California approves carbon market rules

SACRAMENTO Fri Oct 21, 2011 8:20am EDT

A parking structure at the University of California San Diego uses innovative ''solar trees'' to collect renewable energy from the Sun February 8, 2011. REUTERS/Mike Blake

A parking structure at the University of California San Diego uses innovative ''solar trees'' to collect renewable energy from the Sun February 8, 2011.

Credit: Reuters/Mike Blake

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SACRAMENTO (Reuters) - California regulators on Thursday approved final regulations for a carbon market that is one of the biggest U.S. responses to climate change.

The state believes the market for greenhouse gases, which starts in 2013, will let it address global warming in a low-cost way and become the center of alternative energy industries, like solar, although some businesses fear higher energy prices.

The most populous U.S. state is moving ahead with the plan years after federal regulators rejected a similar idea for the nation, partly on concerns of the effect on businesses.

The California Air Resources Board voted 8-0 to adopt the market regulations, which officials said are critical to the state's goal of cutting carbon emissions to 1990 levels by 2020 -- about a 22 percent reduction from forecasted business-as-usual output.

Power companies and factories will be able to trade a gradually decreasing number of permits to emit carbon dioxide and other greenhouse gases under the so-called cap-and-trade plan, which counts on market forces leading companies to find the cheapest way to cut emissions.

About 350 companies representing 600 California factories and oil refineries must begin complying with the program in 2013.

By 2015, when transportation fuels are brought under the cap, the system will cover 85 percent of the California economy, the eighth largest in the world.

LAWSUITS

There is still a possibility, though, that citizens groups, who fear the plan will intensify pollution in poor communities, or trade groups could file suit, Peter Hsiao, a lawyer at Morrison & Foerster said by email.

Brenda Coleman, an official with the California Chamber of Commerce, told the climate regulators on Thursday that elements of the plan amounted to an illegal tax on the refining industry.

Tupper Hull, a spokesman for the Western States Petroleum Association, declined to comment on whether the trade association would file a suit.

A spokesman for the Air Resources Board said that he was confident any legal challenges would be able to be resolved swiftly.

(Reporting by Rory Carroll of Point Carbon, editing by Peter Henderson, Gary Hill and Carol Bishopric at Reuters.

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