California cap and trade cash rolls in for 2013

It was an important year for California's ambitious efforts to limit greenhouse gases, one where the buying and trading of pollution credits brought in big money but left lingering questions about how the money should be spent.

2013 marked the first full year of the state's cap and trade program, the combination of a gradually lowering carbon emissions cap combined with a clean-up-or-pay-up option for the industries affected.

"It brings together the best aspects of regulation and using the market to drive flexible mechanisms," says Stanley Young, spokesman for the California Air Resources Board.

Cap and trade may have a track record in other counties, but California's program is the first in the nation. Timerecently named the Golden State's effort the top environmental achievement of the year.

"The world is watching," says ARB's Young.

While the initial auction at the end of 2012 turned in somewhat disappointing results, 2013's auctions gained a head of steam; to date, more than 324 million carbon allowances have been traded. Each credit is an allowance for one ton of carbon emissions.

But it's the cash value of those carbon allowances that was watched most closely through 2013 around the state Capitol. ARB officials say all told, carbon credits issued and bought in the year were valued at almost $1.1 billion.

Most of that money didn't flow into state coffers -- a decision in the implementation of California's 2006 landmark climate change law that some environmental groups say the Legislature should revisit... but won't.

"I think politics has everything to do with it," says Bill Magavern of the Coalition for Clean Air.

A large number of the carbon allowances were given to companies for free to ease the transition into the system of capping emissions. In addition, state regulations require utility companies to use the value of credits they've been given to keep rates low for their customers.

As a result, most of the value of 2013's carbon allowances -- some $603 million of the $1.1 billion -- stays with the industries and companies affected. The remaining $476.8 million was paid to state government.

Not surprisingly, there's been great debate about what to do with that money.

Business groups thought carbon allowances should be free, arguing the 2006 state law didn't provide for revenues going back to the state. Last month, however, a Sacramento judge rejected a lawsuit that attempted to block the flow of cash into government coffers.

State law requires the portion of cap and trade revenues paid to California government be set aside for programs to help reduce greenhouse gases.

But in 2013, Gov. Jerry Brown and legislators suspended that transfer, arguing the money was needed to help balance the state's bottom line.

Now, with forecasts of several years of multi-billion dollar surpluses, advocates say the money needs to be paid back all in the coming year. In fact, they believe the suspended year's worth of revenues plus another year of cap and trade auctions could push the grand total for climate change programs to $1 billion.

"Our message to the governor," says the Coalition for Clean Air's Magavern, "is let's spend revenues to reduce the pollution that causes climate change."

Magavern says the list could include everything from weatherization programs to solar panels for low-income housing or even new subsidies for public transit. He and others argue that all of those efforts would help reduce carbon emissions through energy efficiency or fewer automobiles on the road.

Brown's own ideas on how to use cap and trade cash are expected to be presented to the Legislature as part of his overall budget plan on Jan. 10.


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