California Considers More Free Credits Under Cap-and-Trade Plan

As it prepares to launch its cap-and-trade program, California’s Air Resources Board (CARB) is considering giving out more carbon credits for free, reports The Sacramento Bee.

The state’s program sets industry-wide limits on greenhouse gas (GHG) emissions, allowing those that exceed those limits to use carbon credits to offset them. It affects only the biggest polluters – about 430 factories, refineries and other industrial facilities.

Critics say the program could cost companies up to $1 billion in the first year, even though 90% of the credits created in the first two years will be free. The allotment of credits will be reduced by 2%-3% each year, with the goal of bringing down carbon emissions gradually.

The new proposal wouldn’t increase the overall number of credits issued but more would be handed out for free, saving companies millions of dollars because they wouldn’t have buy them.

"Obviously, we don’t want industry to leave the state, but we want them to meet the emissions requirements," David Clegern, a CARB spokesman, told The SacBee.

The first auction is scheduled for November 14, but the program officially goes into effect January 1, 2013 – when companies will be held responsible for their GHG emissions.

A second wave of industries will join the program in 2015 – oil refineries and the transportation sector.  

CARB got the legal go-ahead for cap-and-trade last year after being challenged in court. The original program was announced in November 2010 after four years of development.

Cap-and-trade is a key part of AB32, California’s 2006 landmark climate change legislation that was adopted to fill the gap in federal policy. Under the law, California must reduce GHG emissions to 1990 levels by 2020.

An original plan that would have linked California to a wider cap-and-trade system covering other Western states failed to materialize, but Quebec plans to link to the program.

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