All dressed up and nowhere to go? A California cap and trade update
EKO ECO Guest Blogger on September 21, 2012 2 Comments
By Selene Castillo
They've done the test run, they've set the date but how many entities will actually participate in California's initial cap-and-trade program? Talk of this question and more in this quick check in on recent west coast carbon developments.
To assist California in fulfilling the state's Global Warming Solutions Act (AB 32) objective of reducing GHG emissions to 1990 levels by 2020, the state will begin its much anticipated cap-and-trade program regulating initially electric utilities and large industrial facilities in January 2013. During the program's first year, the plan is to auction only 10% of credits, giving away the rest for free. Afterwards, the number of free carbon permits is expected to diminish annually, resulting in 50% of credits being auctioned by 2020.
In late August, the California Air Resources Board (ARB) conducted a mock GHG auction to test the system before the state's marketplace officially launches with its first "real" auction. ARB officials reported the pseudo-bidding among roughly 150 emitting entities went smoothly. However, they stated ARB will not disclose trading volumes and prices to prevent affecting future actions - like the first actual auction coming up on November 14.
But how many entities will turn up to take part when the big day arrives?
Market players say not to be surprised if participation in the initial auction is low - pointing out that, as of a notice sent out last week from the ARB, "Many covered entities have not initiated the user registration and account application process" for registering with the state's Compliance Instrument Tracking System Service (CITSS). This process is the first of a few mandatory steps that entities are required to undergo in order to participate in November's auction.
Says one Cali-facing forest carbon offset developer, "The big question right now is 'will everyone participate in November, or will no one?' Given that there are no compliance offsets in place and the actual true-up period isn't for several years, there's just not a lot of incentive to participate."
Indeed, though the ARB conducted its offset verifier and registry training from March-May of this year, it has not yet announced any accredited verifiers to audit projects generating reductions under one of the state's four compliance offset protocols. In the mean time, word has it that verifiers are informally filling up their calendars for compliance offset protocol audits as soon as ARB opens up the starting gate.
This is particularly true of projects in the forestry sector, where developers report sitting on potentially millions of tons of sequestration in wait to be verified to compliance offset protocols - that is, if ARB has the capacity to move projects quickly through the system. Verifier Environmental Services, Inc.'s Janice McMahon says of the forest carbon offset supply outlook, "I don't think there will be a shortage, but it depends on how many projects can get through, and in what timeframe. Forestry is definitely more complex than the other protocols they've approved."
Well timed for this discussion, last week, Finite Carbon and Downeast Lakes Land Trust (DLLT) registered the first Climate Action Reserve IFM carbon project outside of California in Maine. Finite Carbon says it intends to enter the Farm Cove project into California's offset project pool.
On a recent webinar detailing the American Carbon Registry's recently published Compliance Offset Supply Forecast, presenters made the point that forestry (particularly IFM) has the potential to generate the largest volume of reductions of the three major protocols that also include ozone depleting substance (ODS) and livestock methane destruction.
The truth of the matter is that the program is still in its very early stages although it's been in the works since 2006. In its first "go" at a real auction, participation and supply levels may not align with initial expectations - but that should not be taken as representative of the potential success of the program overall. It's a long road to November 14 and an even longer one to 2020. We'll keep you posted!
Dear Selene Castillo,
I think you should consider the serious concerns of the people in Acre and Chiapas, when you discuss cap and trade in California.
(This comment also refers to Beto Borges' post in http://www.acrealerta.com/colunistas/3/?p=369 . Please ask him for further information)
Please read this:
Problems with REDD and payments for environment services in Acre, Brazil
The state of Acre hit the world’s headlines in December 1988 with the murder of Chico Mendes, the president of the Union of Rural Workers of Xapuri. A year before his death, Environmental Defense Fund and National Wildlife Federation flew Mendes to Washington, D.C. aiming to convince the Inter-American Development Bank, the World Bank, and U.S. Congress to support the creation of extractive reserves.
Since then, Acre has received finance from the World Bank, the Inter-American Development Bank and the Brazilian Development Bank (BNDES) to protect its forests. Ecosystem Marketplace reports that in 2007, the German Agency for Technical Cooperation (GTZ – now renamed as GIZ) funded a report on the potential for a state-level REDD programme in Acre. WWF, IUCN, the Federal Univesity of Acre, IPAM, the Woods Hole Research Center, Embrapa and GTZ started working on REDD in Acre.
Six months of workshops took place in 2009-2010 to discuss draft guidelines for a PES-Carbon Programme in Acre. After attending one of these workshops, Beto Borges, of Forest Trends’ Communities and Markets Programme, described Acre as,
“The most advanced of all Amazonian states in Brazil to develop and implement PES policy… a state with a proven track record of forest conservation and involvement of traditional communities.”
In 2010, the state launched a System of Incentives for Environmental Services (Sistema de Incentivo a Serviços Ambientais, or “SISA”).
But not everyone is happy with Acre’s promotion of market based solutions to its environmental problems. An article by Elder Andrade de Paula, a professor at the Federal University of Acre, published in the October 2012 issue of World Rainforest Movement’s Bulletin questions Acre’s adoption of the “Green Economy” and market mechanisms supposedly aimed at saving the forests. In a longer piece about Acre, Paula writes:
The trade in “carbon” and other environmental services, represents a frontal attack on forest peoples’ autonomy, freedom and control over their territories, in addition to erroneously “offsetting” continued pollution in the industrialized countries of the North, as in the case of California and its agreement with the states of Acre (Brazil) and Chiapas (Mexico). In spite of all this, just as they did in the past, the communities and peoples for whom the forests are their “place in the world” are reacting and fighting back against old and new forms of destruction and plunder.
Paula notes that Acre remains one of the poorest states in Brazil. Indigenous peoples continue to struggle for the demarcation of their territories. Meanwhile the number of cattle in Acre has increased over the past decade from 800,000 to 2.5 million. Logging continues and the area of forest cleared in increasing.
Paula quotes Dercy Teles, the president of the Union of Rural Workers of Xapuri:
“PES policies only serve to silence these people, who have no opportunities or a voice. They have no voice because they sign a contract which is for at least 30 years. And for 30 years they place the area in which they live at the disposal of the government and the multinationals to do research and use all of the knowledge of the area in exchange for a meagre, insignificant amount of money. And what is even worse is that they can’t do anything in this area, they can’t fish anymore, they can’t remove wood for their own use, they can’t hunt anymore, they can’t do anything anymore.”
Michael,
FYI REDD is being dicussed in Acre, rather than implemented.
There is no indigenous communities in Acre that have signed a REDD contract.
Lets get the facts right first, so then we can have a more constructive discussion.
I believe we are all "fighting" for the same cause, lets figure out a way to focus on the bottom line.
Regards,
Beto Borges