No Need for Carbon Auction Says California’s Most Independent Voice

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

Last week the most independent voice in California policy analysis said the following in a letter:  a cap-and-trade “allowance auction is not necessary to meet the AB 32 goal of reducing GHG emissions statewide to 1990 levels by 2020.

The impartial Legislative Analyst (LAO) responded in a decisive letter to Sen. Henry Perea who had asked three formal, basic and highly appropriate questions:

  • Is a cap and trade allowance auction necessary?
  • What are the advantages and disadvantages?
  • What are the steps the California Legislature would have to take to stop the November auction?

The LAO’s four-page response outlined that the advantages of 100 percent free allocation (up to the cap) far outweigh the disadvantages and that “it would significantly offset more of the marginal cost increase.”

In a state where a manufacturer’s operating costs are already more than 20 percent higher than the rest of the country, including 50 percent higher electricity rates, that’s a very big deal.

The LAO concluded that, should the legislature choose to go this route, they simply need to direct the California Air Resources Board in statute to freely allocate allowances before its planned auction this November.

Dear Legislature.  Please HELP!

Time is running out.  Billions of dollars are at stake over the next eight years.  Will California turn AB 32 implementation into a government money-grab without regard for our economy or the plausibility of the country following us on greenhouse gas reductions?  Or will the state see that everyone’s goals are in fact achieved with a free allocation of credits?

Manufacturers are growing outside of California.  If the state sticks with its plan to charge for a majority of the carbon allowances and make California an even less competitive place to manufacture, the original bold and economy-cautious AB 32 greenhouse gas plan from 2006 will have morphed into a cash cow for government and an insurmountable burden for many of our leading employers.

You can read the LAO letter here

You can read Sen. Henry Perea’s release here.

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