Cap and Trade Gets a Boost

Posted: July 20, 2017

California lawmakers voted July 17 to extend cap and trade to 2030. It had been set to expire in 2020. And it was done with a 2/3 bipartisan vote.

That’s right – bipartisan. Seven Republicans in the Assembly voted for the bill, and one Republican in the Senate, to bring the vote to a supermajority of 2/3.

Businesses and some Republicans are seeing a case for cap and trade, partly as an insurance policy against the potential risk of climate change, partly because cap and trade is the most cost-effective policy, and as California Assembly Republican Leader Chad Mayes said, “… we believe that markets are better than Soviet-style command and control”.

The 2/3 vote is important. Cap and trade in California has been hampered by litigation claiming that cap and trade is a tax and therefore needs a 2/3 vote. That was not the case with authorizing legislation – AB 32 (2006). With the current 2/3 vote, the argument is moot.

The bill extending cap and trade – AB 398 – also puts a price ceiling on allowances to protect businesses from the potential of spiraling allowance costs, makes a substantial cut on offsets, provides a path for education and training for those affected in the transition, and establishes additional oversight.

The extension of cap and trade provides businesses some certainty while forcing down emissions with the cap.

AB 398 also restricts local air districts from regulating carbon dioxide, which is already covered by cap and trade. The legislation does not limit authority of air districts on emissions of any pollutant other than carbon dioxide.

A companion bill – AB 617 – increases monitoring of pollutants and toxic contaminants not covered by cap and trade and requires installation of retrofit technology for sources not in compliance.

Cap and trade is essential to meet the new emissions targets set last year to reach 40% of 1990 greenhouse gas emissions by 2030. The California Air Resources Board scoping plan shows that California cannot meet that goal without cap and trade.

With the successful conclusion of this intense legislative battle, the hard work of reducing emissions in California can now continue with market support.

See a write-up and webinar describing California’s cap and trade system here.