Industry Market Trends

NAM Adds Voice to Chorus of Objections to California Cap-and-Trade Program

Feb 21, 2013

Credit: Kim Seng. Credit: Kim Seng.

The National Association of Manufacturers (NAM) has joined the legion of organizations and political groups speaking out against California's cap-and-trade auction, the second of which took place on Tuesday, Feb. 19.

California's Global Warming Solutions bill (Assembly Bill 32) has been controversial since it first became law in 2006. But the biggest impact of the bill has only just taken affect this year, as a cap on carbon emissions kicks in. But the biggest complaint most have with the bill relates to the California Air Resources Board (CARB)'s auction, where businesses can bid from a fixed pool of permits to emit carbon above the cap. The auction is being used a revenue generation opportunity by the state of California.

Many object to the CARB capitalizing on the carbon cap, claiming it's illegal. The California Chamber of Commerce even filed a lawsuit over the issue. The first auction, which took place in November, raised $55.8 million. CARB has not yet revealed how much the second auction raised.

NAM's complaint, which is shared by many energy-intensive businesses, is that the auction is nothing more than a tax on industries like manufacturing. Earlier today, Quentin Riegel, NAM's vice president of litigation and deputy general counsel released a statement saying, "The intent of the program is to simply reduce emissions. However, the income generated by the auction far exceeds the costs needed to run the program. This income stream goes beyond the legal authority of the state's CARB and constitutes a new tax, requiring the legislature's approval."

NAM is intervening in the California Chamber of Commerce's lawsuit against CARB, but according to Riegel, it's not a question of the auction's legality. He says, "The NAM's intervention focuses not on the legality of the cap-and-trade program itself but on the extraordinary revenues generated by the auction and reserve sale provisions adopted by CARB. The auction as carried out by CARB will drive up energy costs for manufacturers in California, harming their competitiveness and ability to grow. Manufacturers use one-third of our nation's energy supply, making access to affordable energy critical to their ability to create jobs and invest in the future."

Riegel's statement refers to the "extremely high revenues" that the auction is bringing to the state. While $55.8 million represents no small amount of money, it falls far short of the $200 million that Gov. Jerry Brown is counting on the program to raise as part of the state's 2012-2013 budget.