E&E News
By Debra Kahn

As California lawmakers debate the future of their climate policies, anti-establishment resentment is proving a force to be reckoned with.

The marquee program dealing with climate change — and the target of reforms — is the state’s quasi-economywide cap-and-trade system for large emitters. Set in motion by former Gov. Arnold Schwarzenegger (R) and tapped for funds by Gov. Jerry Brown (D), it has been beset by legal and political hiccups that have amplified into shock waves. Lawmakers and interest groups are sparring over its future, and traditional political lines are blurring.

The legislative push is being fueled by Brown, who wants a two-thirds vote to insulate the auctions from legal challenges that have dampened demand for permits. But rather than simply reapproving the program as it was designed by the California Air Resources Board, lawmakers have introduced proposals to dramatically reshape the program.

State Senate President Pro Tempore Kevin de León (D) is making the case for starting a new emissions market altogether as a way to unite lawmakers behind the program, which was originally authorized in 2006. A bill introduced last week by Senate Environmental Quality Chairman Bob Wieckowski (D), S.B. 775, would end the current program after 2020, including its current and pending links to other governments’ markets. It has alarmed businesses that were hoping to carry over cheap allowances and other compliance tactics to the post-2020 era, when the statewide cap will tighten significantly on the way to 40 percent below 1990 emissions levels by 2030.

That’s not the main concern of de León, who portrayed those worried about the market’s seamless continuation as rapacious “Wall Street” profiteers.

“We’re not in the business here for energy speculators to make money for Wall Street,” de León said. “Our job is not for those who are speculating on the market right now, who are trying to profit and buy low and sell high. That’s not our responsibility.”

Rather, the lawmakers are focused on smoothing erratic auctions enough to provide steady revenue flows, most of which would go directly to state residents as a dividend, instead of to a fund that is currently devoted to further reducing greenhouse gas emissions.

“We’re going to give it back to the people,” said Wieckowski, who will discuss the bill at a committee hearing today.

Letting cap and trade ‘die on the vine’

Besides S.B. 775, lawmakers have introduced A.B. 378, which would tie businesses’ ability to receive greenhouse gas allowances to their emissions of toxic pollutants. It’s backed by environmental justice groups, which argue that climate policies should also address the conventional air pollution that tends to be clustered in poor neighborhoods and communities of color.

The proposals are in part a reflection of the state’s relatively short term limits for lawmakers, which restrict legislative buy-in and promote distrust of powerful executive-branch agencies like the Air Resources Board.

“None of these members were around 10 years ago,” one observer said. “Even real progressive champions are increasingly leery of giving ARB that much deference. That means we need to be open to ideas and potential changes that legislators want to see.”

Environmental justice groups praised Wieckowski’s bill yesterday, saying that it marks an evolution in carbon pricing.

“Now more than ever, California needs to continue leading the nation and the world in creating serious climate policies, and it has done so by closing long-standing loopholes in the current cap-and-trade system,” the California Climate Equity Coalition, which includes among its 150 groups the Asian Pacific Environmental Network, the Greenlining Institute and the Coalition for Clean Air, said in a statement.

Parties on all sides are now jumping in to defend the status quo ahead of today’s hearing. A law professor said S.B. 775 could jeopardize California’s leadership role on climate policy and wall the state off from influencing other governments.

The Senate bill “basically allows the current cap-and-trade program to die on the vine and replaces it with a program that may well cause many more problems than those it attempts to solve,” Ann Carlson, co-director of UCLA’s Emmett Institute on Climate Change and the Environment, wrote yesterday in a blog post.

“And it does so in a way that embraces a ‘California alone’ philosophy that is fundamentally at odds with California’s approach over the last decade to be a global leader on climate change. At a time when the federal government is rejecting climate change altogether and backing out of a leadership role on the most pressing environmental challenge we face, California should be increasing its connection to the rest of the world in its climate policies, not turning inward.”

Comparisons with Obamacare fight

An economist who has worked with California industry and environmental groups compared the proposal to congressional Republicans’ attempt to repeal the Affordable Care Act.

“I would characterize this as parallel to what’s happening in Washington with Obamacare,” said Harvard University economist Robert Stavins. “775 is a repeal and a replace of the state’s progressive, effective and, for that matter, low-cost cap-and-trade system.”

Even a member of the state’s Environmental Justice Advisory Committee, which opposes the use of cap and trade, is speaking up in defense of the current program.

“The potential downstream and upstream consequences from the key elements of this bill have the ability to destabilize the progress made by the state since inception of the cap-and-trade program,” Mary Petit, co-executive director of the Incredible Edible Community Garden, wrote in comments last week. “Let’s be smart rather than aggressive with changes.”

The Canadian province of Ontario, which plans to link markets with California next year, put out a statement last week pointing out that it “wouldn’t be appropriate to comment” on a draft bill but emphasizing the importance of the link.

“Ontario is committed to partnering with California and Quebec as we work together to responsibly fight climate change,” the Ministry of the Environment and Climate Change said in a statement. “As expert third-party economic modeling from EnviroEconomics has shown, a linked program provides emission reductions at the lowest price for Ontario and its economy.”