Calif. regulators target tech industry emissions

SACRAMENTO -- California air regulators on Thursday broadened their reach into Silicon Valley, implementing rules intended to cut greenhouse gas emissions from semiconductor plants.

The state Air Resources Board voted unanimously to regulate some of the most potent gases produced by the semiconductor industry, which makes chips for cellphones, computers and cars.

By Jan. 1, 2012, more than a dozen California chip manufacturers must reduce their use of fluorinated gases. Scientists say such emissions trap heat in the Earth's atmosphere at a rate 23,000 times higher than carbon dioxide.

"The chemicals are highly potent greenhouse gases. It's important that we begin the process of phasing them out," board chairwoman Mary Nichols said.

Because California has a robust semiconductor industry, the boards' actions could set a global standard for reducing emissions, Nichols said.

Industry officials said the regulation will cost businesses some $37 million at a time when the chip industry is grappling with falling global sales. They also argued that fluorinated gases already are being addressed under voluntary global agreements, although those targets are much weaker than the new California limits.

"To the extent California makes it more costly, more cumbersome to operate here, you're not going to attract these facilities in the future," John Greenagel, a spokesman at the San Jose-based Semiconductor Industry Association, said in a phone interview before Thursday's hearing.

The reductions at semiconductor plants would account for less than 1% of the target California is trying to reach under the state's 2006 global warming law, which is intended to cut greenhouse gases to 1990 levels by 2020.

But the regulation is projected to cut by more than half California's output of fluorinated gases, which scientists say persist in the atmosphere for thousands of years. The air board estimates that the amount to be cut under the California regulations is roughly equivalent to the carbon dioxide emitted by 40,000 vehicles a year.

Much of the regulation's cost will be borne by 16 plants that air regulators say account for 94% of fluorinated gas emissions.

Those plants would spend an average of $280,000 a year over the next decade to reformulate their operations, install equipment or find alternative chemicals, according to an air board report.

Industry officials say that's a high price for businesses already struggling in a weakening economy.

One of California's largest manufacturing facilities, NEC Electronics America, has been losing several million dollars a month. The regulation would further shrink its bottom line, said Gus Ballis, a manager at the Roseville-based company.

"The financial impact is going to be severe and affect our ability to be competitive in the market," Ballis told the board. "We're potentially on the chopping block — whether they are going to keep us or pull our production back to Japan."

Twelve California semiconductor plants already meet the proposed emission standards, while 57 others that generate very few emissions would simply have to report their pollution.

"I think it's very clear the cost for some is going to be nothing because they already comply, and the cost of compliance for others is going to be very high," Nichols said.

Until now, fluorinated gases have been addressed under voluntary global agreements struck by the industry. Semiconductor manufacturers have pledged to cut emissions to 10% below 1995 levels by next year. The target falls well short of California's 56% reduction over the next two years.

Regulators said companies such as NEC that plan to retool or expand their operations would be given another two years to comply.