California Auctions First Carbon Credits; Chamber of Commerce Sues

Undeterred by the California Chamber of Commerce's lawsuit that called the auction "an unconstitutional tax" on businesses, the California Air Resources Board (ARB) proceeded with the nation's first, state-administered sale of carbon credits. The Chamber believes that ARB can only impose regulatory fees on businesses.

Dale Kasler writes that "(c)ap and trade is supposed to be a business-friendly, market-driven approach to curbing carbon emissions. While the state imposes an overall cap on the total amount of carbon emissions, polluters can comply with the law by cleaning their smokestacks or buying emissions credits at market prices."

"The state expects to raise between $500 million and $1 billion selling carbon emission credits Wednesday (Nov. 14) and at a second auction next February. But a lawsuit looming over the process "could dampen the enthusiasm" for the auction, said Jon Costantino, executive director of the Association of Carbon Market Participants."

Considering that only 10% of the total credits will be auctioned on Nov. 14 and the remainder "given away for free", the lawsuit is presumably aimed to stop the February auction. The CalChamber did not ask for an injunction to stop the current auction.

Pat Brennan of The Orange County Register presents both sides on the economic effects on business of the carbon auction.

The CalChamber maintains "that element of the program would prove costly and "will hurt our struggle to maintain jobs", according to Loren Kaye, president of a commerce and education "think tank" affiliated with the chamber.

"Supporters contend that predictions of harmful economic effects are overblown."

"There continues to be cost estimates that are just wildly inflated," said Timothy O'Connor, director of the California Climate Initiative for the Environmental Defense Fund. "So it is creating this skepticism about whether this is the right approach for California. These estimates, time and time again, are consistently undercounting benefits and overcounting costs."

The nation's first carbon auction program, the east coast's Regional Greenhouse Gas Initiative applies only to electric utilities for nine states. The ARB program is far more comprehensive and will eventually capture 85% of the state's greenhouse gas emissions.

Thanks to Sarah Matsumoto