Californian CO2 market delay seen up to 12 months

  • Downtown Los Angeles is seen from a freeway in a file photo. REUTERS/Lucy Nicholson

By Nina Chestney

BARCELONA | Thu Jun 2, 2011 12:36pm EDT

(Reuters) – The start-up of a carbon market in California, viewed as a potential template for future U.S. national emissions trading, could be delayed up to 12 months or more, experts at a carbon conference said on Thursday.

The multi-billion dollar plan will be key to helping the state reduce greenhouse gas emissions to 1990 levels by 2020, a target mandated under a law passed in 2006 known as AB 32.

It is scheduled to begin operating on January 1, 2012, but a California judge’s ruling last month put the move on hold until the agency designing the market completes an analysis of alternative measures to cut greenhouse gases other than carbon trading.

“I don’t know anyone who thinks this will go live on January 1,” said Brian Storms, chief executive of environmental exchange NYSE Blue.

“We are realistically looking at a two to 12 month delay, assuming there are no more challenges in court,” he added.

The so-called Western Climate Initiative of California and some Canadian provinces is seen by many as the most ambitious program to cut emissions in the United States in the absence of federal cap and trade legislation.

It could form a model for a U.S. federal scheme, which has been shelved for now, but which could re-emerge on the political agenda in two to four years, experts said.

DELAY

“The collaboration is there, but I don’t know if the January 1 deadline will be reached,” said Myriam Blais, environmental and climate change coordinator at the ministry of Quebec.

“Quebec is putting in its own regulation, which will be made public at the end of this month. That will hopefully be adopted by the Fall so we can be up and running by 2012,” she added.

In May, a judge ruled that the California Air Resources Board (ARB) had not adequately considered alternative policies to cap-and-trade and ordered it to stop work on the program until an “alternatives analysis” was complete.

But the ARB will continue designing the scheme as it plans to appeal against the ruling, which would stop the order from taking effect.

Some believe the market will still face a delay of at least 12 months, however.

“The delay is in California’s ability to comply with the judge’s ruling. In the filings there were only three pages devoted to additional (emissions cutting) measures,” said Stephen Starbuck, partner in Climate Change and Sustainability Services at Ernst & Young.

“(The ARB) will have to demonstrate that they have done the proper analysis of alternatives and I suspect it is not going to be easy. It is always possible there could be more challenges as well,” he added.

But even a later-than-anticipated launch is not expected to threaten the existence of the plan.

“It is possible that it will be delayed and there will be small changes, but I would argue against anyone who says this is a legitimate threat,” said Nathan Richardson, a resident scholar at Resources for the Future.

(Reporting by Nina Chestney; editing by Keiron Henderson)

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