On Thursday (December 16), California approved rules for a multibillion-dollar carbon market, in what climate change advocates hope will be a turning point for the US towards combating climate change. It is hoped that it will encourage the creation of a national programme to address global warming.
Since US Congress failed to pass a climate change policy last year, California is the first US state to address global warming.
California has mandated that a third of its electricity has to come from renewable sources such as solar, wind and water. It is also encouraging low carbon auto fuels using biofuels and natural gas. On Thursday they approved rules for a carbon market.
"This is what makes us the leader," Governor Arnold Schwarzenegger, who signed the state's climate change law in 2006 and helped convince voters to crush a ballot box challenge to it last month, told regulators.
Schwarzenegger said that California is struggling with a budget shortfall. However the new carbon market is creating green jobs and is getting funds from venture capital investment due to its environmental efforts.
The rules adopted by the Air Resources Board, the state's climate change regulator, limit emissions of CO2 and other greenhouse gases. It will let power plants, factories and eventually refiners be involved in the cap-and-trade market.
California will become the second-largest carbon market in the world, following the EU. Point Carbon, a Thomson Reuters company, forecasts the market will grow from US$1.7 billion in 2012 to nearly US$10 billion in 2016, with prices rising from US$10 per tonne in 2012 to US$18 per tonne in 2016.
Factories and power producers will be able to bear some of the burden for cutting emissions with credits for carbon offset projects. There is already a market in carbon offsets, and prices have jumped in the last several weeks to about US$8 a tonne, traders said.
"The world is watching what California is doing," said Louis Blumberg, Director of the California Climate Change Team at the Nature Conservancy environmental group.
A number of manufacturers still view the programme as doomed, and believe that it will raise costs and hurt the state's competitiveness. Companies will have to buy more and more permits at auctions as the multi-year programme continues.
"This is going to dampen their enthusiasm to grow and invest in California," Dorothy Rothrock, Head of Government Relations at the California Manufacturers and Technology Association, told the board.
Some environmentalists also criticised the plan, taking aim at offset creation rules that let lumber companies level stands of trees, called clear cutting, if they preserve other stands and raise total carbon held in a project area.
"To me, clear cutting looks a lot like deforestation," Sierra Club member Karen Maki testified.
Canadian provinces Ontario, Quebec and British Columbia are looking to join California in 2012. They are members of a group called the Western Climate Initiative, and some California backers hope to join forces with a small US Northeast plan and a developing Midwest programme.
Author: Charity Knight | Climate Action
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