Comment Log Display

COMMENTS ON AB 32 PROPOSED SCOPING PLAN,
SUBMITTED BY SIERRA CLUB CALIFORNIA, November 19, 2008

C. EMISSIONS REDUCTION MEASURES

• We are concerned about the following statement by CARB on p. 28:

“Expiration of existing utility long-term contracts with coal
plants will reduce GHG emissions when such generation is replaced
by renewable generation, coal with carbon sequestration, or natural
gas generation, which emits less CO2 per megawatt-hour.” This
statement is too vague to be of use for policy guidance, since
there is a big difference between replacing coal plants with
natural gas and building renewables. On average, when compared to
coal, natural gas plants reduce carbon dioxide by roughly 40%. And
carbon sequestration technologies—in the near term timeframe—are
expected to capture and sequester only a tiny fraction of carbon
emissions from coal plants. Both of these options compare quite
unfavorably with most renewables.  At present carbon sequestration
is too costly and under-researched.  The additional energy required
to separate and sequester carbon makes this an uneconomic strategy.
 Further expansion of natural gas generation cannot be the
direction if GHG reduction targets are to be met.  Instead, no new
fossil fuel generation plants should be built and all new
investment capital should be put into renewable, zero-emission
generation.  All actions should keep to the fast path toward >80%
reduction by 2050. A careful examination of data will show that
achieving California’s clean energy policies, including the 33%
renewable standard and both the short and long-term greenhouse gas
reduction targets, will require all new generation to be
renewable.

1. California Cap and Trade Program Linked to Western Climate
Initiative (p. 30)

Direct Emission Reductions:  Sierra Club is pleased that the Plan
proposes most of the required GHG reductions come from performance
standards that directly reduce emissions, such as California’s
clean-car, renewable-energy, and energy-efficiency programs, and
incentive programs like the Solar Initiative, with only 20%
proposed for the carbon pollution market program. If possible, we
would like to see that percentage made even lower. 

The Plan correctly points out that many powerful parallel policies
must accompany "cap and trade" in order to remove all the state's
ingrained market barriers and regulatory impediments to GHG
reduction.  State climate programs need to give these parallel
measures – like Feed-in Tariffs, carbon fees, and Community Choice
Electricity Aggregation – the full force of ARB's backing.

• Sierra Club urges CARB to consider the merits of replacing cap
and trade with a carbon fee. A carbon fee would aid business
planning and benefit businesses, because the price of carbon under
a fee system is more predictable than the outcome of a cap and
trade/auction. In addition, such a fee would provide a predictable
source of income for the state to put into Scoping Plan
implementation.  Under the precedent of the Sinclair Paint case,
expenditures of revenue from carbon fees must be related to the
issue of carbon emissions.  CARB has not given this fee option the
attention or study it merits.

We urge CARB to make even clearer that cap-and-trade is no
panacea. Over-reliance on unproven cap-and-trade schemes would be a
risky gamble. 

 • If California establishes a cap-and-trade program, it should
require 100 percent auction from the start in order to be fair to
everyone, including consumers and producers. Auctioning pollution
allowances is the simplest, most fair and effective choice.  
Polluting industries should receive a clear, immediate indication
that the state is heading in this direction. CARB's draft
implementation plan says that achieving 100 percent auctioning is a
"worthwhile goal.”  

• In the event a cap-and-trade program is adopted, we agree with
the Market Advisory Committee’s recommendation of  “a transition to
full auction within the cap-and-trade program, noting that a system
in which California ultimately auctions all of its emission
allowances is consistent with fundamental objectives of
cost-effectiveness, fairness and simplicity.” (Appendix I, p. C-19)
On the other hand, we are very concerned by CARB’s quote that “WCI
Partner jurisdictions have agreed to a minimum percentage of
allowances auctioned increasing from 10 percent in the first
three-year compliance period to 25 percent in 2020.”  These low
amounts would fail to provide an incentive for early GHG
reductions.  In addition, the climate crisis is so great, that we
need substantial revenue as soon as possible to support massive
reductions of GHGs and other air pollutants through fostering the
transition to a low-carbon society. 

• All of the Northeastern and Mid-Atlantic states involved in the
Regional Greenhouse Gas Initiative (RGGI) decided to auction nearly
or fully 100 percent of their allowances, even though a much lower
minimum was discussed earlier in the RGGI process.   Although RGGI
was severely flawed by over-issuing allowances, the RGGI states
raised $38.6 million in the first U.S. auction for global warming
pollution permits. This money can be used to benefit consumers and
invest in clean energy and other green investments.
 
• Giving away pollution permits for free would generate windfall
profits for polluters and enrich out-of-state corporate
shareholders at the expense of Californians.

• Sierra Club strongly supports the CPUC and CEC recommendation
that “all auction revenues be used for purposes related to AB 32.” 
This money should go toward clean energy technologies, public
transit and environmental mitigation, green jobs, and aid for
low-income consumers and small businesses. Funding will also be
required to provide training in renewable energy job skills for
people now working in the fossil fuel industry and to help
low-income consumers and small businesses reduce their utility
bills through greatly improved energy efficiency.    

