THE MONEY TRAIL
Cap and trade program price tag: $2 million
The state will spend nearly $2 million to develop one of the centerpieces of its climate change programs: cap and trade.
Starting in 2013, the state will place a ceiling on the amount of greenhouse gases produced by California's 350 largest oil producers, refiners, electric utilities and other large industrial companies.
These companies – which generate about 85 percent of all carbon dioxide emissions in the state – must then buy or sell the allowance permits to cover the amount of carbon they produce, thereby creating a trading market for the carbon allowances.
The California Air Resources Board, which regulates the state's climate change programs, has began to ramp up for the program.
It recently issued four bid solicitations for contractors to help develop what's likely to be the largest carbon trading market in North America.
The two-year contracts include:
• $750,000 for a vendor to operate the quarterly allowance auctions;
• $500,000 for handling the auction's financial transactions, such as wire transfers, check clearing and letters of credit;
• $400,000 to monitor the trading of allowances and ensure that no market manipulation goes on, and;
• $200,000 to provide training for Air Resources Board staff.
The ARB, which will select the contractors by the end of the year, will fund the work through fees it charges large industrial companies and not through revenue generated from the auction sales.
Companies that pollute more than their allowances permit must purchase more allowances to cover their excesses. Those that pollute less can sell their unused allowances to companies that pollute more heavily.
Although 90 percent of the allowances will be given away free, companies must purchase 10 percent of those allowances.
According to the Air Resources Board, the 10 percent sold at auction could raise between $300 million and $500 million a year – money that will go to the state's general fund.
– Rick Daysog
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