On Friday, the California Energy Commission and the California Public Utilities Commission released a proposed Final Opinion setting forth regulatory strategies to achieve the goals of the Global Warming Solutions Act (AB 32).  To accomplish significant reductions in greenhouse gas emissions, the agencies reaffirmed their commitment to expanding energy efficiency programs and recommended that all electricity retail providers be required to deliver 33 percent renewable electricity to their customers by 2020.  The agencies also set forth their recommendations regarding the distribution of greenhouse gas emission allowances in AB 32’s proposed cap-and-trade program.  In particular, the agencies proposed:

• Starting in 2012, 80 percent of the emission allowances would be distributed for free to the electricity deliverers and 20 percent would be auctioned. Over five years, the percentage auctioned would increase by 20 percent per year, so by 2016, 100 percent of the allowances would be auctioned.
• Free emission allowances would be distributed to electricity deliverers based on their historic energy output, weighted according to the electricity’s fuel source.
• All or almost all of the allowances to be auctioned would be distributed to electricity retail providers, which would then be obligated to sell the allowances in an independent, centralized auction. The retail providers would receive the revenues from the auction, which would be used “for purposes related to AB 32.”

The agencies also expressed their support for linking California’s cap-and-trade program with other states in the Western Climate Initiative, and recommended that the market structure be designed to encourage open and transparent allowance trading and to allow unlimited banking of allowances and offsets.  The Energy Commission and the Public Utilities Commission will consider adopting the proposed Final Opinion at their October 16, 2008 public meetings.  Once approved, the recommendations will be considered by the California Air Resources Board in shaping the final scoping plan for AB 32.

For further information about this topic, please contact Akin Gump.