How do you prevent big business from polluting the environment, while simultaneously funding green industries? Move to California. Last week, the state passed Assembly Bill 1532 (AB 1532), also known as the "carbon market mandate."
Boring government jargon aside, the assembly bill could be a boon for the state, environmentally and financially. It charges massive fees to major corporate polluters, and then takes those fees and invests them into eco-friendly businesses that reduce greenhouse gas emissions.
Starting in November, the state’s biggest greenhouse gas emitters― like power plants and large manufacturers― will have to purchase “carbon pollution allowances” at auction. Revenue from those auctions is expected to reach into the billions by next year, pumping some desperately needed funds back into California’s economy, Forbes reports.
According to Bay Area news channel KQED, by funneling auction revenues into green businesses, like sustainable farming, and encouraging corporate polluters to find more eco-friendly methods of conducting business, the state has a chance to reduce its greenhouse gas emissions by 80 percent by the year 2050.
What exactly constitutes a green business? The news channel reports that sustainable agriculture is on the state's approved list. This includes farms that "sequester carbon" with methods like reducing soil tillage, practicing water and energy conservation, and reducing synthetic fertilizer use through compost, cover crops, and crop rotation.
Surprisingly, California isn’t the first state in the union to try a carbon market mandate of some sort. Grist reports that a group of northeastern states, called the Regional Greenhouse Gas Initiative (RGGI) has been practicing a similar system since 2008. But in RGGI’s case, it charges carbon allowances exclusively to power plants, whereas California’s plan spans across all sectors of business, dependent on a company’s overall pollutants, not its category.
The question remains: What will happen to those companies that have to pay significant fees for their pollutant allocations? Not all of the companies that fit California’s definition of a “major polluter” are in fact conglomerate-sized businesses impervious to the loss of a few million dollars.
For instance, Grist reports that Pacific Coast Producers (PCP) is a processing plant that packages tomatoes. Its use of steam creates enough greenhouse gas emissions to make it (just barely) qualify as a polluter by California standards, but it doesn’t necessarily have the funds to shell out six-figure fees for carbon allowances.
Because the carbon cap will get lower every year, PCP may have to significantly cut its production in coming years to insure it stays below the state limit for carbon emissions. And unless new advancements in steam boiler technology suddenly manifest, the chance of the plant reducing its emissions by altering its technology seems slim.
Critics of the plan warn this is exactly why the carbon market cap could be bad for business; it will put too high of a burden on companies, which in turn will either wither and close, or will force those costs onto their customers.
Which side of the argument is right remains to be seen. And because California is pioneering this assembly bill, it doesn’t really have a predecessor to learn from. It’s a grand experiment, but whether you believe in its viability or not, the state cannot go on as it has― destroying its environment for the sake of boosting commerce. It’s far past time for the two to align.
Would you support assembly bill like this in your own state, or are you concerned it will shut down businesses during an already fragile time in our economy?