California mulls carbon tax, other alternatives to cap and trade

Source: Debra Kahn, E&E News reporter • Posted: Wednesday, November 9, 2016

As California plots its carbon course to 2030, alternatives to its existing cap-and-trade program are getting some consideration.

The California Air Resources Board is considering a carbon tax and the use of more direct regulations on oil refineries as methods of reaching its 2030 target of 40 percent below 1990 emissions levels, as mandated by legislation signed by Gov. Jerry Brown (D) earlier this fall.

Regulators unveiled several new scenarios yesterday for meeting the target, which equates to 260 million metric tons of CO2 per year by 2030, or roughly 6 tons per person. One of them would eschew cap and trade and other market-based programs in favor of more direct regulations like a toughened renewable portfolio standard and emissions standards for industrial sources, refineries and the rest of the oil and gas sector.

Direct regulations will cost nearly six times as much as cap and trade — $9.7 billion by 2030, rather than $1.7 billion with the carbon market — ARB’s analysis found.

Oil representatives are calling for ARB to stick with cap and trade.

“Cap and trade is really the only policy mechanism that ensures meeting your specific greenhouse gas policy goal,” said Ralph Moran, BP’s senior director of government and public affairs. “Cap and trade is by far the most cost-effective.”

ARB is weighing the various policies as part of its compliance with A.B. 197, a bill signed in September that requires regulators to prioritize direct emissions reductions. At the same time, however, regulators are making plans to extend the cap-and-trade program past 2020 and use it as the main policy to comply with U.S. EPA’s Clean Power Plan for existing power plants.

Demand for allowances has fallen in recent months due to oversupply and uncertainty over the program’s extension (ClimateWire, Nov. 7). Besides the language of A.B. 197, a lawsuit from the California Chamber of Commerce in the California Courts of Appeal is still threatening the program.

“The oil industry is in the funny position now of needing to work hard to get stronger authority for cap and trade to continue in its current form,” said Chris Busch, director of research at the consulting firm Energy Innovation. “That’s what the Brown administration would like, too.”