The agency has not “provided evidence to justify the rather large increase in production subsidies” that the MDI program would provide, Meredith Fowlie, a professor at the University of California, Berkeley, and faculty director at its Haas School of Business’ Energy Institute, wrote in an April blog post. “Increasing these output subsidies may further reduce leakage — or it may just transfer more value to incumbent producers without materially changing production decisions.”
And regardless of its efficacy in preventing leakage, environmental advocates say that CARB’s own prior analysis shows that the MDI program would undermine climate goals.
“Creating 118 million additional allowances effectively cancels out the 118 million they’re supposed to be reducing by 2030,” said Caroline Jones, manager of energy transition and carbon markets at the Environmental Defense Fund, which opposes CARB’s plan. “Removing these allowances was initially proposed by CARB as the lowest threshold of change required to meet 40% reductions by 2030.”
CARB’s counter is that these free allowances will flow only to participating companies that pledge to invest in future emissions reductions. But it’s unclear whether CARB will have the ability or the desire to force companies to make good on those promises.
