California has lost a third of its manufacturing sector and the California Air Resources Board (CARB) continues to try to implement the state’s AB 32 carbon reduction program in a cost-effective manner. The rest of the country has lost a large portion of its manufacturing as well, but at least temporarily given up on mandatory carbon reductions.
Cap-and trade is the policy with which CARB intends to produce about 20 percent of the state’s carbon reductions but it is targeted at about 600 facilities during the first three years. Under the program cap, a facility will either have to pay for more expensive equipment to produce less carbon, pay for an offset, or purchase credits in a market.
California industry is famously efficient due to decades of higher than average energy costs, including 50 percent higher electricity rates than the rest of the country.
This is why it is so important that California creates a well-designed cap-and-trade system. It must be tested, proven, and refined (and not rushed) to minimize any more leakage of high wage jobs out of California, and it must ensure competitive costs for consumers.
Last week marked a CARB deadline for public comments regarding their implementation of a cap-and-trade program. The manufacturing community issued a formal letter in its now 3-year effort to help CARB understand the impacts of developing AB 32 regulations.
Serious concerns remain regarding industry carbon benchmarks that penalize the superior energy efficiency of California industries, the lack of any qualified leakage risk analysis, the issue of CARB’s sole authority for dispute resolution, and the stringent limit on the ability to purchase offsets.
CARB recently adjusted the start date for the state’s cap-and-trade program from 2012 to 2013. This delay will help. We ask that CARB takes this time to address the serious concerns of our largest wealth creators. California’s manufacturers and other potential California investors are holding out for a well-designed result.