Processors, ranchers question potential for costs, opportunities
By WES SANDER
As California begins creating a cap and trade system to reduce its emissions, food processors fear added costs while ranchers want more profit opportunities.
The state's goal, as mandated by the greenhouse gas reduction bill AB 32, is to reduce emissions to 1990 levels by 2020, and officials plan to employ a cap and trade system to help reach it.
The California Air Resources Board took public comment through mid-January on its first draft proposal, and plans to have a second draft ready by spring.
Matt Byrne, a spokesman for the California Cattlemen's Association, said the system needs to allow more opportunities for producers to get involved in a carbon-offsets market. But the proposal limits the offsets emitters will be allowed to buy, reducing the incentives ranchers will have to invest in carbon-sequestration projects.
The board has proposed limiting an emitter's use of offsets to 4 percent of its total emissions. Such a low limit would likely discourage ranchers from investing in carbon-sequestration projects, fearing their efforts will be worthless as the limit is reached, Byrne said.
While ranchers anticipate opportunities for creating offsets, the means of measuring their effects are still developing.
"At this point in time, we're still learning what those (offsets) are, and ... their relative value," Byrne said.
The state is scheduled to start auctioning allowances beginning in January 2012. Allowances will be auctioned quarterly throughout a three-year period, and emitters will be allowed to buy additional offsets within the limits.
The offsets would be created under third-party verification through various projects, including some in the agriculture and forestry industries.
That certification would be done according to protocols that the air board adopts. To date, the state has developed a protocol only for dairy digesters.
"We're beginning to look at the extent to which soil can sequester carbon dioxide," said Stanley Young, an air board spokesman.
Rob Neenan, vice president of government affairs with the California League of Food Processors, said the program's resulting costs could be difficult for processors to manage.
The proposal limits emissions to 25,000 tons of carbon annually. Of the state's food processors, 38 emit more than that, with most emitting around 50,000 tons annually, he said.
With economists predicting that prices for offsets and allowances could reach $60 per ton, those high-emitting processors could spend several million dollars annually to cover their emissions, Neenan said.
Those costs could push the state's processors, which buy more than 300,000 acres of California produce, to leave the state, Neenan said. More immediately, the impact could result in lower prices to contracted growers, he said.
"Companies are already at the limit of what they can afford," Neenan said. "They may leave the state or leave the country, to where they don't have this burden."
The air board plans to publish a third draft of its proposal in the fall. The state plans to adopt a cap and trade program by January 2011, and implement it by January 2012.
Other ag groups say they have yet to analyze the proposal.
"There's going to be a whole lot more that happens in the next few months, and there's going to be more clarity," Byrne said.