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  • Cap-And-Trade Costs California Businesses $1 billion

    California businesses paid a whopping $1 billion this year buying permits to comply with the state’s cap-and-trade law — the largest sale recorded since the state began regulating carbon dioxide in 2012.

    Even with record permit sales, the $1 billion raised was well below market expectations. But environmentalists sold the auction as a huge success, because now oil and gas companies have to buy permits.

    “Despite the oil industry’s fear mongering, the sky did not fall,” said Merrian Borgeson, a senior scientist at Natural Resources Defense Council. “California’s carbon market continues to hum along as expected, with this auction’s price right in line with previous auctions.”

    Carbon emissions permits for 2015 only sold for $12.21 per metric ton, and permits for 2018 sold for $12.10 per ton. In total, the state sold 73.6 million permits for emissions in 2015 and 10.4 million permits for emissions in 2018.

    “We are making progress toward a cleaner future,” Borgeson said. “Our clean energy policies cut dangerous emissions, boost the state’s economy, and drive investment in our most disadvantaged communities.”

    But the record permit sales may not be the harbinger of good news that environmentalists and state regulators argue. As of this year, California expanded its cap-and-trade system to cover transportation fuels — meaning oil companies will have to buy carbon credits for the fuel they sell.

    Before that, the state’s cap-and-trade law only covered several hundred industrial companies, like food processors, cement makers and other energy-intensive industries. Basically, the state forced more companies to buy permits and expanded the pool of permits — which means prices are lower than they would have been otherwise.

    Also, California’s cap-and-trade system has been linked to Quebec’s emissions trading scheme to limit the economic impacts pricing carbon dioxide has on California residents. California officials are trying to convince other states to join their cap-and-trade plan to further disperse costs.

    California passed its cap-and-trade law in 2006 under Republican Gov. Arnold Schwarzenegger. The point of the law is to reduce carbon dioxide emissions to 1990 levels by 2030. The law went into full effect in 2012, when the first carbon permit auctions were held.

    State regulators are still in the process of implementing a second prong of the 2006 global warming law: a low-carbon fuel standard. This requires oil companies to reduce carbon emission from gasoline 10 percent by 2020 — though the rule is being rewritten in the wake of legal challenges.

    But that’s not all. California lawmakers are intent on halving the use of petroleum in the next 15 years. State Democrats have proposed a highly contentious law which would remove 8 billion gallons of fuel from state markets.

    The oil industry has come out swinging against the legislation, saying it’s nothing more than an attack on oil companies and jobs.

    “Legislative mandates to force reductions in gasoline use are not climate change policies,” Catherine Reheis-Boyd, president of the Western States Petroleum Association, said in a statement. “They are attacks on an important industry in California designed to create conflict and controversy.”

    “Achieving so radical a goal in so short a time will require the removal of 8 billion gallons of gasoline and diesel from our fuel supply – with no guarantees that something will be available to replace them,” Reheis-Boyd added.

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