Push to extend cap and trade falters
Talks fail to produce climate bill before Assembly Democrat departs for Congress, complicating effort.
SACRAMENTO — A breakneck effort to extend the life of cap and trade, California’s signature program to combat climate change, just got more difficult — thanks to one assemblyman starting his new job.
Despite round-the-clock negotiations this week, including on the July 4 holiday, Gov. Jerry Brown and legislative leaders came up short in their bid to have a bill to reauthorize the program ready for a vote Monday, the last day that Assemblyman Jimmy Gomez (D-Los Angeles) would have been able to cast a vote before he is sworn into Congress on Tuesday.
Acting before Gomez’s departure on a measure to extend cap and trade, which requires companies to buy permits to release greenhouse gas emissions, was the Brown administration’s unofficial goal in hopes of retaining a reliable Democratic vote.
The governor is seeking a two-thirds vote to guard the program against potential legal challenges. Without Gomez, Democrats have a bare supermajority of 54 votes in the Assembly; the Senate Democrats also have the exact number of votes for a two-thirds super-
majority.
But on the heels of a politically fraught gas tax approved in April, powered almost entirely by the majority party, Democratic legislators have shown little appetite for a second partyline, two-thirds vote. That has left Brown with a delicate balancing act of securing enough support from Republicans and businessaligned Democrats without alienating progressive Democrats allied with environmentalists.
“All the sides that are involved in cap-and-trade negotiations are so far apart, it doesn’t make a difference if I’m here or not,” Gomez said Friday. “If there was a deal that was close to getting the necessary votes, maybe me being here would make a difference. But I just don’t see it.”
The negotiating crunch threw a wrench into the soon-to-be congressman’s schedule. Gomez’s swearing-in at the U.S. Capitol is scheduled for Tuesday evening. But as of midafternoon Friday, Gomez still had not booked a plane ticket to Washington, he said.
The uncertainty was due in part to new rules approved by voters in 2016, which require legislation to be publicly available for 72 hours before a vote. To be eligible for a Monday vote, a bill must be in print by Friday. By the end of Friday, no bill was submitted.
Assemblywoman Laura Friedman (D-Glendale) said she understood why Brown was pressing for a vote while Gomez was still in the Legislature. But she noted that the current capand-trade system is likely to expire in 2020, giving lawmakers more time to consider the proposal.
“I’d rather spend next year working on this to get it right than rush it through and have to deal with the repercussions for the next 20 years,” Friedman said.
Renewing the program does face an imminent deadline — even if it’s a bureaucratic one. The California Air Resources Board, which administers cap and trade, has to finish drafting regulations for the amended program by Aug. 7 to satisfy a legal requirement that the agency do so a year after the regulations are initially proposed in a state registry. The regulations were submitted last August.
If that date is missed, climate regulators would have to wait at least another 45 days to finalize the rules, which could require them to rewrite the regulations.
Dean Florez, an air resources board member and former state senator, said the agency would do whatever it needs to do to comply with the process, but he hopes the Legislature will weigh in before Aug. 7.
“It’s definitely a deadline,” Florez said.
The grind of ongoing negotiations — marked by several rounds of proposals and counterproposals floated by the administration, environmentalists and business interests — underscores the complexity of reauthorizing cap and trade.
Much of the back-andforth has centered on the design of the cap-and-trade system. Industry lobbyists and environmentalists have real tussled over how many free allowances — permits to pollute — businesses should receive, so that they are not at a disadvantage against competitors in states that aren’t subject to cap and trade.
Businesses argue the allowances are necessary to prevent companies from moving out of state. But environmentalists have raised concerns that negotiations have contemplated an overly generous distribution of allowances that would amount to a windfall for industry.
Also controversial is the use of carbon offsets, which allow businesses to pay for environmental projects elsewhere — including outside California — to help reduce the cost of complying with the state’s emissions goals. Industry leaders support offsets as a way to rein in costs, but environmentalists, particularly those concerned with local air quality, have seen offsets as a loophole that allows businesses to continue polluting in their communities.
In the current system, companies can use offsets to cover up to 8% of their emissions. Draft proposals would reduce that number, in effect slashing the amount of offsets a company could use, and would require that at least half of those offsets come from projects inside California.
Lawmakers, particularly progressive Democrats in the Assembly, are also pressing for additional measures to improve air quality, including stepping up monitoring of contaminants, increasing penalties for polluters and requiring businesses to retrofit their equipment to ensure it operates as cleanly as possible.
The South Coast Air Quality Management District voted Friday to support cap-and-trade reauthorization on the condition that it provide “significant and sustained funding” for local districts that would be tasked with monitoring and reducing toxic air pollution.
“This is a very significant undertaking, and the most important aspect is there is no funding for any of these programs,” AQMD Executive Officer Wayne Nastri said at a hearing Friday.
How the revenues from the cap-and-trade auctions will be spent remains a major unanswered question in the negotiations. The program currently finances environmental projects, rebates for electric cars, affordable housing and the bullet train, a priority infrastructure project for Brown.
One potential sweetener in negotiations is rolling back the state’s fire prevention fee, which is levied on homeowners in areas where the state has primary firefighting responsibility, largely in rural parts of the state. For years, Republicans have unsuccessfully sought to repeal the fee, which critics contend is an illegal tax.
Assemblyman Rocky Chavez (R-Oceanside) said doing away with the fire fee — and backfilling the money with revenue from the capand-trade auctions — has been f loated in talks as a way to woo Republicans.
“Look at who pays for it,” Chavez said. “The people who pay for the fire fee are in rural areas. Republican voters are in rural areas. It’s something that directly impacts their constituents.”
There’s no shortage of suggestions on additional ways to spend revenue from the cap-and-trade program. Certain industries, including agriculture and trucking, are seeking money to help upgrade equipment to comply with new regulations. Others have suggested returning the money to California residents in the form of dividends, much like a tax rebate.
“Talking about how much money this program would raise and how this will be spent should be front and center in this conversation,” said Danny Cullenward, an energy economist at Stanford University. “And so far it hasn’t been.”