reuters_special report_california carbon rush

8/7/2019 Reuters_Special Report_California Carbon Rush

1/7

the california

carbon rush

REUTERS/MikE Blak

Th Gon Stat is tting that its n caron traing schm can

crat jos an cut missions. Is that Caiornia raming?

By PETER HEndERSon

SAN FRANCISCO, Feb 17

UNdeR CAlIFORNIAS New carontraing sstm, ig poutrs i

paing through th nos or th priig.An so i ron s in th stat.Th asic prmis is no pain, no gain

-- hn th pric starts to pinch, that i

spur innoation an Caiornia i a thor in grn tchnoog. Or at ast thatsth pan.

Th Caron Rush ocia gts unranxt ar. Por pants, actoris anothr companis i ha to otain anaoanc prmit or r ton o caronioxi th prouc. Aoancs i so at stat auctions an on an opn

markt.Most o th nancia sting is ing

ackoa. Th program gins ith a iggiaa, ith th stat haning out mostprmits r -- a sot start, is ho statocias trm it.

This n markt i rapi xpanginning at just unr $2 iion an risingto nar $10 iion in 2016, accoring to

ebruary 2011


2/7

caRBon TRading fEBRUaRy 20

stimats rom Point Caron, a ThomsonRutrs compan ocusing on caronmarkts.

Th stat is xpct to rap iions ooars in rnus, ut th si-cts arhar trifing. An it is on part o an arrao programs to comat cimat chang.Cap an tra is guarant to push up

gas prics or consumrs an, critics sa,som usinsss ma rin aa thaitiona costs in an ara high-cost stat.

An thats assuming it i ork. Thors iggst xisting caron markt, themissions Traing Schm in europ, hasn pagu proms, rom mispricingto tht, an prois no car mo orsuccss.

Moror, Caiornia has its on uniquostacs to orcom -- not th ast ohich is that its companis ar aragrnr than most.

Th pan i ha an impact that xtns on th stats orrs. I th caronmarkt can crat jos, cut missions anoprat cint, othr stats ou morik to gi it a hir. I it fops, th ont.

caRBon TRading HERE WE coME

CAlIFORNIA AIMS TO cut grnhousgas missions to 1990 s 2020,hich is no sma at. Highr prics, sath pans ackrs, i hp. As th thorgos, i gasoin costs mor, pop i gthigh-miag cars; i ctricit prics ris,usinss an homonrs i u nrg-cint ight us; i thr is a nanciapnat to urning coa, por pants i mor incin to us natura gas or ui ain arm.

Th cap-an-tra pan i put a imit ontota missions o grnhous gass, anar ar cras that imit, hich isxprss in caron aoancs. each mtricton o missions i ha to cor ithan aoanc, hich ma gin aa th stat, or so irct th stat or ona sconar markt -- that is, an xchang.big poutrs must account or thir on

missions. Sma poutrs -- such as cars --i s th ct in prics th pa or uan ctricit.

b 2016 Caiornias markt i aouta th th siz o europs, making it thscon argst markt in th or, PointCaron stimats. An th stat ma hacompan: Thr Canaian proincs --Ontario, Quc, an british Coumia -- as as th U.S. stat o N Mxico, aim to

join Caiornia unr th auspics o a group

ca th wstrn Cimat Initiati.Th stat i han out r caron prmits,

or aoancs, to companis that ac out-o-stat comptition, such as cmnt makrs.

Othrs i ha to u thm in stat auctionsan on th opn markt.

Prics ar xpct to start o o, at aout$13 a ton -- not high nough to spark muchchang. but Caiornia companis, araamong th canst an most cint in thcountr, i har prss to n chap,as as to cut missions.

Onc giaas rom th stat r up,markt prics i spik to $75 a mtric tonin 2020, Point Caron orcasts in a n

rport (.pointcaron.com). A pric thht, sa th pans champions, cou act a spur or innoation companis agr cuts costs.

EURoPEan ModEl

THe UNITed STATeS INveNTed th conco aoing por pants to tra rights pout in 1990. Th targt thn as acrain. Priat inustr scram to n t

chapst a to can up th nironm-- an succ, ith th most cicompanis sing prmits to th ast.

