AB 32’s Cap and Trade “Delay” Explained


A funny thing happened on the way to the start of California’s Cap and Trade program in January 2012: it was sort of delayed. At a Senate Committee meeting chaired by greenhouse-gas-reduction champion Senator Fran Pavley, California Air Resources Board Chairman Mary Nichols informed the world that even though the program is still going to start in 2012, there will be no compliance obligation that first year. Huh? Newspapers were quick to call this a delay, but when you dive into the details, it really isn’t. So let’s dive in.

As originally proposed in October 2010, the Cap and Trade Regulation (“Regulation”) required the program to start in 2012. This included allocation distribution, enforcement, credit trading and tracking, auctions, and all the other pieces that go along with a full-blown market program. Within the details was a requirement that each year within a three-year compliance period an entity subject to the Regulation would have to turn in (surrender) 30% of their annual greenhouse gas emissions. In her testimony, Chairman Nichols stated that CARB will remove that initial obligation to surrender allowances, but that major components of the program were still in effect. So on one hand there is a delay in the initial date that an obligation has to be complied with, but the overall scope, direction, reduction amount, and breadth of the program are NOT being proposed to be changed. According to Chairman Nichols: "This would not affect the stringency of the program or change the amount of emission reductions that the program will achieve, keeping us on track to meet the 2020 target required by AB 32."

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