Brown: ‘Very good chance’ of a deal on cap and trade

Source: Debra Kahn, E&E News reporter • Posted: Monday, May 15, 2017

California Gov. Jerry Brown (D) said he is confident lawmakers can come to an agreement this year on extending the state’s economywide cap-and-trade system.

Speaking at the release of his revised budget proposal in Sacramento, Brown acknowledged several new proposals that have been floated to stretch the climate change program past 2020. But he pointed to the strengths of the current program as justification for continuing it.

“I think we have a very good chance,” he said in response to a question on whether a deal could be reached by next month’s budget deadline. “I’ll tell you why we have a very good chance. The money that comes from cap and trade, 50 percent of it benefits disadvantaged communities.

“And there are millions of dollars going to low-carbon public transit, inner-city rail; it goes for low-income weatherization — these are programs that help mitigate the impacts of pollution in disadvantaged and communities of color,” he said. “And I think as the Legislature as they look at that, they’ll say, ‘Why throw that away; it doesn’t make any sense.'”

The state’s auctions of greenhouse gas allowances have raised more than $3 billion in state revenues since they began in 2012, but demand for permits has been flagging due to nagging uncertainties around the legal basis for continuing the program past 2020.

Brown said yesterday that he was working with lawmakers and thought a compromise would emerge. “In order to have a viable cap and trade, you need an auction that is healthy and functioning, and if we don’t get that bill soon, that comes into question,” he said. “We’re finding that business and others who have been reluctant before are joining, so I think the constituency is getting bigger, although there are a number of legislators who aren’t there yet.”

Last year’s S.B. 32 set an overall target of 40 percent below 1990 emissions levels by 2030 but did not explicitly authorize the use of cap and trade to get there, as the original 2006 law, A.B. 32, did through 2020. Brown has asked lawmakers to reauthorize cap and trade by a supermajority vote, and several bills have been introduced.

While emissions reduction projects in disadvantaged communities have been receiving roughly half of the auction proceeds — significantly more than they are required to receive under a 2012 bill by Senate President Pro Tempore Kevin de León (D) — environmental justice groups have been pushing for more reforms.

One of the bills, A.B. 378 by Assemblymember Cristina Garcia (D), would tie businesses’ ability to receive free allowances to their emissions of toxic pollutants. In response to a question on whether cap and trade should address conventional air pollutants, Brown acknowledged the tension between the two types of emissions but said there is room to address both.

“At the end of the day, cap and trade means that someone who can’t achieve a pollution reduction has an option of paying somebody else who can achieve that reduction of CO2 or greenhouse gases cheaper, and you have to maintain that element,” he said, “although there’s certainly plenty of room for reducing pollution in low-income communities, as well.”

Another bill introduced just last week, S.B. 775 by Sen. Bob Wieckowski (D), with the backing of de León, would reform the program even more dramatically, removing free allowances and carbon offsets altogether and requiring links to other governments’ markets to be re-established after 2020.

Brown acknowledged lawmakers’ wariness of the current system. “I understand that there are people in the Legislature, for example in the Senate, where you have some people at the staff level who certainly have their doubts about cap and trade,” he said. “I don’t rule out getting some Republicans. I do think that’s a possibility. But I would like to make sure we get the Democrats. I don’t think we should turn our backs on the low-income communities of California by destroying millions and millions of dollars that they’re now slated to get, but will not get if the cap and trade is destroyed.”

Wieckowski said he looked forward to working with Brown.

“I agree with Governor Brown that the Legislature should take action to improve and extend cap and trade beyond 2020, building on what we have learned from the existing system and ensuring that we meet our greenhouse gas reduction goals set in last year’s S.B. 32,” he said.

Industry observers who have been hoping Brown would get involved on the side of continuing the current program with minimal tweaks were encouraged by the remarks.

“They indicate that he is following the pending bills and that he understands the policy tools and the nuances of the current debates well,” said Nico van Aelstyn, a partner at Sheppard Mullin Richter & Hampton LLP who represents emitters as well as companies that have developed carbon offset projects.

“Most importantly, he maintained the focus on fighting climate change while indicating flexibility with respect to addressing public health and EJ concerns. He recognizes that for markets to work as a policy tool to address climate change, regulatory certainty is needed ASAP. At present, the pending bills are adding to the uncertainty. I am hopeful that the governor’s active engagement in the weeks ahead will enable a two-thirds majority to coalesce in support of an extension of the existing program with some relatively minor modifications. There are issues, for sure, but in general it is working well.”