The California Air Resources Board last week released a preliminary draft version of the state’s greenhouse gas cap-and-trade regulation, marking the beginning of the next phase of rulemaking for reducing emissions and greenhouse gases.

“By releasing the first draft of a cap-and-trade system that California will put into effect in 2012, we are demonstrating the state’s determination to push ahead, continue to work with other states in the U.S. and abroad, and invite others to join us,” said the agency.

The document combines the results of a yearlong public process involving more than 21 workshops on issues related to the program’s design as well as its work with the Western Climate Initiative. It contains both regulatory language on process and structure along with narrative sections that address significant issues that remain to be solved within a cap-and-trade program. The agency is taking public comments on the preliminary draft until Jan. 11, 2010.

The cap-and-trade program is one of the major building blocks of California’s plan to address the state’s contribution to climate change. The Global Warming Solutions Act (AB 32) of 2006 requires the state reduce GHG emissions to 1990 levels by 2020, and ultimately achieve an 80 percent reduction from 1990 levels 2050. When fully implemented, the cap-and-trade program would cover 85 percent of the Calif.’s, GHG emissions.

The preliminary draft covers the full range of elements for the cap-and-trade program outlined in the Scoping Plan, adopted in December 2008. These include: requiring sources of GHG emissions to manage their emissions under an aggregate declining emissions cap that supports achieving the 2020 emissions target mandated by AB 32; starting the program in 2012 with about 600 of the state’s largest GHG-emitting stationary sources, primarily industrial sources and electricity generators, along with electricity imports; including emissions from transportation fuel combustion in gasoline, diesel, ethanol, and from fuel combustion at stationary sources that fall below the threshold for direct inclusion in the program, such as residential and commercial natural gas combustion, by covering the suppliers of fuel to these sources; requiring a minimum number of allowances to be auctioned at program start; allowing limited use of high quality offsets outside of capped sectors to cover a portion of the overall emissions reductions and establishing clear rules for emissions trading, monitoring and enforcement.

The ARB is expected to release a proposed draft regulation for further public comment in the spring of 2010 and the final regulation is set to be approved by the agency in October 2010. The rule is expected to take effect Jan. 1, 2012.