2012-12-24. California Law Tests Company Responses to Carbon Costs

posted Dec 26, 2012, 7:13 AM by Alan Gould
| Felicity Barringer, The New York Times. Relevant to GSS Climate Change, chapter 9. Excerpt:   …Beginning Jan. 1, under the terms of a groundbreaking California environmental law known as AB 32, … 350 companies statewide will begin paying for those emissions, which trap heat and contribute to global warming. Companies ... have lobbied state regulators to minimize the costs. In the meantime they are weighing their options. Should they stay and adapt or move operations elsewhere? Should they retrofit and innovate to reduce emissions? Should they swallow the regulatory costs or pass them on to customers? … Regulators do not want California companies to lose their competitive edge, because that could make other state governments reluctant to adopt this approach. …For the 200,000 metric tons of carbon dioxide emitted annually by Morning Star’s three plants, the company is being awarded about 192,500 free allowances the first year; the company must buy the remainder on the open market. In the first allowance auction in November, the allowance price settled at $10.09 a ton, meaning in the first year Morning Star has to pay roughly $75,000 to cover its emissions. But over the next five years, the number of free allowances will decrease sharply to encourage further emissions cuts. At current rates, that means Morning Star will have to buy 100,000 allowances for both 2017 and 2018, by which time the prices may have doubled or tripled in an open market. The company estimates the law will cost it an extra $20 million over the next seven years. Nick Kastle, a company spokesman, said it would almost certainly pass on the new costs to makers of ketchup and frozen pizza, which would be likely to share the extra costs with consumers. “People nationwide are going to be affected by AB 32,” he said.…. Read the full article: http://www.nytimes.com/2012/12/25/business/energy-environment/california-manufacturers-weigh-costs-of-new-greenhouse-gas-rules.html?nl=todaysheadlines&emc=edit_th_20121225&_r=0