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California Nears Decision On Cap and Trade

— California air-quality regulators spent Thursday hearing testimony on the nation's most sweeping greenhouse-gas-regulation systems. Air Resource Board members are expected to vote Thursday night or Friday on the proposal, which would involve financial incentives for power plants and other major polluters to cut emissions.

Many of those testifying were representatives of the business community. But, even among that subgroup there was little consensus on what the new regulations will mean for the state’s economy.

“Small businesses across our state stand to benefit greatly from the incentives a carbon emissions trading system establishes,” John Arensmeyer, CEO of Small Business Majority told the board.

However, a few minutes later Ruben Jauregui, of the Latino Institute for Corporate Inclusion, countered that the system will raise energy costs and squeeze small businesses.

“We’re very concerned that the cap and trade program you are considering will make it much more difficult for small businesses and entrepreneurs, who are striving to build and maintain businesses here in California, to be successful,” he said.

Representatives of San Diego companies Qualcomm and Solar Turbines also testified in Sacramento. They are concerned the organizations will be penalized for measures that actually reduce energy usage under the current proposal.

“We’ve got to make sure we’ve got a system that doesn’t penalize people for doing the right things and incentivizes the kinds of things we want to see,” said Ron Roberts, San Diego County supervisor and Air Resource Board member. He added that once adopted, the proposal will go through a series of improvements through the next year.

The cap and trade system is a key piece of California's 2006 climate law, called AB32. The board is expected to approve the proposal when it finally votes, with the hope that other states and nations will follow the lead of the world's eighth largest economy.

California's rules would set up the largest U.S. carbon trading market as a way to enforce the state's gradually tightening cap on emissions. Companies that reduce emissions below their capped level could then sell credits on a carbon market to polluters exceeding their cap.

The cap-and-trade rules are "a critical piece because it's the tool we're using to make sure we reward businesses that invest in efficiency and renewable technologies, and that we are pushing and creating the right incentives," said Mary Nichols, air-board chairwoman.

Nichols also believes the program will help spur economic recovery and innovation by influencing business to invest in clean technologies. In addition, money collected from the new carbon market is ultimately expected to provide billions of dollars for the state that could be directed by the Legislature to various clean-air programs.

Under the new California rules, regulators would enforce limits on heat-trapping gas emissions beginning in 2012, eventually including 85 percent of the state's worst polluters.

The amount of allowed emissions would be reduced over time, and the regulations would expand in 2015 to include refineries and fuel distributors like oil companies. The cap would reach its lowest level in 2020, when California wants its greenhouse gas emissions reduced to 1990 levels.

The Associated Press contributed reporting to this story.

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