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Theory Meets Reality on California’s Carbon Cap-and-Trade Program

Gino DiCaro
Vice President of Communications for the California Manufacturers & Technology Association

Theory met reality on Tuesday at a Senate informational hearing on California’s carbon cap-and-trade program that is set to start with an auction in November 2012. Craig Anderson from Solar Turbines, an industrial gas turbine manufacturer with 4,000 employees in San Diego, testified that the soon-to-be-fully-implemented cap-and-trade program is the most significant threat to his company’s growth.

“I can say without hesitation that AB 32 is viewed by our company leaders as not only the most significant environmental regulation we have faced in California, but also the greatest threat to the growth of our business in California,” said Anderson.

You can view Anderson’s full testimony here (5:45 min)

Following are more real world impacts from employer testimony on Tuesday. These are companies that, as you’ll see in their video remarks, are already some of the cleanest and most efficient in the world.

Mona Schuman with Pacific Coast Producers

“Our costs over the life of this program will be at a minimum $1.5 million to $2 million dollars.”

“If cost of allowances go too high for us, our option is to reduce production. Reducing production means reducing jobs, reducing our growers crops and all the suppliers and vendors that supply our growers. “

View testimony here (5:49)

Ryan Modlin with Owens-Illinois

“It costs us 30 percent more already for us to do business in California than anywhere else in the United States. Under this program, it will add a couple million dollars at $20 per ton.”

View testimony here (8:49)

 

Rob Joyce with Guardian Industries

“Compliance costs associated with cap-and-trade regulation will likely erode the competitiveness of flat glass manufacturers in California without providing a meaningful incentive to reduce greenhouse gas emissions.”

View testimony here (7:49)

Key questioning and testimony also came from Sen. Rod Wright (Committee chairman), Sen. Michael Rubio, Sen. Bob Dutton, LAO’s Tiffany Roberts, CMTA’s Dorothy Rothrock, WSPA’s Cathy Reheis-Boyd, NFIB’s John Kabateck, CLFP’s John Larrea, and Gallo glass worker and representative. (click names for video)

Collectively the hearing’s appeal to the California Air Resources Board was to freely allocate emission allowances up to the cap, for all industries, for all eight years of the program. There is no reason to do otherwise. California will still reach its goals and companies will still be forced to reduce to their capped benchmark. (Here is a chart to show how the current auction will charge the food processing industry beyond the cap over the next eight years)

The cap-and-trade concerns reached far beyond employers and workers this month too. The Federal Energy Regulatory Commissioner Philip Moeller wrote a letter last week to Gov. Jerry Brown asking him to

“suspend enforcement of the prohibition of resource shuffling until such a time that ARB clarifies rules surrounding compliance with, and enforcement of, the provisions. Suggested guidance documents are not sufficient, as these do not provide the certainty needed by market participants.”

….

“I am now, however, extremely concerned about the potential disruption to California’s electricity market that may arise from the California Air Resources Board’s (ARB) implementation of California’s greenhouse gas trading plan….”


View the complete letter here.

It’s now CARB’s turn, before it is too late, to get realistic about making this program work for California’s economy and environment.

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