“The state and the federal government were until recently working hand in hand on these issues,” said Danny Cullenward, an energy economist, lawyer and research associate with environmental research organization Near Zero, who helped advise the development of the new proposal. “In an era of the Trump administration, carbon pricing is one of the few tools that the state has to whatever the federal government does.”
California already maintains some of the most ambitious climate goals of any state in the nation — cutting greenhouse gas emissions by 40 percent below their 1990 levels by the year 2030, a pledge that California Gov. Jerry Brown signed into law last year — and it’s now focusing on how to reach those targets in the coming decades.
It’s the same emissions reduction target as that pledged by the European Union in the Paris climate agreement, and it ties with New York for the most ambitious state climate goal in the nation.
That’s where the new program comes in.
In addition to reducing greenhouse gas emissions, the new pricing proposal — which was introduced at a Monday news conference by California state Sens. Bob Wieckowski and Kevin de León — is also designed to return some of the revenue it raises to the public, particularly to low-income and other vulnerable communities.
For now, the bill is only in its earliest stage, and it may be difficult to predict how it might evolve or gather support in the coming weeks. But the legislation has the support of de León, California Senate’s president pro tempore and its most powerful figure.
“Today marks the first step in that process,” Wieckowski said at Monday’s news conference. “We’ll be amending the bill, and it’ll have its first hearing before the Senate environmental quality committee next week.”
Since 2012, California has been working to reduce its emissions by way of a cap-and-trade carbon pricing scheme, which places a ceiling on allowable carbon emissions — one that grows stricter over time — and requires companies to pay a penalty if they exceed the limit. The system also establishes a market through which companies can buy and sell permits allowing them to emit a certain amount of carbon. It’s designed to encourage companies to save money by cutting down on their own emissions.
But while the current program has proven successful at reducing emissions over the past five years, many experts believe that its current language does not give it the authority to continue past the year 2020. There’s been some debate about this question among lawmakers in the state, but many are concerned that the program will legally need to be renewed or replaced after that point.
Additionally, the revenue it has raised for the state through the sale of emissions allowances has recently begun to slow — suggesting to some experts that a different kind of program might be called for in the future.
“The last five quarterly markets, the state has struggled to sell the permits it wanted to make available,” Cullenward said. “Prices are low, revenue isn’t coming in, and there’s frankly a lot of challenges associated with that market structure.”
The new proposal establishes another cap-and-trade program — which will extend either until 2030 or until the state meets its 40 percent emissions reduction goal, whichever comes first — with some notable updates intended to make it more effective and more socially responsible.
For instance, it would also fund a special program that would return a certain amount of the revenue it raises to the public in the form of rebates. The exact details of this program, and how the money would be distributed, are still in the works — the proposal also establishes an advisory committee to help make those decisions. But the program is likely to particularly benefit low-income communities, Cullenward noted.
“Because poor people use relatively little energy and emit relatively little carbon, it turns out these kinds of processes … tend to produce a progressive impact on people who live in the state,” he said.
And according to Michael Wara, an energy and environmental law expert at Stanford University, who also advised the development of the proposal, moving to extend the state’s cap-and-trade program, rather than allowing it to expire, is an ambitious move in the first place.
“This is really a discussion about what do we do next, and any program that comes next is going to have to be enacted by the legislature,” he told The Washington Post. “The alternative to not extending carbon pricing is really command and control regulation.”
The proposal also requires more legislative effort than the previous cap-and-trade program did when it passed. The original program was established by a simple majority vote — but since then, “the voters approved changes to the rules on how new programs that raise revenue can be passed,” according to Cullenward. The new proposal will likely require a two-thirds majority vote to pass — a requirement that could make the legislation’s passage more challenging, but will also insulate it against legal challenges in the future, he said.
The proposal isn’t the only climate-related legislation that’s been introduced this week. A separate bill, announced Tuesday by de León, proposes an ambitious new energy target requiring the state to generate 100 percent of its electricity sold at retail from renewable sources by the year 2045. Its current targets include a goal of generating 50 percent of its electricity from renewables by the year 2030.
For the time being, though, there have been few other proposals discussed that would address a replacement for the current cap-and-trade program, Cullenward added. Absent another plan, he said, his concern would be that after 2020 “nothing happens” — an even more significant concern for environmentalists at a time when the federal government has begun rolling back numerous environmental and climate regulations established under the Obama administration.
“Given the fact that what is happening today with the climate change deniers as well as climate change liars in Washington, it’s absolutely imperative that we move forward with an extension, with the necessary modifications and reforms that are necessary,” de León said at Monday’s news conference. “The world is watching very closely what we’re doing here in California.”