Big polluters could curtail California’s climate goals

State authorities gave major polluters a boost last week as they tweaked California’s hallmark climate law, while offering a rare acknowledgment that the capand-trade system for cutting greenhouse gases may not deliver the required reductions.

Meeting Thursday in Sacramento, the California Air Resources Board set its plan for implementing a 2017 law that extended the capand-trade program through 2030. The board’s modifications deliver on promises legislators made to state industries as they secured the votes needed to pass the extension.

In cap and trade, industries may pay to pollute by buying allowances in a carbon-trading market. In addition, some receive free allowances from the state. The board voted, as it has in the past, to continue a full supply of free carbon credits to some companies — subsidies that may be worth as much as $350 million — even though they were scheduled to be reduced.

The move assures industry the maximum state assistance through 2020. The cap-and-trade law guarantees the maximum from 2021 to 2030. With its decision, the board gives the biggest possible financial cushion to many major polluters.

Separately, the board affirmed its view that there is no excess supply of allowances and other credits in the cap-and-trade market. The nonpartisan Legislative Analyst’s Office, academics and market experts have concluded that companies are holding too many credits and can use them to cover future emissions rather than reduce their pollution.

The monthslong debate over the allowances issue has exposed a vulnerability in the system’s design, its critics say, and it has raised questions about the ability of cap and trade to deliver on its carbon-cutting promises. In its early incarnation, the system was not considered a main factor in reducing state emissions; rather, it was intended to backstop other programs aimed at cutting climate-warming pollution.

But the air board now expects the program to provide as much as half of those reductions, amplifying cap and trade’s expected benefits and putting pressure on the program to work as designed in order to meet the state’s ambitious climate goals.

An oversupply could prevent that. The legislative analyst foresees a reckoning, estimating that because of excess allowances, actual emissions could be as much as 30 percent over the statewide target by 2030.

“We know we are not on a line to meet the 2030 target,” Mary Nichols, the board’s long-serving chairwoman, said Thursday. She cautioned, as she has at other times, that achieving the state’s next set of climate goals will be challenging and encouraged the board to “think bigger and more broadly” to find emissions reductions.

Even the smallest acknowledgment of a shortcoming in the board’s carefully designed cap-and-trade program offered an I-toldyou so moment for critics.

State Sen. Bob Wieckowski, D-Fremont, had vowed to block any decision not to reduce the free industry allowances. In a statement issued from Poland, where he was attending a climate conference, Wieckowski said an overabundance of allowances “will not only make it harder to achieve our 2030 goal for greenhouse-gas emissions, it sends the wrong message at the exact time climate leaders are in Poland trying to increase global ambition to curb emissions. This decision moves us backwards and reduces future revenue to curb emissions.”

Air board member Dean Florez said the justification for not reducing the free allowances — that emissions caps put California companies at a competitive disadvantage and they’re leaving the state — is “bogus.”

“Oil companies aren’t going anywhere, nor are most polluters,” Florez said by text message after voting with the rest of the board to adopt the new implementation rules.

Florez said one benefit of the contentious supply debate is that the air board and staff appear willing to re-examine the issue, particularly in the face of looming emissions benchmarks that some state officials and outside experts fear will not be met.

While California has generally beat its own goals for cutting greenhouse-gas emissions, lowering them further — and more steeply — will be a challenge. The deadline for reducing emissions to 30 percent of 1990 levels by 2020 has already been met. What lies ahead are reductions of 40 percent by 2030 and 80 percent by 2050.

Given that difficulty, there is renewed focus on ensuring the system doesn’t let polluters off the hook. Assemblyman Eduardo Garcia, D-Coachella, who authored the cap-andtrade extension law and a non-voting member of the board, said at Thursday’s meeting that allowances should be monitored continually.

Some of the issues dogging the board today are the result of a political deal brokered by California’s powerful oil and gas sector, which crafted business-friendly language in the law in return for its support. Among the concessions was to remove the ability of local air districts to regulate industrial emissions, ceding that power to the state air board.

“It was part of the deal to make sure we could get a (two-thirds) vote to extend the cap and trade program,” Garcia told CALmatters last year. “Without a doubt, it’s a compromise in order to reach the greater goal.”

Some critics of the deal said it gave a financial legup to polluting firms that don’t need it, and by removing some incentives to reduce emissions, could even undermine cap and trade’s prime goal.

The board previously dismissed such concerns as mistaken and misguided. But the criticism has intensified. Most recently the Independent Emissions Market Advisory Committee, established by the state Environmental Protection Agency to advise on the cap-and-trade program, concluded that the system’s design “needs to be addressed” by the air board.

Danny Cullenward, an economist with the climatechange think tank Near Zero and a member of the advisory board, said the air board’s position is based on a math error.

“The analytical integrity of what the staff has put forward does not meet the standard set by state law,” Cullenward said.

As the matter was coming to a vote on Thursday, Nichols acknowledged that the issue “sticks in the craw” of those who continue to question whether the board has sufficiently studied the issue.

“It hasn’t been put to rest; let’s put it that way,” she said.