Som sa thr as no innoation a. A th por pants i as sitch or suur coas. An othrs sa thas incri innoation -- th popants sitch to or suur coas, jokconomist Jami Fin o th enironmntdns Fun, a major aocat Caiornias caron markt.

europ took th nxt ig stp ith a caan-tra caron markt in 2005, ut

has stum rom on aiur to th nNrous gornmnts ith no car ia ho much grnhous gass thir conomprouc foo thir companis ith rprmits hn th pan start.

Factoris cou not pout nough to kup ith th supp. Onc that cam knoin 2007, th pric o caron to nar zbut por pants manag to prot rom thanouts jacking up rats an sing rprmits.

gREEn REPUBlican:om Clioni govno anold

Schwzngg ld th div to mk th stt ld in

gn tchnolog. Photo tkn Jn 14, 2011. REUTERS/

MaRio anzUoni

California carbon market real-world effects

* Includes offsetsSource: Point Carbon and California Air Resources Board

Reuters graphic/Stephen Culp

Carbon dioxide equivalent mln tonnes

Gasoline and fuel oils

added to emissions cap

Business as usual emissions forecastEmissions cap*

Californias greenhouse gas market will force real cuts in carbon dioxide and other gases in 2016,

according to Point Carbon estimates. The cap-and-trade market expands from factories and powe

plants to include gasoline and natural gas in 2015.

0

50

100

150

200

250

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350

400

450

202020192018201720162015201420132012

Cuts required to meet emissions cap
http://www.pointcarbon.com/http://www.pointcarbon.com/


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I dont thInk the market

Is expectIng prIcIng to

Instantaneously rocket up.

HaRnESSing naTURE: Windmills sn t wind m in Plm Spings, Clioni, 9, 2011. REUTERS/lUcy nicHolSon

Price forecasts for California carbon market

Source: Point Carbon

Reuters graphic/Stephen Culp

Forecast $ per tonne of carbon High/low rangeAverage

California begins regulating greenhouse gases in 2012 using a cap-and-trade system that limitstotal carbon dioxide emissions. Each ton of emission must be covered with a permit. Permit prices

are expected to rise quickly late in the decade.

0

20

40

60

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202020192018201720162015201420132012

b th tim rguators ha ork thkinks out o th eTS, or emissions TraingSchm, th goa conom ha gon intoa taispin. That i th caron schms orkor it: an i actor os not pout.

Maartn Nis, an anast at caronconsutanc ecos, sai th europansstm i utimat ork. Starting in 2013,it shou aso com succssu in trms oaatmnt, h sai. Sinc som companisstor up caron crits hn th conomorc thm to sca ack prouction, manont n to o anthing unti 2014 or 2015,h sai.

In, a po Point Caron puishar ast ar sho th caron marktgaining criiit in europ. A majorito participants or th rst tim sai that

th sstm ha caus ructions at thircompan.

Simp starting captra, an haingsom crtaint that caron i pric,automatica changs th sstm inCaiornia sai can nrg ankr Jimbutchr o Southrn Caiornias RnaAisors.

larning rom europs misstps, Caiorniahas a car inntor o caron missions anhas sign its giaas to prnt por

pants rom proting rom thm, anastsagr.

with a U.S. ra ort on ho an a U.S.northast caron traing schm traing atamost augha o prics, Caiornia is thU.S. stanar arr.

loW-Hanging fRUiT

U.S. eNeRGy SeCReTARy Stn Chu ikto sa that th o-hanging ruit o a ocaron conom is nrg cinc, anthat th ruit is so o its ing on th grounor most o th nation.


4/7


but Caiornia at a that stu in th 1970s.It has n riting rguations to ncourag

consration sinc thn. Practica spaking,that mans som o th chapst as tocut th caron ootprint o Caiornia haara n on.

Th rst ars i as or poutrs,caus o a th r prmits. Prics orcontracts to stt nxt ar ar a oars pr ton highr than th $10 foorst th stat, ut nothing that i causmajor strain on ano.

I ont think th markt is xpctingpricing to instantanous rockt up, sailnn Hochschi, a trar an managingirctor o eoution Markts in N york,hich tras in europ an th Unit Stats.

but th rockt ma it ith a so-urning us, n i man companis hantraiz it t -- atr a, th rguatorpan as appro in dcmr, ith somtais sti to com.

