Cap-and-Trade Extension Bills Announced

California’s market-based system to reduce Greenhouse Gas (GHG) emissions, also known as Cap-and-Trade, has been a hot topic in the Capitol for two years now. The program is currently set to expire in the year 2020. Governor Brown would like to bolster his environmental legacy through an extension of the Cap-and-Trade program, but has proclaimed that he wants it done with two-thirds of the Legislature’s support to protect the program for years to come. The rumor in the Capitol is that the legislation will be voted on Thursday evening, once the legislation meets the 72-hour deadline to have been publicly available.

On Monday evening, Governor Brown and the Democrat Leadership in both the Assembly and the Senate unveiled the most recent attempt to extend the life of the Cap-and-Trade program. Assembly Bill 398 (Garcia, F.) and Assembly Bill 617 (Garcia, C.) were amended and posted for public review, both of which contain different aspects of the new proposal expected to garner enough support to receive the requisite two-thirds of votes in both the Assembly and the Senate.

AB 398 (Garcia, F.) is the heart of the extension package. Within AB 398 there are numerous provisions that were negotiated by businesses and industry affected by the Cap-and-Trade program. As such, there are provisions that will put a price ceiling, to be determined by the California Air Resources Board (CARB) and requiring that economic impacts be factored in, on carbon credits. Most notably, the bill will preempt local air districts from regulating GHG emissions that are already covered under the Cap-and-Trade program. This is big win that was pushed for by CIOMA’s partners at WSPA. A requirement for a Legislative Analysts’ Office report to the Legislature, annually, has been installed in the bill.

AB 617 (Garcia, C.) is the partner legislation that contains environmentally friendly provisions. As such, there is a definition within the bill regarding what a "stationary source" is (emitting over 250 tons of any nonattainment pollutant or that receives a prioritization score for cancer or noncancer health impacts), along with others. There is also a community and fence-line monitoring requirement for facilities that CARB, in conjunction with local air districts, deem necessary and to address local public health impacts. The legislation will also require the creation of a statewide clearinghouse on best available retrofit technology available to air districts, and increase penalties for specified emissions violations from $1,000 per day to $5,000 per day.

The reason these two bills have become the "new" extension of the Cap-and-Trade program, is because earlier this year there were competing proposals for the extension of Cap-and-Trade. Those who attended CIOMA’s Day at the Capitol will recall that CIOMA has been engaged in this conversation since the beginning and opposed a proposal (AB 378 – Garcia, C.) that was far too extreme, and CIOMA supported a more reasonable approach (AB 151 – Burke). The Democrats in the Capitol pushed hard for the far left version, AB 378, back in May, but it failed without any doubt. With that defeat, it tore down the other proposal, AB 151, at the same time. So, the new Cap-and-Trade package that should be voted on this week is the result of the business community, CIOMA and WSPA, and other entities negatively impacted by Cap-and-Trade negotiating these provisions.

The bills still have a long road ahead, even in the short timeline of a couple of days. We shall see what happens with the extension of the Cap-and-Trade program; which, no matter what happens, is still effective until the year 2020.