Cap N Trade is an Enron “light bulb” moment from over 10 years ago
Despite fierce opposition from much of the business community, California’s grand experiment in taming global warming begins in earnest Wednesday.
State officials are set to auction tens of millions of dollars’ worth of carbon-emission allowances to scores of oil refiners, cement manufacturers and other large industrial polluters.
The computerized auction marks the beginning of California’s “cap-and-trade” market. The market is the centerpiece of Assembly Bill 32, the state’s 2006 law aimed at reducing greenhouse gases, and Wednesday’s kickoff is being closely watched.
Cap and trade will force affected companies to scale back their carbon pollution – or purchase allowances to get into compliance.
State officials and environmentalists say the market-based approach gives companies flexibility in how they reduce emissions.
Many affected businesses call it a cleverly disguised tax that will cost them upwards of $1 billion in the first year. The expense will balloon in 2015, when refineries will have to buy more credits to cover greenhouse gases spewed by cars and trucks.
“It’s going to be a huge burden,” said Shelly Sullivan of the AB 32 Implementation Group, a business coalition. “That turns into a multibillion-dollar energy tax on the state’s economy.”
Her group, which includes the California Chamber of Commerce and the California Manufacturers & Technology Association, has petitioned Gov. Jerry Brown to abort the auction.
But the auction is expected to proceed.
“Everything is still on schedule; we’re moving forward,” said spokesman Stanley Young of theCalifornia Air Resources Board, the agency running the auction.
Carbon trading isn’t new. Polluters in the European Union have been subject to a greenhouse gas market since 2005, and a similar program covers power plants in the northeastern United States and eastern Canada.
But until Wednesday, when carbon trading comes to California, it’s never been tried on a large scale in America.
More than 62 million allowances – each representing the right to emit a ton of carbon – will be offered for sale in a three-hour window starting at 10 a.m. The minimum bid price is $10 a ton.
The auction will be a low-key affair. It will be run electronically, with a half-dozen staffers monitoring the bidding behind closed doors at agency headquarters in Sacramento.
“This happens in a sealed room with no windows,” said David Clegern, another agency spokesman.
The agency says potential buyers aren’t allowed to publicly discuss their purchasing plans, out of fear that disclosure could skew the market. Results of the auction, including pricing and volume, won’t be revealed until Monday.
Some analysts believe many potential bidders will sit out Wednesday’s auction. Another auction is set for February, and there will be regular auctions each year. Besides, companies needing carbon credits will be able to buy them on the open market and don’t have to go through the state.
Uncertainty could dampen bidding in the first auction as well. Jon Costantino, head of the Association of Carbon Market Participants, said bidders might be dissuaded by rumors circulating that an industry group could file a last-second lawsuit to block the auction.
Analysts say the uncertainty has caused prices to drop on private futures markets where California carbon credits have been traded for months. The per-ton price, which had been around $20 over the summer, has fallen to around $12, according to Bloomberg business news.
Low prices could undermine the state’s goal of curtailing emissions. If carbon is cheap, there’s less incentive for industries to reduce their pollution. That’s why the Air Resources Board has set a $10 minimum on bidding in the state’s auction.
thanks to reinhardt for the background information:
so al was very friendly with “kenny boy”..hes done well from the scaremongering of global warming..very well..and here is the irony i cant understand..people who dont trust the government one iota..suck this message up from the government as if its gospel truth?..why would it be true?..do you know who is behind it all?..the elites..going back to the early 70′s..the filthy elite trash the greenies blame for destroying the earth are the same people they now support in setting up tax systems around the world to tax us to make the world stop warming..you have been played..so easily..why do you think the governments and big banks and big business are all behind it?..BECAUSE THEY WIN !!..get that in your heads!
california is the next to take their economy to the cliff edge..check back in 2 years..
its great to see Reinhardt get behind this now..its the biggest scam on earth..none bigger..its the ultimate enterprise corruption..