On Wednesday, March 8, I look forward to speaking at Capitol Weekly’s Carbon Free California conference to discuss cap and trade’s future in California and to outline the steps we need to take and the priorities we must balance to achieve a 40% greenhouse gas (GHG) reduction by 2030.
While the goal is important, the path we take to meet the State’s GHG goals should matter to decision makers, many industries and, ultimately, to all the State’s residents. If the “solution” to GHG reduction is poorly implemented or approved without diverse stakeholders at the table, California’s place as the world’s sixth largest economy could be in jeopardy.
To reach these reductions through a well-designed cap-and-trade program that utilizes the marketplace will minimize those costs to businesses and, ultimately, to consumers.
Intense pressure will be applied by some legislators, regulators, and stakeholders who favor a heavy-handed command and control approach instead of market-based measures to clean the air and reduce GHGs.
Look no further than the March 3 South Coast Air Quality Management District (SCAQMD) governing board meeting for a real-life example. At this meeting, cap-and-trade critics set in motion a process to discard a successful program for more traditional command and control-type regulation.
Through a last-minute amendment to its Air Quality Management Plan, on a 7-6 vote, the governing board decided to phase out a successful cap-and-trade program called RECLAIM as “quickly as possible.” That same amendment also requires an additional five tons per day reduction in nitrogen oxide (NOx) from large stationery sources as soon as feasible, no later than 2025.
Discouragingly, this un-vetted amendment did not receive the required technological feasibility, environmental (i.e., CEQA) or socioeconomic cost analyses by SCAQMD Staff, and the hearing was closed for public comment on all the proposed amendments.
The governing board’s vote is disappointing because of the RECLAIM program’s 23-year demonstrated success at reducing air pollution.
Ironically, in 1994, the SCAQMD implemented RECLAIM because the board recognized that the South Coast Basin needed to reduce emissions that cause air pollution, and that existing command and control regulations would require multiple rules for different industries, different equipment, and with changing compliance dates – in short, a bureaucratic nightmare to monitor, regulate, and enforce.
The SCAQMD’s website states that through RECLAIM, “The marketplace allows businesses greater flexibility and a financial incentive to reduce air pollution beyond what clean air laws and traditional command-and-control rules require.” NOx emissions from the RECLAIM sources have declined by approximately 70% since 1994.
At the same March 3 SCAQMD board meeting, SCAQMD staff submitted a lengthy 2015 RECLAIM compliance audit. According to the Annual RECLAIM Audit Report for 2015 Compliance Year presented by District Staff on 2/17, the RECLAIM program continues to meet its aggregate emissions goal and has met Federal New Source Review offset ratios and State No Net Increase requirements. Furthermore, there is “no evidence of increased health risk due to RECLAIM.”
At the state level, California has adopted some of the world’s most stringent GHG reduction targets. Achieving this target will be difficult and costly. But, efforts to reach these reductions through a well-designed cap-and-trade program that utilizes the marketplace will minimize those costs to businesses and, ultimately, to consumers.
Cost containment will be a critical component to the existing cap-and-trade program, as stakeholders’ work together toward achieving California’s climate goals (and cleaner air) while protecting the economy, as well as California families, consumers, and businesses. For example, the men and women of the petroleum industry comprise a significant part of California’s economy: more than 450,000 direct and indirect high paying jobs with benefits, $204 billion in economic activity, and $38 billion in labor income. Any cap-and-trade program modifications must take this contribution into account.
Ultimately, how the cap-and-trade issue is decided will say much about our State, our economy, and our future. WSPA strongly supports market-based solutions that have proven to both preserve economic growth while cleaning the air. Working together, we hope to utilize similar approaches to reduce GHGs over the next 15 to 20 years.
Ed’s Note: Catherine Reheis-Boyd is president of the Western States Petroleum Association.