Air Quality Discussion Impacts Life Sciences

New regulations intended to lower greenhouse gases and implement a carbon cap and trade system will have an impact on Northern California’s life sciences industry.

Two years ago, California enacted the Global Warming Solutions Act (AB 32) to address growing concern over potential impacts to the state economy as a result of climate change and global warming. This legislation is intended to reduce and cap the state’s emissions of greenhouse gases.

Central to AB 32 is a proposal to implement a cap-and-trade system, in which the overall carbon output is capped, but credits can be created and traded to allow pollution up to that limit, which will be eventually reduced by 10 percent from current levels by 2020 and 80 percent by 2050.

The California Air Resources Board (CARB) was charged with implementing the measures associated with the legislation. Last week, on June 26, CARB issued the proposed Scoping Plan for comment and review. AB 32 requires that the Scoping Plan be put into place by January 1, 2009.

Because the Scoping Plan will likely have an impact on all sectors of California’s economy, including the life sciences industry, the coming months of discussion on the bill are crucial as companies evaluate the potential costs and benefits of the plan. As CARB chair Mary Nichols asserted, “Setting California ahead of the curve on global warming will give our state a competitive advantage.” BayBio participated in a conference call with the Governor’s office, on which the administration stated its hopes to both provide incentives to reduce pollution, as well as opportunity for entrepreneurs to create clean technology.

Although the plan undoubtedly presents opportunity for investment and growth in greentech and biofuel, there are nevertheless many challenges and costs inherent in its implementation. Some life sciences companies, especially small or growing companies, may feel the pinch of the new regulations. Of particular interest to industry is how the credits will be apportioned or auctioned, in attempts to keep costs down for both companies and consumers. If the credits are auctioned, where the resulting revenues land, will also likely be a point of contention.

Another concern which has been voiced is that there are a number of pollution reduction programs being enacted in other state and local agencies. Ensuring that these programs in conjunction with AB 32 are nonduplicative will be crucial to minimizing costs to businesses.

For AB 32 to succeed, it should not only reduce greenhouse gases, but also encourage economic growth. However, the manufacturing industry has voiced particular concern that the plan could present severe cost disadvantages to companies in California, and create additional risk to those considering manufacturing in the state.

Both the Air Resources Board and the administration, which is closely following the proposal, hope that the enactment of AB 32 will be an important milestone and serve as a framework for other states to adopt similar plans. It could even potentially serve as a framework for a national plan in the coming years. From now until October, the proposal is open for public comment, before a final proposal is released and incrementally put into effect. Although BayBio is still assessing the plan, it is important that all voices are heard in this discussion. Please see the links below to review the plan and register your comments.

Click here to download the scoping plan (PDF)

Click here to publicly comment on the proposal and its potential effects