Th stat projcts that 2017 i th rstar in hich th supp o crits i ssthan man. Th markt i gin to orcchang at that point. Point Caron orcaststhis a o rckoning a itt soonr, somtim

in 2016. No on isputs its coming.whn it os, th changs ik ont

chap. europan por pants otn can cutthir caron is sitching rom coa togas. but Caiornia utiitis ha ara onthat at most in-stat pants.

An othr orms o can tchnoog manot ra in tim to hp. Major manatorts to ui ast soar pants an inmiarms in th srts an mountains aso arhin schu.

Fina, th cap-an-tra markt oa sat a in th orm o crits projcts that ost caron missions, suas managing timr ans to cut trs

caRBon Sink: a viw o th Gci riv ost n Longvl, Clioni Jl 27, 2009. REUTERS/PETER HEndERSon

Big Bad caRS: evning tfc tvls soth long

intstt highw 5 in Clsd, Clioni 8, 201

REUTERS/MikE BlakE

To s a spcia rport rom Januar 2011on grn on grn tnsion or soaropmnt in Caiornia, cick hr:://k.ee./vj84

SOlAR SPeCIAl RePORT
http://link.reuters.com/vuj84rhttp://link.reuters.com/vuj84r


5/7


rqunt, thus soaking up caron, ancapturing mthan at air arms. but thri not nough in pac in tim, ithr.

Thats h Point Caron is orcasting thatprics i jump to tn $69 an $87 prton in 2020, sucint to tap a containmntrsr o crits that th stat ha hopou an unocia ciing on th markt.

A ot o por pants an inustriaaciitis ha ara ruc thirmissions. Th urn can us, thha chang thir oirs. So or thm itsgoing to har to cut urthr -- unss ntchnoog mrgs. For th markt hatthis mans is that thr ar o-costaatmnt options aaia. That i push

prics up a th a to th containmntrsr, sai emii Mazzacurati, ha oCaron Rsarch or North Amrica at PointCaron.

barcas Capita commoitis anastTror Sikorski ss th sam trn, ith thpric o caron rising rom $16 pr ton in thrst thr ars o th program, 2012-2014,to an arag o $40 pr ton in th sconprio an $73 pr ton in th thir prio,2018-2020.

you cou s som quit stick tims orth markt, h sai.

MaRkET MEcHanicS

IT COUld be wORSeTHAN stick, argusGar Strn, a porutiit xcuti.Strn i throughth isastrousrguation o thCaiornia pormarkt a caago an ars thcaron markt i

sma an opn tomanipuation. Th stat russ to st aimit or prics. Trars cou arn ho tocornr th markt (think enron) an thnho hostag utiitis an actoris ith nooption ut to u sk-high prmits on thopn markt.

Stat ocias sa th ar orking on nsaguars to stop just such orts an iuni thm in Ju. Caiornia aso pans tohir an xtrna monitor to atch th markts-- a k rcommnation o Strn. Im not

saing ou xpct th sam thing tooccur in th missions markts, h sai.Hor, int xpct that to occur inth ctricit markts.

en i a gos , nin ars o carontra ont nough to n orris aoutcimat chang, spcia i othr stats annations ont pitch in.

Th amition osnt a up in trmso hat th scinc is caing or. In act it

osnt gt cos, sai Grnpac orcampaignr Ro Skar, ho ris tcision to gi aa an poution prmat a. H aso turns up his nos at Caiorniapans to t inustr pa or osts projcts to soak up caron, such as ormanagmnt.

Osts ar sn as an important prisat a -- tting a roo gro iggto captur caron in its oo is chapr th

doUBlE dUTy: a pking stct t th univsit o Sn Digo Clioni ss innovtiv sol ts to collct nwl

ng om th Sn 8, 2011. REUTERS/MikE BlakEgaRy STERn

you could see some

QuIte stIcky tImes

For the market.


6/7


uiing a caron-r por pant, an asustantia portion o Caiornias missionsructions cou com rom such schms.

Onrs tpica pa contractors to risuch projcts -- hich is not issimiarto a on issur paing acrit agnc to rat it --ut signrs sa th ostprogram aois conficts ointrst an projct stanarsar xtrm strict.

