Cap-and-trade auction should be transparent

As California’s cap and trade auction moves forward, ethical people of all viewpoints should be able to agree that citizens deserve an open and transparent process.  Assemblywoman Shannon Grove and Senator Ricardo Lara have introduced important accountability measures, AB 245 and SB 726 respectively, that would place the cap and trade auction back in the sunlight where it belongs.

At the end of last year’s Legislative session, the cap and trade auction was exempted from California’s Bagley-Keene Act, a sunshine provision in the State Constitution designed to ensure open meetings.  This exemption was buried in a last minute budget trailer bill that was never discussed in any committee hearings and that many lawmakers probably never even had a chance to read.

The Coalition of Energy Users has previously expressed concerns about the auction’s vulnerability to speculators and the role of out of state financial institutions such as Deutsche Bank and Markit North America in managing the process.  The Bagley-Keene Act exists to guarantee government is held to the highest standard of transparency and should be embraced by the California Air Resources Board, which aims to make the cap and trade auction a global example for others to emulate. Open transparency is crucial to this new market’s effectiveness and efficiency.

That’s why the Sacramento Bee Editorial Board, a staunch supporter of the cap and trade auction, has spoken out against the hastily-passed transparency exemption, saying the Western Climate Initiative Corporation (WCI Inc.) overseeing the cap and trade auction should be no less accountable than the California Independent System Operator, which does have to abide by state open meetings laws including the Bagley-Keene Act.

The Bagley-Keene Act has been a part of the California Constitution since 1967 and guarantees citizens the right to know what their government and government officials are doing and prevents public servants from taking action in secret.  Because of this important sunshine law, citizens have the right to be notified in advance of upcoming government meetings and receive records of what was discussed in meetings.

The federal EPA recognizes transparency as a critical component of emission trading programs. In June of 2003, the EPA published an overall guidance document to assist agencies in the design and implementation of these programs: “Tools of the Trade: A Guide to Designing and Operating a Cap and Trade Program For Pollution Control.”   In this document, the EPA affirmed the importance of  public access to information about cap and trade programs, saying such access ensures:

“… [the] public, interest groups, and academics can use the data to evaluate the effectiveness of the cap and trade program, identify barriers to cost-effective trading, assess overall market activity, identify trading trends, and analyze the emission implication of trades.”

The Western Climate Initiative, the governing body for WCI, Inc., itself has published a trading program design document that includes the following auction design principles which says, “the greater the level of transparency and disclosure of information, the more trust stakeholders, compliance entities, and others place in the value and integrity of the auction program.”

CEU is joined in supporting transparency by a broad coalition of small business, faith-based and grassroots organizations that agree a program of the size and scope of the cap and trade auction should be conducted responsibly.  There are no good reasons for WCI, Inc. to act in secrecy.

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Ed’s Note: Eric Eisenhammer is the Founder of the Coalition of Energy Users and a Board Member of Friends for Saving California Jobs