California Air Resources Board Delays Implementation Of Cap-And-Trade Program

The California Air Resources Board (ARB) has announced that the implementation of the state's A.B.32 policy, which requires the state to cut its greenhouse gas emissions to 1990 levels by 2020, will be postponed until 2013. The cap-and-trade program in A.B.32 is designed to work in concert with other policy measures, including the state's 33% renewable portfolio standard, to encourage the development of clean energy and reduce pollution.

‘The cap-and-trade regulation is projected to achieve about 20 percent of the total reductions needed to meet the A.B.32 target,’ said Mary D. Nichols, ARB chairman, in a Senate testimony. ‘In fact, other policies – like the Clean Cars Rule and the renewable electricity standard – are responsible for a greater percentage of the overall reductions.’

Nichols said in the response to concerns about public participation and ‘informed decision-making,’ the board now plans to initiate the cap-and-trade program in 2012, but begin compliance requirements in 2013. ‘This would not affect the stringency of the program or change the amount of emission reductions that the program will achieve, keeping us on track to meet the 2020 target required by A.B.32,’ she noted.

This implementation delay is not related to lawsuits filed against the ARB that sought to delay or cancel A.B.32's rollout, says law firm Vinson & Elkins.

In a research note, the law firm explains that the program's postponement primarily stems from concerns over carbon-market manipulation and stresses that for companies affected by the new regulation, planning must still begin immediately.

‘Because the ultimate emission targets for the first compliance period have not changed, it may be in a company's interest to continue with planned emission-reduction activities in 2012 in order to avoid having to make steeper cuts or to purchase more allowances to reach the 2014 targets,’ the firm says. ‘In addition, there will be opportunities by mid-2012 to begin purchasing allowances from the carbon market.’

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