Independent media needs you. Join the Tyee.


The Hook: Political news, freshly caught

California to proceed with cap-and-trade in 2012

The failure of Proposition 23 has poised California to become the first U.S. state to charge companies for producing greenhouse gas emissions. Electric power plants and other large emitters will begin complying in early 2012, much as they will under British Columbia's related cap-and-trade plan.

The plan is not expected to raise electric rates significantly, according to utilities officials quoted last week in a California newspaper. North County Times reporter Eric Wolf wrote:

The power generators don't seem too concerned about the upcoming cap-and-trade rules.

Sempra Generation, a division of the same company that owns SDG&E and Southern California Gas, will add staff to a trading desk to buy carbon credits for their natural-gas-fired generators, said Scott Kreider, director of external affairs.

In addition, the company will add to its portfolio of wind and solar generators, which have no emissions, as a direct response to the new rules...

At [NRG Energy Inc.], Steve Corneli, vice president for market and climate policy, said the company already had active trading desks for carbon allowances related to cap-and-trade programs like those established in the U.S. Northeast and in the European Union. He said the company wouldn't have too much trouble adjusting to the price of carbon dioxide.

"Most to all of the plants in California should be able to pass through the costs of buying allowances either through their power-market prices or through their contracts," Corneli said.

But Corneli estimated that the increased price of electricity from carbon allowances won't have much if any effect on residential ratepayers.

Under a cap-and-trade system implemented among 10 northeastern states, carbon allowances go for about $10 a metric ton, he said. Given that a natural gas plant produces about half a metric ton of carbon dioxide per megawatt-hour of electricity produced, then utilities would bear an extra $5 per megawatt-hour, or half a cent per kilowatt-hour.

A typical San Diego household uses 6,000 kilowatt-hours a year, according to SDG&E, so if that cost were passed on to customers, that would work out to an extra $30 a year, or $2.50 a month. The rules proposed by the air board cap the price of carbon at $40 a metric ton, which means a typical household would pay a maximum of $120 extra a year, or $10 a month.

That cost could be reduced potentially to nothing depending on how the allowances are distributed. SDG&E and Edison will be allocated enough allowances to cover 90 percent of their annual emissions. But while factories will be granted their allowances for free, utility allowances will be sold at public auction. All proceeds from the auction would go to the Public Utilities Commission for distribution to the utilities. The provision is designed to insulate ratepayers from rising energy costs, the rules say.

"It really wouldn't have any impact for consumers," Corneli said.

Gary Stern, director of market strategy and resource planning for Southern California Edison, concurred with Corneli's analysis.

The California Air Resources Board has mandated that California reduce its greenhouse has emissions from a projected 467 million tons in 2010 to 408 million tons in 2020. This is the "cap."

Companies will be able to purchase carbon credits (similar to voluntary offsets) for each ton of carbon dioxide they emit. These carbon credits can be bought or sold. This is the "trade."

British Columbia is also launching a cap-and-trade system in 2012. Like California's, the B.C. system will initially apply only to factories or generators that emit 25,000 or more metric tons of greenhouse gas. Both are part of the Western Climate Initiative.

Monte Paulsen reports on carbon shift for The Tyee.

Find more in:

What have we missed? What do you think? We want to know. Comment below. Keep in mind:


  • Verify facts, debunk rumours
  • Add context and background
  • Spot typos and logical fallacies
  • Highlight reporting blind spots
  • Ignore trolls
  • Treat all with respect and curiosity
  • Connect with each other

Do not:

  • Use sexist, classist, racist or homophobic language
  • Libel or defame
  • Bully or troll
  • Troll patrol. Instead, flag suspect activity.
comments powered by Disqus