California has decided to delay the implementation of its CO2 cap-and-trade program by one year until 2013.
The state had previously planned to begin the first three-year compliance period in 2012. The first compliance period will now be shortened to two years and the emissions reduction targets remain on track. The initial allocation of emissions allowances in 2012 would have been about equal to expected emissions, so state regulators claim the delay will not have an environmental consequence. By 2014 all firms will have the same compliance obligations as they would have otherwise.
There could be a lot going on here behind the scenes, including the possibility new Governor Jerry Brown wants to morph the cap-and-trade program originally designed under his predecessor Arnold Schwarzenegger into some other program. But all real signals are that the situation is just as Air Resources Board Chairwoman Mary Nichols said – that the Air Resources Board has too many regulatory deadlines and decisions that, subject to sunlight provisions on rulemakings in the state, can’t get done by the end of this year.
In announcing the delay, Chairwoman Nichols claimed that it would ensure the process is adequate, allow for a stress test of the trading system and make sure the system is not open to gaming.
A very good aspect of this turn of events is that the Air Resources Board will hold auctions to distribute some emissions allowances before the start of the compliance period. Staff had indicated a desire to do this, but with the previous start date of 2012 they could not get the rules in place to make auctions happen before the start of the compliance period. But now they can. The auctions will help identify a market price that will make compliance decisions for regulated entities somewhat less difficult.
Anyway, no one seems demoralized about the delay in California. Rather, it seems like they are treating it as ho-hum, another day at the rulemaking factory.
