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California Legislature Passes 10-Year Extension to Cap and Trade

Public Policy

Success in the legislature:

After weeks of negotiations in the California legislature, the Senate and Assembly passed an extension to cap and trade on July 17. This is a win for California’s climate leadership and for green building. USGBC actively supported the cap-and-trade extension, as one of the state’s key strategies to reach its SB 32 goal to reduce emissions by 40 percent from 1990 levels by 2030.

The extension package includes two bills: AB 398 extends and modifies the cap-and-trade bill that took effect in 2012 and AB 617 adds provisions for air quality control in priority areas. AB 398 was signed into law this week by Gov. Jerry Brown in San Francisco, and AB 617 was signed near Los Angeles. The modifications to cap and trade will take effect in 2020 and continue through 2030.

Learn more about how cap and trade works.

Air quality controls

To address the issue of air quality in at-risk communities, AB 617 puts the Air Resources Board (ARB) in charge of monitoring pollutants across the state and proposing pollution control technologies and community emissions reduction programs in the highest-priority locations, as well as providing grants and technical assistance.

Local air districts will not be permitted to impose additional mandates for CO2 reduction; however, they may still impose mandates for non-CO2 pollutants. Additionally, they will be responsible for planning the implementation of the technologies recommended by ARB to industrial plants and refineries, if the local communities experience pollution levels above the set limits.

The new law continues to charge ARB with allocating 1-ton allowances, some free and others via auction, to companies regulated under the cap. Although free allowances have been criticized for making it too easy for businesses to comply and for weakening the market signal, they also make it easier for in-state businesses to compete in out-of-state markets. ARB will be reducing the distribution of free allowances over time, increasing the investments in real reductions.

Carbon offsets

Another pathway for companies regulated under the cap to meet their reduction targets is through the purchase of carbon offsets. If regulated properly, however, offsets can provide valuable climate impacts and give flexibility to the cap-and-trade program. Currently, only 8 percent of any company’s total needed allowances may be achieved through offsets, which will be reduced to 4 percent in 2020 (rising back up to 6 percent in 2026 to reflect the expected increase in carbon pricing).

To encourage local pollution reduction, at least half of the maximum offsets must be through programs that directly reduce emissions in-state. The Compliance Offsets Protocol Task Force under ARB will identify acceptable programs, prioritizing ones that benefit disadvantaged, tribal and agricultural communities.

One of the discussed provisions that did not make it to the approved law is a border adjustment tax. Some argue it would create political friction and have too many logistical complications. To compromise, the bill requires ARB to report carbon leakage and submit a report to the legislature with suggestions for reduction, mentioning the possibility of a border adjustment in the future.

In the larger picture, the greenhouse gas emissions that the cap-and-trade program will save are small in comparison to global emissions. However, if the California cap and trade is successful, it will serve as a scalable and exportable model within the U.S. and, potentially, the world.


10 Comments on "California Legislature Passes 10-Year Extension to Cap and Trade"

  1. Plantagenet on Fri, 4th Aug 2017 3:38 pm 

    HooRAY for California.

    Afer leading the world in auto use and FF pollution, now they are leading the world in cap and trade.

    This is a step in the right direction. Way to go!


  2. Outcast_Searcher on Fri, 4th Aug 2017 6:26 pm 

    But why not just tax all FF burning, if the goal is to reduce CO2 production?

    You don’t have all the complexity, the vagaries, the cheating and/or undesirable side effects of companies trying to game the system.

    You have less CO2 production as cheaper alternatives are strongly sought, and you have lots of tax revenue to do things liberals love government to do?

    In liberal CA, this seems like total nirvana? Why doesn’t governor Moonbeam wake up and get with a better program?

  3. Anonymouse on Fri, 4th Aug 2017 6:41 pm 

    Shut up plantytard. Crap and trade, aka pollution bait-and-switch, is only slightly less retarded than you are. C+T has done zero, zip, nada, to reduce pollution or consumption in real terms. The entire concept is a fraud, which goes a long way to explain your apparent infatuation with it.

    Cherrio retard!

  4. onlooker on Fri, 4th Aug 2017 7:22 pm 

    Yes, the crap and trade just like the so called climate treaties and just face saving schemes by the powers that be. Global man made emissions have been increasing steadily year after year. They talk the talk but do not walk the walk

  5. Go Speed Racer on Fri, 4th Aug 2017 8:44 pm 

    Here is how CO2 Cap and Trade works:

    I was going to burn 15 old La-Z-Boy Recliners
    in my backyard in a bonfire. Each one would
    produce 100 pounds of CO2.

    However I will agree to only burn 3 of them,
    leaving 12 La-Z-Boy recliners NOT burned up
    and I have to keep them in the RV garage
    stacked up by the motorhome.

