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Questions for CARB

By: Chuck Devore

Dec 31 2010 Published by Chuck Devore under Energy and the Environment

California’s Air Resources Board (CARB) convened its cap-and-trade regulation hearing mid-month.  I submitted the following questions and comments for the record to CARB regarding their cap-and-trade regulation due to go into effect in 2012.

California’s go-it-alone approach to saving the global climate will kill California’s economy – and do nothing measurable for the environment.

Emissions leakage

When considering the 2020 emission limit of 427 million metric tons of carbon dioxide equivalent (MMTCO2E) of greenhouse gases in conjunction with the Western Climate Initiative (WCI), will emissions leakage be considered?  Specifically, BC Power, the government-owned utility in British Columbia, has been in power deficit for 10 of the past 11 years.  It makes up that deficit by importing coal-fired power from Washington State and the province of Alberta.  BC Power then sells California “green” hydropower after backfilling their grid deficit with coal power.

Will the ARB account for this form of electron laundering by looking at the full life cycle emissions of the sources of power imported into California?  How will the ARB attempt to account for multiple sources of power generation within the Western Interconnection?  Has ARB considered the cost impact of electricity to California consumers if BC Power, or other providers of electricity, are forced to purchase emissions allowances to fully account for their electron laundering?

Full lifecycle greenhouse gas emissions accounting

When considering the 2020 emission limit of 427 million metric tons of carbon dioxide equivalent (MMTCO2E) of greenhouse gases (GHG), what method of GHG accounting is used?

For instance, ethanol production varies widely in carbon intensity, depending on such factors as the whether it originates from corn or sugar cane, the amount of energy needed to process it and transport it, the impact on land and whether rain forest was cut down to make room for the crop, or, in the case of U.S. corn ethanol subsidies, corn crops displacing soy bean production, which in turn went to Brazil which cut down forest to produce more soy beans that were once produced in the U.S.

Secondly, some studies have suggested that hydropower, depending on where it is sited, can be a net negative for GHG emissions because it can drown carbon-impounding forests while the rotting plant matter releases large amounts of methane.  Given this, will hydropower from BC Power have a higher imputed GHG load than hydropower from the Hoover Dam, which did not drown forests as it was built in a desert?

Offset Credits

ARB is considering allowing up to eight percent of the required greenhouse gas (GHG) emissions reduction to be met through the purchase of offset credits.  Experience has shown that many of the mechanisms used to calculate the effectiveness of offset credits are non-transparent, non-scientific, and rife with fraud, especially in developing nations.  What sort of comprehensive auditing mechanism will ARB put in place to ensure that offset credits are truly “real, permanent,

verifiable, enforceable, quantifiable, and additional”?  If an offset credit is purchased and allowed, then it is later discovered that the offset credit purchased was not effective, or the foreign government was engaging in fraud, what mechanism will ARB use to make the system whole?  Will the ARB audit offset credits?  Has the cost of oversight for offset credit auditing been considered?

Economic analysis

The ARB makes of number of seemingly contradictory economic claims.

The ARB states that its cap-and-trade regulations will reduce the growth rate of the California economy from 2.4 percent to 2.3 percent.  At the same time, the ARB claims that the regulations under consideration will “not have a significant statewide adverse economic impact directly affecting businesses, and little or no impact on the ability of California businesses to compete with businesses in other states.”  And that, “…impacts on long-term projected growth rates in personal income and employment are similarly small.”  And that, “Regulated businesses may face additional indirect costs due to increased energy and input prices, and some businesses might be impacted based on the compliance path they choose to meet their obligations under the proposed regulation.” And that, the “proposed regulatory action would not eliminate existing businesses within the State of California, but would affect the creation of new businesses or the expansion of existing businesses currently doing business in California. The proposed regulatory action would not eliminate jobs within the State of California, but would affect the creation of jobs within California.”

It strains credulity to believe that California can act to completely reorder the energy sector and only slightly reduce economic growth, slightly increase prices and end up with more jobs, not less.  Assuming this to be the case, does that mean that the ARB projects more lower paying jobs and relatively less higher paying jobs as the result of its actions?  How else can a reduction of economic growth be explained as part of the ARB analysis?

Lastly, the ARB in its economic analysis states that the analysis did “…not consider the avoided costs of inaction. The potential effects of climate change that are expected to occur in California, such as increased water scarcity, reduced crop yield, sea level rise, and increased incidence of wildfires, could cause severe economic impacts.” Given that California’s cap-and-trade efforts, when viewed in the global context of a developing China and India, is likely to provide, at most, a day or two’s reduction in greenhouse gas (GHG) emissions (and this is assuming that leakage doesn’t accelerate, as more economic activity that once occurred in California is off-shored to coal-fired China), how can this statement even be seriously countenanced when, in fact, there will be no significant global GHG emissions reduction as a result of the ARB’s actions?  Lastly, over the past 150 years, California has experienced “increased water scarcity, reduced crop yield, sea level rise, and increased incidence of wildfires” with three of the four directly attributable to environmental policies that have limited water storage and conveyance (increased water scarcity), cut flows of water to farms (reduced crop yield), and reduced timber harvesting and forest fuel management (increased incidence of wildfires) – the one foot rise in sea level over the past 150 years being the sole impact not caused by environmental policy, and certainly not an impact anyone in California has seen as particularly difficult in which to adapt.