To mak a srious nt inmissions, rguators i

targt transportation. Cars,trucks an pans sp out 40prcnt o th stats caron,mor than utiitis or inustr.

Th stats cimat changa cou ha n ca thCaiornia Ptroum Us Ruction Act,Mar Nichos, Caiornias top cimat changrguator, jok ast ar.

Th stat is th thir iggst usr ogasoin in th or, atr th U.S. as a

ho an China, ut rirs can changmissions r quick -- aing th car inth garag or uing a n, mor cint,car.

you ar just tring to gt pop to riss, cti, hich is proagoing to quit xpnsi, saiSikorski o barcas.

Auto us ar pu into thcap-an-tra sstm in 2015.Gasoin prics ar sur to risas istriutors ar orc to ucaron prmits.

Gas prics ris amost 1 cnt prgaon or r oar o caroncost. So a $50 caron pric oua 44 cnts to a gaon, PointCaron stimats.

Caiornians ara pa thhighst gasoin pric in th countr causo thir nironmnta rus, an this is goingto ri thm highr, sai bi da o rnrvaro, hich ntua i ha to uprmits or th grnhous gass ras

uring rning.Th rnris at varo, at ast, ar ao

as nrg cint as th can . Thr is caron scrur. It osnt xist, h a

iTS THE EconoMy, STUPid

CAlIFORNIA MAy be THe blUeST o stats, ut that os not mak it immuto th nationi ackash against puspning. dan logu, a Rpuican staAssmman, ris caron markts a Ponzi schm o sorts that i attrainstmnt an oans or qustiona c

nrg projcts.Th prom ith th grn conom

hn ou s grn, ou s susiizsai logu, on o th authors o a rjctNomr aot masur to rai tcimat a. His prim xamp o susiigon ar is San Francisco ba ara sopan makr Sonra, hich has rci$535 miion in ra oans ut has shxpansion pans in th ac o comptitirom China.

HigH-TEcH ToolS: Woks ssml Pon Sol 90kWp DC CPV gnting sstm tht ss wt to st cool nd tck th sn in Sn D igo, Clioni 9, 2011. REUTERS/Mi

BlakE

MaRy nicHolS


7/7


coVER PHoTo: a pking stct t th univsit o Sn Digo Clioni ss innovtiv sol ts to collct nwl ng om th Sn 8, 2011. REUTERS/MikE BlakE

Thomson rts 2011. all ights svd. 47001073 0310

rpliction o distition o Thomson rts contnt, inclding ming o simil mns, is

pohiitd withot th pio wittn consnt o Thomson rts. Thomson rts nd th Thomson

rts logo gistd tdmks nd tdmks o Thomson rts nd its flitd compnis.

FOR MORe INFORMATION CONTACT:

Jim impoco,

EntErprisE Editor, AmEricAs

+1 646 223 8923

[email protected]

clAudiA pArsons,

dEputy EntErprisE Editor

+1 646 223 6282

[email protected]

pEtEr hEndErson

+1 415 677 2541

[email protected]

It is uncar that Caiornias grn rami chang th conomics o uiing thactoris o th utur. Critics ar companisma simp choos to ot to ss coststats.

Caiornia is th U.S. hom o startups, Siicon va ntur capitaists ho gia miion oars hr, a miion oars thr,

hoping to th os an n th nxt

Goog. For thos oung companis, a sharpris in nrg prics rom th caron marktmak it orthhi to innt somthing n.

Oh o. Thats a mor than hatrna nrg ns to comptiti,sai Stphani Rosntha, prsint osouthrn Caiornias Pron Soar, at thprospct o ou igit riss in nrg prics

rom th caron markt.

Th ris o caron prics, thats xachat ths n tchnoogis n, sh saIt gts a mor intrsting or pop inst in ths tchnoogis.

(For mor nironmnta ns our enironmnt og

http://ogs.rutrs.com/nironmn(eiting Cauia Parso

an Jim Impoc

faST TRack:rsh ho tf

tvls noth nd soth lon

intstt highw 5 in ClsdClioni 8, 201

REUTERS/MikE Blak
http://blogs.reuters.com/environmenthttp://blogs.reuters.com/environment

reuters_special report_california carbon rush

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