• California Air Resources Board Approves Greenhouse Gas Cap-and-Trade Regulation
  • January 5, 2011 | Authors: Christopher H. Calfee; Beth S. Dorris
  • Law Firms: Best Best & Krieger LLP - Walnut Creek Office ; Best Best & Krieger LLP - Los Angeles Office
  • In a decision that impacts industries across the state and leads the way for developing similar programs around the world, the California Air Resources Board (CARB) recently approved a Cap-and-Trade regulation for greenhouse gas emissions. Cap-and-Trade is a key component of the Global Warming Solutions Act - better known as AB 32 - which seeks to reduce California’s greenhouse gas emissions by fifteen percent from current levels, thus reaching the same levels emitted in 1990 by the year 2020. The resolution authorizing the regulation was approved with modifications discussed at a hearing on December 16, 2010, with a final resolution expected soon on the CARB website.

    Key features of the program outlined by CARB include: 

    • Specific allowances provided to companies for covering their annual emissions cap. Allowances may be banked or traded when emissions are below the cap.  

    • Emissions limits beginning in 2012, and reduced annually over time. 

    • Covered entities which initially include large emitters of greenhouse gas emissions such as the electricity industry, including electricity importers and other large stationary sources that emit more than 25,000 metric tons of carbon dioxide-equivalent (MTCO2e) per year. Other covered entities include refineries, cement producers, oil and gas producers, glass manufacturers, and food processors. Fuel distributors will be subject to the regulations beginning in 2015. Cities and special districts could also be affected by the regulations if they operate facilities that fall within these categories.
    • The ability for covered entities to comply with the cap by purchasing allowances at an auction or from other allowance holders.

    • The ability for covered entities to use offsets to satisfy up to eight percent of their compliance obligation. Four separate offset protocols are covered in the regulation, including livestock methane digester projects, urban forest projects, U.S. forestry management projects, and destruction of U.S. ozone-depleting substances projects.
    • Provisions to develop international offset programs. The program is also designed to link with other states and Canadian provinces participating in the Western Climate Initiative, though linkage to those programs will not be immediate.

    The resolution instructed the Board’s staff to conduct further workshops and refine some of the regulation’s language regarding allowance allocations, which will be circulated for a 15-day comment period.