Enforcing Greenhouse Gas Emissions Limits

The real, gritty work involved in carrying out what is probably the biggest project in the history of state regulation has begun.
- Daniel Weintraub

Here's a challenge that may put a practical halt to the enforcement of the far-reaching Global Warming Solutions Act of 2006.

The legislators who passed the bill are displeased with how Governor Schwarzenegger intends to bring companies into compliance with its carbon caps. In short, the Democrats and their environmentalist allies want to force companies within each industry to comply across-the-board with the limits contained in the bill.

The Governor, who signed the bill, sees using a carbon credit program as being a more practical way to implement the bill's provisions. Daniel Weintraub of the Sacramento Bee describes it as " a market-based system that allows companies to buy the right to pollute from others who have done more than their share to reduce greenhouse gas emissions. The idea behind such a market is to achieve the desired amount of reduction without crippling a particular industry or company."

It is incumbent upon drafters of the legislation to realize that resistance to change by those who will have to pay for it will ultimately delay its implementation. Imagine the lawsuits that could pit major industries and utilities (electricity generation, oil and gas extraction, oil and gas refineries, cement production and landfills) against the State. They are trying to comply with the provisions of the bill but are prevented from implementing solutions because of failure of the State to reform antiquated regulations and permitting legislation.

The other obvious unintended consequences - companies will leave the state or be force to cut back rather than be faced with fees that will render them uncompetitive within their own industries. Utilities could easily outsource across state borders. These consequences could prove disasterous for California's tax revenues at the state and local level, depressing employment and adversely affecting labor unions. How does that promote the interests of the Democrats political base?

Unless industry-requested regulations and permitting reforms are passed, companies and utilities can effectively argue in court that the California legislature is hamstringing their efforts to deploy solutions to meet the provisions of this bill.

Weintraub has written an excellent article - excerpts are listed below:

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Grit hits the fan on pollution credits
By Daniel Weintraub, Sacramento Bee

California's landmark law to fight global warming by clamping down on greenhouse gas emissions has not even taken effect, and already the Democrats in the Legislature who crafted the bill are at odds with Gov. Arnold Schwarzenegger, who, if he is re-elected Nov. 7, will be responsible for making it work.

Democrats and their environmentalist allies are charging that Schwarzenegger is breaking commitments made during a long summer of negotiations on the bill, AB 32. The governor, they say, is taking steps that could undermine the state's ability to cut greenhouse gases 25 percent by 2020, the bill's ambitious goal.

Schwarzenegger aides counter that the governor is merely trying to position the state's environmental bureaucracy to get a running start implementing the law when it goes into effect Jan. 1.

Behind the confrontation is a fundamental dispute over exactly how California should force its industries to comply with the caps on greenhouse gas emissions as they are phased in during the years ahead.

Democratic lawmakers and most environmental groups want to emphasize state-imposed standards and regulations to limit greenhouse gases.

Industries would be ordered by the Air Resources Board to retool their operations in particular ways to limit the production of carbon dioxide.

Schwarzenegger is not averse to this kind of direct regulation, which opponents characterize as "command and control." But the governor has also insisted that the new regulatory regime include a market-based system that allows companies to buy the right to pollute from others who have done more than their share to reduce greenhouse gas emissions.

The idea behind such a market is to achieve the desired amount of reduction without crippling a particular industry or company.

Now Schwarzenegger has issued an executive order calling on the Air Resources Board, whose members he appoints, to move forward immediately with a market-based system that allows the trading of emissions credits with the European Union and a group of northeastern states that have begun a similar program.

Assembly Speaker Fabian Núñez and Senate Leader Don Perata have objected, saying the bill they passed contemplated emissions trading only after other, more direct measures were taken.

Perata, in a letter to Schwarzenegger, said the order was "ill-timed and unnecessary," and called on the governor to rescind it. But Schwarzenegger's chief of staff, Susan Kennedy, told me in an interview that Schwarzenegger has no intention of backing down.

"The governor is committed to developing a workable cap and trade system that includes market-based incentives," Kennedy said. She added that the two approaches -- direct regulation and the trading of emission credits -- need to be developed into a comprehensive system that offers industry the flexibility it needs to comply in the most cost-effective manner possible.

"This needs to be seamless," she said. "It will be seamless."

This is only the opening skirmish in what promises to be a long and contentious battle over AB 32. The smiles and hugs and bipartisan press conferences that heralded the bill's passage last month are now history. The real, gritty work involved in carrying out what is probably the biggest project in the history of state regulation has begun.


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