James Irwin for The Bay Citizen

Steam rises over the Valero Benicia refinery early Saturday morning, May 22, 2010.

Afters four years of meetings and debate, the California Air Resources Board today announced the release of its proposed greenhouse gas cap-and-trade regulation.

“This program is a crucial element of reducing our greenhouse gas emissions. It will help drive innovation, create more green jobs and clean up our air and environment,” said Mary D. Nichols, the chairwoman of ARB in an e-mailed statement.

The agency's action comes days before the election that will decide Proposition 23, which would suspend the state's greenhouse gas emissions law. The proposed regulations are authorized by AB 32, the state's global warming law. If Prop. 23 passes, AB 32 will go on ice until the state unemployment rate reaches 5.5 percent for four consecutive quarters. That means the cap-and-trade program will be stalled, too. The most recent polls show Prop. 23 trailing.

“If Prop. 23 passes, the Air Resources Board does not have the authority to implement this,” said Jon Costantino, a former climate change planning manager at the CARB, who is now a senior advisor at the law firm Manatt, Phelps & Phillips.

The cap-and-trade program will apply to about 85 percent of greenhouse gas emissions in the state, which come from 360 businesses. Large industrial emitters are among those that would be impacted when the regulation starts in 2012. The electricity sector would also be affected.

In 2015, fuel distributors would be regulated by it, too. In California, some 40 percent of greenhouse gas emissions come from fuels used in transportation, and about 25 percent from electricity, with the rest from industrial and other sources like agriculture.

Oil companies Valero and Tesoro, which are both based in Texas but have refineries in the Bay Area, have been the top two contributors to the campaign to pass Prop. 23. Valero has contributed more than $5 million, while Tesoro has contributed some $2 million, according to MapLight.org.

Under California’s landmark global warming law, the state is required to develop regulations that will reduce greenhouse gas emissions to 1990 levels by 2020. The cap-and-trade program works toward that goal by setting an emissions cap, which will then decline approximately two percent a year from 2012 to 2014 and about three percent a year after 2015. 

“The state is setting a cap for the global warming pollution that comes from the state’s largest emitters, and every year that cap gets ratcheted down. So over the next decade those emitters will bring their emissions down to 1990 levels, which is about a 12 percent decrease from today’s levels,” said Erin Rogers, manager of the Western States Climate & Energy program for the Union of Concerned Scientists, a non-profit environmental group.

To implement the system, the state will issue permits, with the number available decreasing over time. Companies will either receive them for free or buy them in an auction.“The more that they reduce their emissions, the fewer permits that they need to have. So, it’s an incentive for them to clean up,” said Rogers. 

Many permits, like those in the industrial sector needed by Valero and Tesoro starting in 2012, will be given away, instead of auctioned off. It's a concession to industry given the state’s sorry economy. “I would have preferred to see less free allocation,” said Chris Busch, policy director for the Center for Resource Solutions, a non-profit renewable energy policy organization. “I think it’s a response to the difficult economic times.”

The timing of the release of the proposed regulation is not tied to the election. By law, the regulations to comply with the state’s global warming law have to be finalized by the end of the year, and the Air Resources Board is now entering a public comment period on the cap-and-trade regulation before a public hearing about it in Sacramento on Dec. 16.