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Transportation Industry faces new challenges with California law to reduce greenhouse gas emissions

Transportation Industry faces new challenges with California law to reduce greenhouse gas emissions

The effects of California’s greenhouse gas (GHG) cap-and-trade program will be felt in transportation industry affecting trucking companies, air and ocean transport carriers, freight forwarders, logistics providers, and shippers.

On November 14th, California conducted the state’s first ever cap-and-trade auction to reduce greenhouse gas emissions. California has taken a leading position in the environmental effort to reduce greenhouse gas pollution. The California Carbon Market will be the second largest carbon market in the world, the European Union Emissions Trading Platform being the first.

While helping to reduce emissions, the State of California also expects to raise billions of dollars from selling carbon credits, known as allowances, over the next several years. Money raised will be used to invest in California’s clean energy future, funding projects in renewable energy, energy efficiency, advanced vehicles, and natural resource conservation. In addition, 25% of proceeds will be used in ways that benefit disadvantaged communities. These investments will boost clean technology in California, improve air quality, and create jobs.

Under California’s cap-and-trade program, power plants, refineries and other large polluters must purchase credits, known as allowances, equal to their reported and verified greenhouse gas emissions. California’s greenhouse gas (GHG) cap-and-trade program is regulated by AB32, a central element of California's Global Warming Solutions Act.

AB32 requires California companies to reduce carbon greenhouse gas emissions to the 1990 level by the year 2020. Under the law, the California Air Board is authorized to impose a market-driven system. The Board will set levels of emissions for certain industries and, if one company is able to become more efficient in reducing greenhouse gases, a market mechanism will allow it to sell credits to higher emitters or those who cannot cost-effectively reduce their emissions. Key elements of California’s program include giving free allowances (credits) in the beginning years to help companies with the transition; letting companies bank allowances for future use; and establishing an allowance reserve in case prices exceed a certain value.

How the California Cap and Trade Carbon Market Auction works:

 

1) California Air Board regulators set a limit or “cap” on the amount of greenhouse carbon emissions that private utility companies, oil refineries, oil producers, power generators, manufacturers’ factories and other industrial plants can emit that will gradually achieve a reduction of about 15 percent by 2020. The cap will drop 1 to 3 percent each year. Companies will buy and sell credits called allowances to release greenhouse gases. Greenhouse gas (abbreviated GHG) is a gas in the atmosphere that absorbs and emits radiation within the thermal infrared range thought to be a major cause of global climate change. The primary greenhouse gases in the Earth's atmosphere are carbon dioxide, methane, nitrous oxide, and ozone. Each allowance represents one ton of greenhouse gases.

2) Each private utility company, oil refinery, oil producer, manufacturer factory and other industrial plants must obtain a set number of credit allowances each year based on a benchmarking formula of the anticipated carbon pollinates or greenhouse gas emissions emitted from similar facilities. Companies who emit excess GHG emissions must buy more allowances. California will sell allowances four times a year through 2020 – 32 more times after November 2012.

3) Companies that are more environmentally friendly than their peers will have unused GHG credit allowances that they can sell.

4) Companies can buy and sell GHG credit allowances outside the California-run auctions. Each credit allowance will have a serial number and each sale must be reported to a central tracking system. Cap and trade will force companies to scale back their carbon pollution – or purchase allowances to get into compliance.

Greenhouse gas reduction is a global climate problem. California regulators hope that its greenhouse gas (GHG) cap-and-trade program will be adopted by other states. The California Air Resources Board will offer 23.1 million carbon allowances for the first phase of trading beginning Jan 1, 2013 and 39.5 million for the second phase starting in 2015. The carbon market prices and participation will fluctuate as the cap reduces and businesses decide how to participate and be in compliance The California Chamber of Commerce filed suit Nov. 13 against the auction, calling it unconstitutional, contending that the state had exceeded its authority in making the program a revenue-generator.

The effects of California’s greenhouse gas (GHG) cap-and-trade program will be quickly felt in the State’s transportation industry affecting trucking companies, air and ocean transport carriers, freight forwarders, logistics providers, and shippers. Freightgate, a global leader in technology software solutions for the logistics and supply chain industry, is taking a leading role in carbon footprint tracking. Using Freightgate’s COx wizard and modeling, shippers and carriers can capture, analyze and optimize the carbon footprint of their logistics and supply chains.

To learn more about the California Cap on Greenhouse Gas Emissions and Compliance, go to:http://www.arb.ca.gov/cc/capandtrade/september_2012_regulation.pdf

For a Free Demo of Freightgate’s carbon footprint tracking COx wizard and modeling, email: sales1@freightgate.com

Transportation Industry faces new challenges with California law to reduce greenhouse gas emissions


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