 • Sierra Club is concerned that aligning with the Western Climate
Initiative (WCI) could dilute California’s program and result in
fewer emissions reductions and more delays, unless California can
bring other states up to higher standards than WCI is currently
recommending. The Design Recommendations for the WCI Regional
Cap-and-Trade Program states (Appendix I, p. D-54): “The WCI
recommends each Partner auction a minimum percentage, between 25
percent and 75 percent, of its allowance budget.” If California
agrees to this, it could mean that between 25% and 75% of emissions
allowances will be given away for free to the biggest polluters in
the state.  This is unacceptable.

• Direct reductions in capped sectors are vastly preferable to
offsets. CARB should require power and oil companies to invest in
renewable energy and cleaner transportation, rather than to pay
someone else in some other jurisdiction to reduce their pollution.
Any offsets should be limited in number and subjected to rigorous
criteria (See more discussion below). We are also concerned about
how WCI’s recommendations for cap-and-trade and offsets relate to
concerns of the environmental justice community. We note that,
among WCI member states, California is the only state with an
official environmental justice advisory committee for climate
issues, and we are disturbed by the failure of the WCI process to
give sufficient attention to EJ concerns.

• California should not allow emissions trading with any
jurisdiction that does not have a hard emissions cap of AB 32-like
stringency, because such trading would remove the assurance that
our emissions reductions were real.

• No trading in emissions should be allowed if it causes “hot
spots” that exacerbate air pollution at the local level, especially
within communities already beset by environmental justice issues.

• Aggressive steps must be taken to guard against leakage by
measuring the carbon emission at its actual point of production for
electrical generation consumed in CA at its actual point of
production.

• Every product manufactured in the world today has its own carbon
footprint—the carbon emissions associated with the production of
that product. To maintain a fair market for California goods, CARB
should require that producers of emission-intensive products
imported for consumption in California purchase the same emissions
allowances that California producers must when they sell their
products in the same market. Similarly, emissions associated with
products produced in California but exported should be allocated to
the exporting state or nation rather than California. Any other
principle would sorely disadvantage California industries and act
as a powerful lever for driving additional jobs offshore.

OFFSETS 

CARB's Plan undercuts its cap-and-trade program by unduly relying
on offsets.  These are credits that polluters in capped sectors can
buy based on estimated pollution reductions made by others in
uncapped sectors. In this way, offsets substitute for cuts that
could have been made directly by polluters in the electricity,
industrial, and transportation sectors directly addressed by
cap-and-trade. Both CARB and WCI would allow approximately half of
the required pollution reductions under a cap-and-trade system to
occur through offsets.
 
However, CARB's plan goes beyond the WCI's minimum offset limit.
WCI allows states to use offsets for as much as 49 percent of
reductions over the lifetime of the program without rules on when
polluters can use offsets. Under that approach, polluters could
rely entirely on offsets in the early years of the program, which
could allow polluters in capped sectors to delay making their own
emission reductions until later years, in some cases not until
2018. In contrast, California has decided it will limit the use of
offsets to 49 percent during each three-year round of reductions
under WCI. In that way, California will guarantee at least some
real reductions in sectors covered by a cap-and-trade system
throughout the program's earlier years. 
 
Rather than outsourcing efforts around the world through offsets
to cut GHG emissions, California should be aggressively harnessing
its own energies and capacities to develop new clean technologies
that can help reduce global warming pollution here and around the
world.
 
•  If offsets are allowed, they must be very limited in number and
subjected to rigorous criteria. The Proposed CARB Scoping Plan
suggests limiting offsets to 10 percent of a firm's "compliance
obligation." CARB must clarify that this means that no more than 10
percent of the emitter’s required reductions may come from offsets,
not 10 percent of its total emissions.

•  While the proposed plan does limit emission offsets more than
the draft did, it still allows up to 49 percent of emission
reductions to come from offsets, from anywhere in the world – not
just from California. This would allow pollution to continue in
low-income communities that already carry a heavier burden of
polluting industries. ARB must put in place strict safeguards to
assure that pollution trading and offsets do not harm air quality
in those communities.

 •  We are opposed to any system that would relieve any domestic
emitter of carbon from paying for their fair share of the costs of
the carbon they emit in exchange for “offsets,” either for
internationally produced CO2 emissions or domestically for
activities designed to enhance carbon sinks, like tree planting.
While government and private support of improved soil carbon
content and reforesting are highly desirable, it is impossible to
retain the integrity and effectiveness of a program to reduce
domestic CO2 emissions if it is combined with an international
trading mechanism involving efforts to preserve and enhance carbon
sinks.

•  We oppose trading between sources of carbon pollution and
sinks, like forests, that store carbon. The ability of forests to
store carbon should not become a justification for maintaining
higher emissions of air pollution. We need both 80% reductions in
domestic CO2 emissions and strong programs to enhance carbon sinks;
we should not “trade” them off against each other. This separation
of carbon control systems is especially important given the
increasing vulnerability of California’s forests and other flora
owing to fire, drought and potential effects of climate change.