By Leanna Sweha
Democrats in Sacramento are in lockstep against President Trump on climate change. At the same time, it looks like a rift is growing between some Democrats who prefer Cap-and-Trade and others who prefer direct (or “command and control”) regulation of greenhouse gas emissions. If the rift widens, it could harm California’s climate leadership.
Governor Brown is in the Cap-and-Trade camp, while environmental justice aligned legislators are in the direct regulation camp.
Cap-and-Trade is a market-based system that allows regulated sources of greenhouse gases to find the least-cost way to comply with a declining emissions cap, either through direct reductions or by purchasing emissions credits on the market.
With direct regulation, the state commands a source to reduce greenhouse gas emissions to a certain level or face fines.
The rift among Democrats has a lot to do with distinctions between greenhouse gases on one hand, and criteria and toxic pollutants on the other.
Greenhouse gases, most notably carbon dioxide, are global pollutants which are not direct health hazards. Consider that the ultimate goal of state climate laws is to keep global warming under two degrees Celsius.
On the other hand, criteria and toxic pollutants, such as ground level ozone, are local health hazards. They are directly regulated under the Clean Air Act by the state and by local air districts to keep concentrations below hazardous range.
But there’s also a connection. When fossil fuels burn, they release both greenhouse gases and criteria and toxic pollutants. So, generally speaking, fewer criteria and toxic pollutants is a co-benefit of directly reducing greenhouse gases.
Environmental justice groups advocate for poor communities which are near refineries, industrial plants and freeways. These groups rightfully point out that all residents deserve equal protection under environmental laws.
So, it makes sense for environmental justice groups to focus on the co-benefits of reducing greenhouse gases.
Under AB 32, the 2006 law that mandates greenhouse gas emissions be reduced to 1990 levels by 2020, the state must consider these co-benefits. AB 32 also established the Environmental Justice Advisory Committee (EJAC) to advise the Air Resources Board on its Scoping Plan, the state blueprint for climate regulations.
The Air Resources Board is currently updating its Scoping Plan to meet the 2030 climate goals of SB 32, enacted in 2016. SB 32 requires California to reduce greenhouse gas emissions to 40 percent below 1990 levels by 2030.
The EJAC has recommended against Cap-and-Trade and in favor of Cap-and-Tax in the 2030 Scoping Plan. Under Cap-and-Tax, each regulated source must reduce its emissions below a cap and pay a tax on amounts emitted.
EJAC doesn’t like Cap-and-Trade because regulated sources can avoid direct reductions by buying emissions credits (allowances). EJAC particularly criticizes the fact that the state gives out free allowances to some sources to avoid “leakage,” that is, sources moving out of state and emitting elsewhere. EJAC also doesn’t like the fact that sources can buy emissions offset credits that pay for programs outside the state, for example, forest protection in the Amazon.
Cap-and-Tax is the best of both worlds for environmental justice groups. It is a direct regulation that, like Cap-and-Trade, also generates revenues for climate programs. Under current law, at least 25 percent of these revenues must go to climate programs for “disadvantaged communities”.
Brown also needs revenues to continue, because 25 percent by law go to the high speed rail project.
Language enacted last year requires the state to “prioritize” direct greenhouse gas emission reductions to meet the 2030 goal. So, the draft 2030 Scoping Plan relies largely on Cap-and-Trade but also includes direct regulation of oil and gas refineries.
This apparently has not satisfied environmental justice groups. Last week, environmental justice aligned legislators introduced a bill that leaves no doubt that direct regulation must come first. AB 378 would only allow Cap-and-Trade if it “complements” direct regulation. Cap-and-Tax also would fit nicely into AB 378.
Brown has asked the Legislature to reauthorize Cap-and-Trade by a two-thirds majority, because the courts may invalidate it as an illegal general tax which has not been approved by a two-thirds vote. However, he may not have expected the bill to come in the form of AB 378.
Democrats hold a two-thirds majority in both houses and so in theory can pass AB 378 by a two-thirds majority. The question now seems to be whether Cap-and-Trade will survive and under what conditions.