Power plants, natural-gas extraction ops prep for California’s new carbon market.
Thursday, November 15, 2012
Despite the groaning from big polluters, California’s first carbon auction kicked off Nov. 14, launching a cap-and-trade program second in scale only to the European Union’s.
The auction, open to major greenhouse gas emitters such as power plants and cement manufacturers, is the first phase of the state’s ambitious carbon program. The goal is to reduce greenhouse gas emissions by 15 percent under the state’s climate law, AB 32, by 2020.
Companies get free credits for 90 percent of their recent emissions and must cut or buy the remaining 10 percent. One credit (at a starting auction price of $10) is worth 1 metric ton of emissions. The cap on total carbon permits will ratchet down 2 to 3 percent per year, creating a market incentive to invest in cleaner tech.
Stanley Young, spokesman for the California Air Resources Board, says companies can always buy and sell credits on the open market. “The can put it on eBay if they want to,” he says. “It’s a commodity, like a pound of copper or pork belly.”
A CARB map shows 10 affected facilities in Monterey County. The biggest by far is Dynegy Energy’s 2,529-megawatt, natural-gas-fired power plant in Moss Landing, which emitted more than 1.4 million metric tons of greenhouse gases in 2010.
Dynegy spokeswoman Katy Sullivan says the cost of the cap-and-trade program could force the plant to scale back its operations. “It increases the cost of generating electricity in California, but on the plus side it’s applied to all natural-gas-fired generators equitably,” she says. “So the competition is subject to the same cost structure that we will be.”
San Ardo is the other local hot spot, with about 900,000 metric tons emitted by two cogeneration facilities and two petroleum and natural-gas extraction operations.