California joins big carbon-trade partnership California in North American carbon-trading partnership

California, six other Western states and four Canadian provinces launched plans on Wednesday for one of the world's largest carbon-trading systems, a sweeping effort to cut greenhouse gas emissions that contribute to global warming.

The North American program, like a similar market-based system in Europe, focuses on heavy polluters such as electric utilities, oil refineries and large industrial and commercial facilities.

Environmental groups immediately questioned whether the plan will be tough enough on polluters, while industry groups said the program lacks details.

California officials said the proposal will be an integral part of the Golden State's ambitious goal of reducing greenhouse gas emissions by 30 percent by 2020, as required by the landmark legislation AB32 that the Legislature approved and Gov. Arnold Schwarzenegger signed in 2006.

"We very much believe this supports California's own plan to grow the economy and protect the environment," said Linda Adams, secretary of the California Environmental Protection Agency.

The draft plan is a key component of the Western Climate Initiative, a partnership created in February 2007 among the governors of California, Arizona, New Mexico, Oregon and Washington to curb global warming.

The group - which has added Utah and Montana, along with the Canadian provinces of Manitoba, Quebec, British Columbia and Ontario - has set a regional goal to reduce greenhouse gas emissions by 15 percent of 2005 levels by 2020.

Under the plan, industries would be required to begin reporting emission levels beginning in 2011 to allow participating governments to agree on the maximum level of emissions for the region when the program begins in 2012.

Template for other states

Final recommendations are to be adopted by end of the year and will be used as a template for states to develop their own systems that would link up with others in the Western Climate Initiative.

The California Air Resources Board, which is responsible for implementing AB32, released a blueprint last month that included such ideas as requirements for cleaner cars, more energy-efficient appliances, less-polluting fuels and more reliance on wind and solar energy.

But the air board's preliminary recommendations also cited the need to work with states and provinces in the Western Climate Initiative to develop a cap-and-trade program, under which heavy-polluting firms would buy carbon credits from less-polluting companies.

The air board said such a system would account for as much as 20 percent of California's projected reductions in carbon emissions. Mary Nichols, who chairs the board, has said a broader market would be more effective than a statewide one.

While the formation of the North American partnership has been applauded by both industry and environmental groups, the proposal received mixed reviews Wednesday.

Gary Stern, Southern California Edison's director of market strategy and resource planning, said he wished the 10-page document had specified how states would initially distribute carbon credits, which can be used in place of reducing emissions.

Cap-and-trade program

"In any type of cap-and-trade program, we're ultimately going to be concerned with what the cost to customers is going to be," he said.

But Stern said he liked the program's aim to include many types of industries, unlike the Regional Greenhouse Gas Initiative, a similar program among 10 Northeastern states that targets only electric utilities.

The European Union's system to cut greenhouse gases, the only other regional cap-and-trade program, got off to a rough start because the emissions cap was too high and companies were awarded carbon credits for free, said Erin Rogers, California outreach coordinator for the Union of Concerned Scientists, an environmental group.

The result was that the high emissions cap meant most companies weren't required to cut emissions, while the flood of free carbon credits made them virtually worthless, Rogers said.

The European Union has since tried to fix its system by resetting the cap and requiring companies to buy carbon credits through an auction system, Rogers said, a lesson for California and other jurisdictions.

Potential problems

Environmentalists said the Western Climate Initiative's draft plan does not clearly state whether carbon credits would be given away for free or sold in an auction.

Another potential problem, they said, is the draft plan's emphasis on offsets, a program under which polluters could emit greenhouse gases above the capped level by purchasing carbon credits from groups or businesses with environmental programs such as reforestation or mega-dairies that capture methane gases for energy use.

Jason Barbose, global warming advocate for Environment California, said that under the draft plan, industries may be able to meet all their emissions requirements by purchasing offsets.

"It would be far better to require power companies and oil companies to invest in clean energy and better transit than to pay someone else in some other country to reduce their pollution instead," he said.