It's a first: Bay Area businesses to pay CO2 fee

updated 5:16 p.m. ET May 21, 2008

SAN FRANCISCO - Air pollution regulators in the San Francisco Bay area voted overwhelmingly Wednesday to approve new rules that impose fees on businesses for emitting greenhouse gasses.

The Bay Area Air Quality Management District's board of directors voted 15-1 to charge companies 4.4 cents per ton of carbon dioxide they emit, an agency spokeswoman said.

Experts say the fees, which cover nine counties in the Bay Area, are the first of their kind in the country. The new rules are set to take effect July 1.

The move follows recent steps by San Francisco Mayor Gavin Newsom to curb carbon emissions. He's said he wants voters to decide in November on a proposed "carbon tax" on businesses that would also lower payroll taxes on those businesses that reduce emissions.

The ballot measure would increase the city's 5 percent commercial utilities tax by an as-yet-undetermined amount to encourage energy-saving steps by hotels, offices and other nonresidential buildings, ...

The modest fee probably won't be enough to force companies to reduce their emissions, but backers say it sets an important precedent in combating climate change and could serve as a model for regional air districts nationwide.

"It doesn't solve global warming, but it gets us thinking in the right terms," said Daniel Kammen, a renewable energy expert at the University of California, Berkeley.

State working on own plan
But many Bay Area businesses oppose the rules, saying they could interfere with the state's campaign to fight global warming under a landmark law signed by Gov. Arnold Schwarzenegger in 2006.

The California Air Resources Board, which is charged with implementing the law, is expected next month to issue its preliminary plan to reduce the state's emissions before it approves a final plan later this year.

Climate change is "a big issue that needs a comprehensive statewide plan to address it," said Cathy Reheis-Boyd, chief operating officer for the Western States Petroleum Association. "We believe it's premature for local air districts to design local programs before we have a state program."

The Bay Area fees are expected to generate $1.1 million in the first year to help pay for programs to measure the region's emissions and develop ways to reduce them.

More than 2,500 businesses will be required to pay the proposed fees. About seven power plants and oil refineries would have to pay more than $50,000 a year, but the majority of businesses would pay less than $1, according to district estimates.

Area less competitive?
The program, which requires companies to measure and report their own emissions, could make it more complicated and expensive to do business in the Bay Area, said Shelly Sullivan, who heads the AB32 Implementation Group, a coalition of business groups working with state regulators to implement California's global warming law.

"It's going to make Bay Area businesses less competitive because companies outside the area won't face similar costs," Sullivan said.

Opponents also question whether the agency, which is charged with regulating air pollutants such as ozone and particulate matter, has the authority to impose fees on greenhouse gas emissions.

Bay Area district officials believe the agency has that authority because global warming is raising surface temperatures, which worsens air quality.

"We see a direct connection between the climate and air pollution," said Jack Broadbent, the district's executive director.

The Bay Area follows in the footsteps of Boulder, Colo., which in 2006 became the first U.S. city to adopt a tax to combat global warming, specifically an electricity bill charge on kilowatt-hours used.

Officials in Portland, Ore., last November proposed charging developers for every home they build that exceeds the city's energy efficiency building requirements.

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