Cap-and-Trade System To Be Adopted This Week by California

California, which has the world’s eighth-largest economy, is expected to approve regulations this week that will impose a cap and a price on CO2 emissions beginning in 2012. The California Air Resources Board is set to adopt key provisions of California’s landmark climate bill, known as AB32, at meetings Thursday and Friday. Under the plan, emissions from the state’s 600 biggest industrial facilities — including cement manufacturers, electrical plants, and oil refineries — would be capped in 2012, with that ceiling gradually diminishing over eight years. Mary D. Nichols, chairwoman of the Air Resources Board, said the cap-and-trade system “will help drive innovation, create more green jobs, and clean up our air and environment.” Concerned that the cap-and-trade system might inhibit the ability of California businesses to compete with companies in other states, the Air Resources Board softened the law in several significant respects. Instead of initially auctioning the permits needed to emit CO2, the board will give them out for free during the first three years, then phase in a system of purchasing emissions permits. The board also approved a plan allowing companies to offset up to 49 percent of their emissions by investing in CO2 reductions elsewhere, such as forestry preservation projects.