    I get a credit for the 1200 pounds of CO2
    and then I can sell it to a rich government
    official and he gives me $500 for the 1200
    pounds CO2 that I didn’t burn. I am getting
    happy now cause now I got $500 from the rich

    Now the rich man, has a CO2 credit that HE
    didn’t burn the 1200 pounds of CO2, and
    instead he now has ‘credit’ to fire up his
    125 foot marine pleasure cruiser, complete
    with underwear models in swimsuits on the
    forward bow deck where he can watch them
    while he pilots the boat. At 12 knots, to
    a nice quiet harbor somewhere on the California coast.

    And thanks to his CO2 credits, while he’s
    banging away in the forward cabin, he did the
    whole travel as CO2 neutral.

    Meanwhile back at my double-wide trailer ranch
    with the RV garage, I got tired of looking
    at all those old La-Z-Boy recliners and
    when nobody was looking I burned them up
    anyway, the flames went up 40 feet and the
    smoke was visible from outer space.

    So I am happy cause i burned up all 15 of
    the La-Z-Boy recliners, the government is
    happy, and the rich guy with the yacht
    and the underwear models is OBVIOUSLY happy.

    See how much better for the Earth and to
    lower your CO2 footprint, is the “Cap and Trade” what a bucketload of horse crap.

  6. deadlykillerbeaz on Fri, 4th Aug 2017 11:07 pm 

    California growers of lettuces, grapes, oranges, et al should acquire an emissions credit since they grow plants that fix carbon dioxide from the atmosphere. An analysis of how much carbon dioxide fixed will determine a finite amount. California’s vintners, vegetable and fruit growers and so on would be deserving of a monetary gain.

    A carbon sink fund and credit ledgers.

    Gotta get some money some how.

    Logging would be mandated a carbon emissions accumulation and would be taxed to fund carbon credits for CO2 fixation benefactors.

    It is only fair to make someone rich at the expense of others.

  7. drwater on Fri, 4th Aug 2017 11:59 pm 

    “They talk the talk but do not walk the walk”
    Actually both California and British Columbia leveled out their CO2 emissions despite greatly increased GDP and population. Their per-capita emissions have gone down quite a bit. Cap and trade is far from perfect, but even many California Assembly Republicans voted in favor of the final compromise bill. That is very significant.

  8. Anonymouse on Sat, 5th Aug 2017 2:20 am 

    Actually, Drunderwater, you have not provided the slightest evidence that either California, or BC, have done anything of the sort. And the only significance one can attach to so-called ‘republicans’ voting for crap and switch, is that they have absolutely nothing to lose by doing so. In fact, they likely stand to profit from the entire scam, I mean program, w/e.

    Crapitialists embraced crap and trade because they could extract some additional profit from polluting, while pretending to avoid polluting, but mostly did it because it allowed them to keep doing exactly what they had been doing long before the financier-industrialists PR dept’s came up with crap and trade as a concept.

    Go Speed Racer summed up Crap and Trade perfectly.

    Consider it: Crap and Trade for Dummies.

    Btw, there is plenty of pollution(still) in BC. Crap and Trade is not practiced there, so that makes your ‘point’, even harder to parse.

  9. onlooker on Sat, 5th Aug 2017 3:12 am 

    Anyway, as per Greg link, 19 feedback have already been activated. While some were trying to convince profiteers and idiots, Nature has already reached a verdict. We are screwed. Fact is as has been pointed out, we probably were screwed no matter what. Because we like to consume and have sex a little too much. We also like fighting too much, that may do us in by itself

  10. Davy on Sat, 5th Aug 2017 6:28 am 

    Cap and trade is better than nothing but it is like having a rubber mallet when you need a good 8lb hand hammer. What is needed is behavioral changes and those require widespread public engagement. Try engaging the public on doing less and saying no. Isn’t this what this whole matter is all about, less? We know “Moar” with less is just a “feel good” of doing more within the big picture. In our growth based market system efficiency always is utilized elsewhere for more. Growth means more. In a different type of arrangement more with less is possible but not ours. To be fair some are doing less and some efficiency is really less but this is not the case in general globally with our growth based global system.

    We surely are barreling into a crisis of an unknown proportions and timeframe. The time frame is ahead because so many indicators are indicating problems. The proportionality is unknown because there are so many different problems we really have no clue how they are going to converge and what that convergence consists of. Sure we can single out a problem and determine a possible time frame with proportionality but it is the multidimensional summation we really don’t have a handle on. I don’t think we want to have a handle on it. Techno optimism in a latent denial is so much more attractive. Problems point to a reckoning. Humans want no part of a reckoning except when there are miracles and sky daddies. Cap and trade is more fake green BS but it is something. We need to ask ourselves if something is even worth the effort. Could the delusions be effort better spend elsewhere?

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