New Year’s Resolution for California Business: Get Involved With Climate Change
 
March 6, 2007
 
Michael Wara - San Francisco

This year will be pivotal in determining the costs and benefits to California businesses of the recently enacted Global Warming Solutions Act (AB32). In order to achieve passage of AB32, which limits state emissions of greenhouse gases, the California legislature left many critical details of the global warming program to be decided by the Air Resources Board (ARB). The new law regulates emissions of carbon dioxide, methane, nitrous oxide, perfluorocarbons, sulfur hexafluoride and hydrofluorocarbons. Major emitters of these gases in California include the electricity generation and transmission, transportation, agriculture, waste management and cement industries, among others. The details of the program that the ARB must decide in the coming twelve to twenty-four months are in many ways more important than anything included in the enacted legislation, except perhaps the stated goals of reducing greenhouse gas emissions to 2000 levels by 2010 and to 1990 levels by 2020.

Among the questions and issues for the ARB to address are the following:

• the 1990 emissions baseline, which serves as the target for emissions reductions, past estimates of which vary by as much as 10 percent

• whether to implement the law through a command and control or a market-based system, which will determine the total cost, economic efficiency and impact of the program on regulated industries

• establishment of the coverage and minimum installation size for a carbon dioxide cap-and-trade program, which will determine which businesses are regulated by the law (assuming the ARB opts for a market-based system)

• allocation of carbon credits within a trading program, which will impact the costs of the program to businesses as much as any ultimate limit on emissions

• whether California businesses will be allowed to both generate and import carbon offsets from other carbon markets, which will drive price and volatility in the future California carbon market
 

For more information, e-mail Michael Wara at michael.wara@hklaw.com or call toll free, 1-888-688-8500.