CARB Board Unanimously Approves Extension of Industry Assistance for Second Compliance Period

On Friday, April 25, 2014, the California Air Resources Board (CARB) voted unanimously to extend by three years free supplies of greenhouse gas (GHG) allowances to companies subject to the Cap-and-Trade regulation.   The move will provide substantial relief for companies that have been designated a medium leakage risk under the Cap-and-Trade regulation.

Under the regulation, companies designated as a medium leakage risk were scheduled to lose 25 perecent of the industry assistance starting in 2015, the beginning of the second compliance period.  With the extension, all facilities, regardless of leakage designation, will continue to receive the same amount of industry assistance in the form of free allowances in the second compliance period as received in the first, that being 100 percent.

Industry assistance essentially means that ARB will provide free GHG allowances to companies subject to compliance obligations under the Cap-and-Trade.  If ARB did not provide the assistance, the companies would be required to purchase potentially millions of GHG allowances, which average about $14.

CARB staff first proposed the extension in 2013.  The proposal drew significant early opposition from environmentalists, who labelled it "windfall profits" and argued that relaxing the GHG allowance allocations for major industry sectors may undermine the integrity of the program and could fail to produce a desired "carbon price signal" in commerce.

CARB was originally scheduled to consider the revised proposal for adoption at its October 24-25, 2013 meeting.

In addition, Chairperson Mary Nichols indicated that CARB will continue to look at possible future modifications of industry assistance for the third compliance period beginning in 2018.  However, no further explanation was given and it is unknown whether that means CARB may consider a further extension of industry assistance or not by 2018.

Article written by John Larrea, Government Affairs Director, California League of Food Processors

California League Of Food Producers