Carbon is now a commodity. Under California’s Global Warming Solutions Act, businesses and institutions – including universities – must pay for the carbon they emit.
Senate Bill 497 strives to alleviate the financial burden on the University of California and California State University by freely allocating allowances, effectively exempting both university systems from having to purchase more carbon.
UCLA, as an energy-producing institution, has already spent $6 million purchasing carbon allowances since the program kicked off with its first allowance auction in November 2012.
This bill, while well-intentioned, is counter to the overarching goal of cap-and-trade. By wholly excusing the institutions, the state fails to hold itself accountable for emissions and sets a precedent contrary to California’s commitment.
A more viable alternative to the senate bill would be to provide temporary, limited carbon allowances rather than outright exemption. The California Air Resource Board, which manages sources of emissions of greenhouse gases in the Golden State, could provide a compromise by alotting a certain number of credits to the university systems without allowing them a free pass.
Cap-and-trade programs hold institutions accountable for their greenhouse gas emissions by setting a total limit, or cap, on the amount of carbon that can be emitted by all utilities in the state.
Professor J.R. DeShazo, Director of the Luskin Center for Innovation, said that the program combines environmentalism and economics by creating a market-driven incentive for businesses to reduce their greenhouse gas emissions. If a company does not reduce its emissions, it must purchase additional allowances from an entity with unused credit to cover the excess carbon they emit.
While it is clear that the cap-and-trade program presents a financial burden for the UC and CSU, Senate Bill 497 jeopardizes the longevity of the cap-and-trade program.
While the universities may be strapped for cash, providing limitless carbon permits creates a dangerous precedent against Assembly Bill 32, which was signed by Governor Schwarzenegger in 2006 and commits California to reducing its greenhouse gas emissions to 1990 levels by the year 2020.
“In principle, it’s probably not a good idea to provide a lot of exemptions,” DeShazo said. “Why is it that public universities should not be held responsible for the emissions that they produce while other emitters do have to be responsible?”
Certainly, the UC and CSU were among some of the earliest enactors of reforms to reduce greenhouse gas emissions and should not be penalized for such actions.
Prior to the cap-and-trade legislation, UCLA implemented its own target for reduction under the UCLA Climate Action Plan and UC Office of the President Policy on Sustainable Practices. UCLA has managed to keep its greenhouse gas emissions roughly level even as the campus has expanded, said Nurit Katz, the chief sustainability officer at UCLA.
Theoretically, the cap-and-trade program should provide a financial incentive to reduce overall greenhouse gas emissions. For UCLA, however, the program creates a somewhat reverse incentive.
UCLA’s action plan included the construction of a cogeneration power plant, also known as “Co-gen”, which provides a majority of UCLA’s electricity. UCLA generates roughly 70 percent of its own electricity and buys the remaining 30 percent from the Los Angeles Department of Water and Power, Katz said.
Because the cap-and-trade program imposes compliance fees on electricity-producers – not consumers – it only regulates the emissions generated by UCLA’s power plant. This means UCLA must still purchase carbon allowances, even though the electricity generated by Co-gen is cleaner than the electricity the univeristy purchases from the Department of Water and Power.
UCLA’s cogeneration power plant generates electricity from natural gas and compbustable landfill gas. The L.A. Department of Water and Power generates power from a mixture of renewable resources and fossil fuels, including coal, producing roughly twice as many greenhouse gas emissions per hour as Co-gen.
The allowance fees for cap-and-trade will cost UCLA roughly $2-3 million annually, Katz said. This fee could continue to rise as the cost of allowances goes up.
For this reason, UCLA deserves some form of financial relief in order to alleviate this burden.
This financial relief could come with transitional assistance from the California Air Resources Board, which oversees the cap-and-trade program.
The California Air Resource Board should recognize the universities for being early actors through the provision of a more limited number of carbon allowances. Currently, there are talks about making a legislative amendment to the California Global Warming Solutions Act that would authorize the board to temporarily give assistance in the form of free allowances, Katz said.
This method would provide financial relief for the universities while still keeping them accountable for their carbon emissions.