyweight business groups are staging a last-ditch protest against California's new cap-and-trade carbon market, demanding changes to a program they've labeled a job killer.

Manufacturers, oil refiners and others are lining up to testify today before the California Air Resources Board, which will run the carbon market.

Their goal: To get the Air Resources Board to reduce the costs of participating in the market. The program is set to begin Nov. 14, when the state agency will auction off millions of carbon emission allowances.

"It's our last chance to really comment on this thing before they go forward with the auction," said Gino DiCaro, spokesman for the California Manufacturers & Technology Association.

Despite the pleas from business, the Air Resources Board isn't expected to take any concrete action today, said agency spokesman David Clegern.

The carbon market is at the heart of AB 32, the state's global warming law. The Air Resources Board will distribute millions of carbon allowances to 430 heavy industrial users, each one representing the right to emit a ton of greenhouse gases.

The total amount of available credits – the "cap" – will decline each year, bringing about an overall drop in statewide carbon emissions.

The state will hand out most of the credits free of charge but will auction off 10 percent.

The air board anticipates that businesses will pay upward of $1 billion over the next year for the credits – and the cost is expected to grow in future years. Business groups say this is far too big a burden.

The agency is considering giving out more free credits, but probably not until 2015.

Some environmentalists have opposed doling out more freebies, saying it would weaken the program.

But business groups say they need the relief – and they need it now.

"That's a huge issue now," said Catherine Reheis-Boyd, president of the Western States Petroleum Association, the oil industry's lobby.

The manufacturers' group, along with the California Chamber of Commerce, California Business Roundtable and California League of Food Processors, urged Gov. Jerry Brown recently to rewrite the rules of the market.

"We urge you to take immediate steps to protect California businesses and consumers by increasing the allocation of free allowances," they wrote the governor. "If more time is needed, we urge you to halt this auction as it is currently envisioned. We must ensure that this auction does not raise billions of dollars in new taxes on the backs of California businesses and consumers."

The business leaders cited a Legislative Analyst's Office report that said California could give away all the carbon credits for free and still achieve the goals of AB 32.

"The cap is what gives you the emissions reductions," said Reheis-Boyd.

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