Mary Nichols yesterday made much ado about the impact that California's cap and trade scheme would have on the development of clean technology.
The chairwoman of the California Air Resources Board yesterday said in her opening remarks: "The programme sends a clear signal to the global investment community that an investment in California's clean technology and clean energy industries will be rewarded, maintaining our status as a magnet for cleantech investment.
"Cap and trade sends a policy signal to the market and guarantees that California will continue to attract the lion's share of investment in clean technology."
Unlike last December's meeting, when there were less than a handful of opposing voices, opponents of cap and trade from steel unions and oil refineries attended in great numbers.
BP America and the Western States Petroleum Association were among those who lined up for their 3 minutes in front of the board to complain about the "10% haircut" for oil refineries because the benchmarking gives free allocation for only up to 90% of emissions.
Carb has this year introduced a best in class benchmarking system so that at least one installation in each sector will be allocated 100% allowances. While examples where given for the cement and glass sectors, perhaps many of California's refineries fear they will flunk the class, even though as Carb staff pointed out the benchmarking in the EU system had been set at a more "ambitious level".
Chris Riley, who described himself as a "concerned citizen employed by Valero" which attempted to spike the cap and trade scheme last year through the ballot box with prop 23.
"I'm concerned about how these emission taxes and in general this will have impacts on our families and higher energy costs that will be incurred consequently what will happen to our jobs."
Lisa Bowman, a ConocoPhillips employee, made an impassioned testimony about how her company had allowed her as a single mother to bring up her children without government support. She asked Carb for "leeway" to meet the regulations on behalf of her employer.
Enough individual ConocoPhillips employees followed to repeat their concerns about job losses to suggest their presence was not a spontaneous response.
As Carb's charts for mandatory GHG reporting clearly show, refineries are the biggest polluters in the state. California's stringent regulations on refineries makes building a new installation prohibitively expensive, while the refineries themselves claim that they are already working to optimal levels of efficiency. But refineries run a double accounting system for carbon emissions by producing transportation fuels, thereby being involved in the first and second highest source of emissions in the state and reductions are not going to be easy, the refiners say.
Mike Wang, of the Western States Petroleum Association, said: "Our facilities are the cleanest in the world and they produce the cleanest products. What you are hearing from us is can we choose alternatives to the 10% reductions in allocations. Can we achieve the goals of AB32 more easily?"
So far, Carb's rules have been subject to legal challenges from environmentalists, not industry. But that may change once implementation approaches and it will be interesting to see how Californian oil refineries respond to mandates designed to force innovation.
In the EU, the Emissions Trading System is also designed to be a principal driver of the deployment of low carbon technology. The NER300 assists with large-scale demonstration of low carbon energy technologies in Europe and bridging finance also comes from the European Economic Recovery Programme, the Strategic Energy Technology Plan and the Global Energy Efficiency and Renewable Energy Fund.
A report published soon after the EU ETS began showed that anticipation of mandatory emission limits can drive innovation. The report included a case study at the Shell Pernis Refinery in Rotterdam, Europe's largest refinery, where engineers have been capturing 170,000 tonnes of CO2 a year since 2005. The CO2 waste is converted into fertilizer, avoiding the need to import and burn natural gas to generate fertilizer. It's a double accounting benefit from fossil fuel industry.
But Europe's power sector is the great polluter not refineries, and account for 60% of EU ETS emissions. Electricity generation in California produces 20% emissions in the state which mostly burns natural gas to produce electricity.
California is clearly a leader in many market segments of the broad category of cleantech. It already appears to dominate the solar market in the US. Some of this success can be attributed to the state's Renewable Portfolio Standard - the most aggressive (and mandated) target in the US. But it means the state's the power sector is primed for innovation in energy efficiency and cleaner generation.
And the transportation sector could also flourish as the low-carbon automotive industry has followed the money to the west coast where the bulk of VC capital has come from to fund Tesla and Fisker (it also helps that VCs are a perfect test market for the upmarket electric vehicles).
The California Global Warming Solutions Act of 2006 acknowledged its position and potential as a cleantech leader and ordered the Economic and Technology Advancement Advisory Committee was created under to advise Carb on "identifying new technologies… that will assist in the reduction of greenhouse gas emissions."
But yesterday it took 79 testimonies and seven hours to return to the subject of stimulating cleantech when board member, Daniel Sperling, asked whether it would be a good idea for Carb to employ a chief technology officer who could monitor whether the scheme was incentivising innovations in energy efficiency and clean tech. Presumably this person would sit alongside ETAAC's chairman, Alan Lloyd.
Carb staff agreed to look into this "interesting issue" raised by Sperling.
But a report from the Fraunhofer Institute in Germany last year indicated that the connection between cleantech development and climate policies such as carbon trading is not so clear cut.
The authors found that: "the innovation impact of the EU ETS has remained limited so far because of the scheme’s initial lack in stringency and predictability and the relatively greater importance of context factors. … Our analysis suggests that the EU ETS by itself may not provide sufficient incentives for fundamental changes in corporate climate innovation activities at a level adequate for reaching political long-term targets."
Recent low carbon prices of around €10 have hardly helped to stimulate behaviour change and innovation in the EU.
Metrics will be vital to California's scheme but carbon reductions shouldn't be the only thing Carb measures - progress in cleantech innovation and job creation will be vital too.
But new and unforeseen opportunities would inevitably arise from the cap and trade scheme - along with the unintended negative consequences, Nichols said yesterday.
"When the nation is ready to address the growing danger of climate change as I believe it must and it will California's climate programme will serve as the model for a national programme. We believe that if we implement a cap and trade programme in California other states, the federal government and other nations will join with us."