Impending Cap-and-Trade Amendments: CARB's Proposed GHG Reductions and Industry Impacts

This recommendation follows CARB's 2022 Scoping Plan, which stated that GHG emissions must be reduced to 48 percent below 1990 levels by 2030 to be on track to meet the state's statutory 2045 emissions reduction target of 85 percent below 1990 levels. Among other changes, CARB is proposing to update industrial allowance allocation to protect against leakage risk and incentivize GHG emissions abatement actions in hard-to-abate sectors, such as electrification of natural gas-fueled industrial processes.

CLFP members who are subject to the Cap-and-Trade Regulation have a particular interest in these changes. A reduction in free allowances would affect the amount of resources available to invest in decarbonization industrial processes. This could jeopardize operations to the point of unattainable compliance costs which could result in plant closure. Notably, a large number of the food processors in the Cap-and-Trade Program are located in rural communities in the Central Valley that rely on the processors and the thousands of farmers that supply them for jobs and local tax revenue. In addition to GHG compliance costs, food processors are also facing rising costs for labor, packaging, water, and trucking, affecting the long-term economic viability of these operations. Closure of these facilities would have a devastating effect on local and regional economies, which would be inconsistent with social justice goals.

Ultimately, leakage is a major concern as competitors that are out-of-state do not have to meet these burdensome requirements. CLFP was able to communicate this and other concerns in a recent meeting with CARB staff. Although staff was not able to provide a date for the release of the proposed changes to the regulation, they encouraged CLFP to provide comments during the current informal comment period – ending on June 21. CLFP staff will be gathering industry information in order to provide as much guidance to CARB staff as possible. We will continue to reiterate arguments about the minimal impacts of our industry on statewide GHG emissions as well as the lack of “zero-emission” technology available to meet the varied needs of the food processing industry.

Members may also recall the pending Zero Emission Forklift rulemaking. CARB staff has been working on this regulation for the last few years, and it will be presented before the Board for a vote on June 27. CLFP joined a large coalition of agricultural, processing, and equipment stakeholders to oppose the regulation and provide comment on the program and its effects to the industry. Some of the key issues are energy reliability, energy accessibility, zero-emission forklift availability, and the costs associated with the transition in comparison to the seasonality of our operations. If you would like to provide additional comments or listen into the proceedings, please follow this link.

CLFP will remain engaged on these issues and will inform membership as soon as the proposed changes to the Cap-and-Trade Regulation are announced.