Isra-Mart srl: California ‘sensible’ to delay start of trading – experts

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California regulators will give emitters an extra year to comply with their cap-and-trade programme, but regulated entities should not become complacent, market experts said.

The California Air Resources Board (ARB) has proposed launching the programme in 2012, but starting the compliance requirements in 2013, according to ARB chairwoman Mary Nichols.

But this change will not affect the stringency of the programme nor change the amount of emissions reductions that it sets out to achieve, she cautioned.

Talk of a delay has dominated the markets due to a court ruling that found that the ARB had not sufficiently analysed alternatives to cap and trade, such as a carbon tax, as part of an environmental analysis required under California law.

A trial judge issued an injunction preventing the ARB from implementing its proposed programme, but an appeals court granted the agency’s request to continue developing the programme pending the final outcome of the appeal.

Market experts welcomed the announcement because it gives emitters more time to fully develop their compliance strategies, particularly as major elements such as individual allowance allocations and a full list of eligible offset projects have yet to be finalised.

The International Emissions Trading Association “believes this delay is a sensible step to ensure the programme is a success when fully implemented”, said Hannah Mellman, US policy advisor based in Washington, DC. “The extra time will help create a better functioning market and give participants greater certainty and confidence that the programme will work as efficiently as it was intended.”

“Chairwoman Nichols has delivered an elegant solution that will keep the environment whole and have a minimal impact on sources,” said Josh Margolis, San Francisco-based co-CEO of environmental broker CantorCO2e.

But observers cautioned emitters against complacency and urged them to take the extra year to carefully plan their compliance strategies.

“Affected sources understand that ARB has given them a breather, not a pass,” Margolis said. “Some who were breathing into a paper bag, who were fast running out of options and looking for the exit, can now take the time to develop compliance options.”

The ARB staff will hold a public workshop in the next few weeks on this proposal and receive feedback on elements needed to finalise the programme rules.