In an effort to dissuade companies in key industries facing new carbon costs from leaving the state, California is considering giving them millions of dollars worth of additional free greenhouse gas allowances, state’s air regulator said on Monday.
California’s cap-and-trade program seeks to emulate tactics used in the European Union and Australia to address emission “leakage” – a term describing the exodus of employers from a state or country in order to sidestep environmental costs.
The California Air Resources Board (ARB), the regulator of the forthcoming program, held a workshop in Sacramento on Monday where it discussed plans to give away more free permits to prevent leakage in “trade-exposed” industries like cement production, oil refining and food processing.
Over the first three allowance auctions, which begin in November, the state will sell 48.9 million allowances and give away 53.8 million allowances, according to ARB.
Any company deemed to have either a high, medium or low risk of leaving the state will receive all the allowances they need to comply with the program during the first two-year compliance period, from 2013-2014, rather than have to buy the permits at regular auctions.
But those in the low and medium risk groups are currently scheduled to see their allotment of free allowances start to decline in 2015 by as much as half.
ARB officials on Monday said they are conducting studies examining the leakage risk of companies based on their historical energy costs and trade flows.