Comment Log Display

Clerk of the Board, Air Resources Board
1001 I Street 
Sacramento, California 95814

December 14, 2010
Re:  Proposed Regulation to Implement the California Cap-and-Trade
Program

Dear Sir/Madam:


MGM Innova thanks you for the opportunity to submit the following
comments on the State of California Air Resources Board’s (“ARB”)
proposal to develop an emissions cap-and-trade program  targeting
greenhouse gas abatement under the California Global Warming
Solutions Act of 2006 (Assembly Bill 32; 2006, Chapter 488) (“AB
32”).  In particular, MGM Innova's comments are focused on the
“Proposed Regulation to Implement the California Cap-and-Trade
Program, PART I, Volume I, Staff Report: Initial Statement of
Reasons,” dated October 28, 2010 (the “Proposal”).

In PART 1, Volume I, III.A.5, four different compliance offset
protocols are discussed including destruction of ozone depleting
substances (“ODS”) within the United States.  PART I, Volume I,
III.A.7.c further notes that “Staff plans to evaluate how the four
protocols being taken to the Board can be expanded to include
projects in Mexico and Canada.”  This statement contains the
following footnote on page III-11:

	35 Staff does not intend to evaluate an ODS protocol for offset
projects in Mexico because the substances covered under the
protocol have not yet been phased out in developing countries.  

Our research indicates that this statement is not factually
correct.  Specifically, the Montreal Protocol requires all Article
5 countries, including Mexico, to phase-out production of all Annex
A, Group 1 Substances by January 1st, 2010  .  These substances
include Chlorofluorocarbons (“CFCs”) covered under the Proposal. 
Mexico went above and beyond this requirement, and agreed to
phase-out all production of CFCs by the end of August, 2005 .

On May 5, 2010, MGM Innova received a letter from Augustin Sanchez
Guevara, Coordinador de la Unidad de Proteccion of Mexico’s
Secretaria de Medio Ambiente y Recursos Naturales (“SEMARNAT”)
which confirmed the following: 
1)	Mexico phased out production of CFCs in August, 2005.  Since
that date, production of CFCs, and imports of feedstock of Carbon
Tetrachloride has been banned in Mexico.
2)	Since January 1, 2010, Mexico has banned imports of CFCs
including for use in Metered Dose Inhalers, as Mexico did not
request essential use exemptions for any purpose under the Montreal
Protocol.  
3)	Mexico does not have regulations requiring the destruction of
virgin or recovered ODS of any kind, including CFCs.   

MGM Innova would be happy to provide ARB with a copy of this letter
if more clarification is needed.  

While Mexico can still produce HCFC-22, and HCFC-141b which are
both considered as potential ODS sourced from foam under ARB’s
Compliance Offset Protocol for U.S. Ozone Depleting Substances
Projects, it is worth noting that HCFC-22 can still be produced in
the United States for use in equipment manufactured before January
1st, 2010 .  Finally, given the important role Climate Action
Reserve (“CAR”) has served in helping to develop ARB’s compliance
offset protocols, MGM Innova would also like to point out that
CAR’s Article 5 Ozone Depleting Substances Project Protocol Version
1.0 is limited to CFCs produced for the refrigerant market, and
does not include HCFCs.  

It is our recommendation that ARB strongly consider the development
of a compliance offset protocol for ODS destruction projects for
ODS sourced from Mexico.  In line with this recommendation, MGM
Innova suggests utilizing CAR’s Ozone Depleting Substances Project
Protocol Version 1.0 as a proxy for Mexico offset protocol
development and a potential source of early action offsets from
Mexico.  The CAR Article 5 Protocol has stringent point-of-origin
documentation requirements, monitoring requirements, and
destruction facility requirements.  Furthermore, the Article 5
Protocol negates perverse incentives related to production of ODS
given the requirement that ODS be produced prior to the Montreal
Protocol phase-out date .  A Mexico ODS destruction protocol has
the potential to deliver significant environmental benefits given
the high global warming potential of CFCs.  Finally, drawing upon
its extensive experience working as a consultant across a wide
range of emission reduction projects located in North America, MGM
sees a significant risk that the compliance protocols currently
listed on the Proposal will not be able to produce the quantity of
offsets anticipated by ARB.  The inclusion of a Mexico ODS protocol
and other project types that meet ARB’s environmental integrity
standards will mitigate the risk of offset supply deficiencies.  

MGM Innova thanks the Board for its time and attention and hopes
that these comments are well received.