California’s emissions law to ‘test’ its ailing economy in the new year

Mary Katherine Ham @ Hot Air:

Following boldly in the footsteps of the European Union, California is set to implement a cap-and-trade system in 2013—the fruition of AB 32, the Global Warming Solutions Act of 2006. The bill was passed with gusto in sunnier economic times before we knew California had endured a net outmigration over the past 10 years. This ought to help. The New York Times reports on Morning Star, a tomato producer figuring out how to withstand the financial blow of the new system. Morning Star, it notes, has to stay in California, for proximity to tomato farms, but it may now struggle to compete with foreign producers. Other companies don’t have to stick around:

Companies are trying to figure out how this will affect their bottom lines and have lobbied state regulators to minimize the costs. In the meantime they are weighing their options. Should they stay and adapt or move operations elsewhere? Should they retrofit and innovate to reduce emissions? Should they swallow the regulatory costs or pass them on to customers?…

About 600 facilities with hefty emissions are covered by the Global Warming Solutions Act of 2006. Oil refiners, electric utilities and cement makers, whose greenhouse-gas output totals in the millions of metric tons annually, are the biggest. But over all, dozens of industries are affected.

In recent months, as the start date of the new cap-and-trade program neared, California regulators have fine-tuned the rules, industry by industry, to avoid imposing severe economic hardship while trying to keep the rules stringent. It is a delicate balance. Regulators do not want California companies to lose their competitive edge, because that could make other state governments reluctant to adopt this approach.

The Times notes, the decision to simply move, pay to emit, or pay for emissions-reducing technology may be do-or-die for some companies:

The state’s Air Resources Board is using an array of policies to reach its intended goal of reducing emissions to 1990 levels by 2020. It has tried to structure the cap-and-trade program to encourage industry investment in energy efficiency that could cut costs as well as lower emissions. Investing in energy efficiency may make sense for companies under California’s rules, Dr. Fowlie said, “but if they are making them before their competitors, that could be fatal.”

Companies like Morning Star will be given free credits to cover most of their emissions in the first year of the program in the effort to smooth the transition, but their costs will gradually go up over the years.

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