Regulatory Round-up: ARB staff favour Cap-and-Trade and Washington’s use of Californian allowances

June 27, 2016 by Harry Horner

June 23rd ARB Board Meeting – Informational update on the 2030 Scoping Plan

Beyond ARB’s broad conceptual progression that was elucidated upon in last week’s regulatory Round-up, there were a few key takeaways to be had from this Board meeting. Least of all was the repetitive plugging of this Plan being ‘greater than the sum of its parts’, ARB must still be waiting for this highly original slogan to catch on.

First and foremost, staff explicitly promoted ‘Option 1’ (Cap-and-Trade with complementary measures) as their preference at this point of the process. This provides some reassurance to market stakeholders, whilst allowing ARB to show due process to the doubters of emissions trading in California, most notably EJAC. On this note, in the ensuing discussion a plethora of stakeholders from organizations including, but not limited to, PG&E, EDF and So Cal Edison all emphatically re-pledged their support for Cap-and-Trade; those seemingly opposed comprised of EJAC and the representative from the Coalition of Clean Air.

The next steps in the Plan’s formation are a slew of meetings of the bodies assembled to both produce and review the plan. Sector-specific workshops continue on unabated (as reported in beneath), Technical and economic workshops are to be held to examine the modelling process behind the Plan, whilst EJAC will also engage in outreach for feedback from the disadvantaged on the four options. The full draft 2030 Scoping Plan is still scheduled for release early in Fall of this year.

As may well be expected, the subsequent discussion by stakeholders and then board was at least as enlightening as the preceding staff presentation.

Predictably, the first to speak was the passionate and ever-present Katie Venezuela Garcia, representative of EJAC – the group’s Scoping Plan recommendations are already finalized and will be ci­rculated over the week. Her message was layered: whilst the group are glad to see ARB considering a broader range of post-2020 options (read – ‘without Cap-and-Trade), concerns remain over the rapidity of process pursued by Staff.

It is possible to perceive this as a dragging of heels, however she highlighted that the Scoping Plan will be presented to the Board in November, whilst the environmental analysis will only be available in December, the Board’s final approval is due in March. Concerns were raised over this expedited process, but forcefully batted away by Chair Nicholls saying above dates ‘were official only, and the real process would be more ongoing’. In all, it seems that ARB is willing to offer ointment to EJAC ‘s concerns in the form ‘consideration other options’, bringing the side effect of prolonged uncertainty; but will not budge any further on the timeframe of events.

Elsewhere, Board member Michael Gibbs proffered ARB’s current thinking over Washington’s use of WCI instruments for compliance within their 2017 anticipated Clean Air Rule. He stated that whilst there is no prohibition on the voluntary private purchase and retirement of WCI allowances, it would be a different matter for a state’s program to be involved in this activity. His solution would be to amend regulations to include a list of eligible programs who have express permission to retire Californian allowances, no doubt Washington would be the first name on that list.

Finally, a proposal from floor from the California League of Food Processors for an increased industrial presence within the ARB decision process was met warmly by the Board. Chair Nicholls all but explicitly called for the resurrection of the Environmental Technology Advisory Committee (ETAC). Depending on perspective, such a development would no doubt be painted both as a way to access further environmental innovation, but also as a lever for prohibitive industrial lobbying.


June 24th Mandatory GHG Reporting and Cap-and-Trade Program Workshop

This sector-specific workshop on Friday was far more technical and less political than the above board meeting. The two relevant thrusts of the workshop concerned quantifying the EDU allowance allocation post-2020, and emissions associated with the ‘Least cost dispatch’.

The initial proposal for EDU allowance allocation was aired during the March sector specific workshop; the details were thus:

–       Subtract out emissions associated with electricity sold to industrial covered entities

–       Factor in preplanned changes to electricity sources, e.g. known coal divestiture and nuclear resource availability  

–       Continued 100% consignment for IOU’s, still optional for POU’s

–       Extra allowances may be allocated given proven increased electrification

On the last point, the CEC Demand Forecast projects a 0.4% annual decrease in statewide load from 2014-26, compared to a 1.2% increase per year forecast in 2009 for the years 2010-20. Assumptions have clearly changed rapidly, the uptake of electric vehicles in California will be a key variable in this, and thus the total EDU allocation figure.

The update to the above proposal was a variation over the 2020 achievement of the RPS, the first option assumes that all EDU’s meet the same 32% renewable standard, the second, only the reduced 28% target.

Lastly, a highly technical presentation concerned emissions accounting for the practice of least cost dispatch. Least cost dispatch involves the relevant EDU sending electricity from low emitting resources to CAISO – thus incurring less compliance cost; whilst the portion of electricity with greater associated emissions is sent to a state where emissions are not costed. This state of affairs can serve to prolong the use of high emitting resources, and thus the practice can be viewed as a diluted form of leakage.

Six accounting options were outlaid in the program, likely too much detail to specify now (see full ARB presentation). Regardless, further information is due in early July when the MRR and Cap-and-Trade Regulations are released for comment, two board meetings will follow later on in the year, whilst the review process ought to have concluded by February of next year. This column will continue to report on all relevant material from the above schedule.

Harry Horner – (harry@californiacarbon.info)

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