California Extends Bipartisan Carbon Cap and Trade

On Monday night, the California Legislature passed AB-398, which extends the state’s cap-and-trade climate law to 2030. The bill passed both houses easily, though largely along party lines. Nevertheless, AB-398 had considerable bipartisan support compared to other bills debated and passed in Sacramento. GOP advocates included former Governor Pete Wilson as well as George Shultz, who served in the Eisenhower, Nixon, and Reagan administrations.

Wilson, in a letter reportedly sent to Republican legislators in an effort to garner their support, said, “The choices are limited, and unfortunately you are faced with what you can do to make a bad situation better.” Wilson opined that other options, such as a carbon tax, would be "truly disastrous for our state."

Shultz described AB-398 as an effort that would have made Reagan, under whom he served as Secretary of State, "proud," insisting that the law’s extension is a "common sense, free-market approach."

The bill had considerable support from the private sector as well as environmental NGOs. In an op-ed co-written with Fred Krupp, President of the Environmental Defense Fund and Allen Zaremberg, CEO of the California Chamber of Commerce, Governor Jerry Brown said, “Not only is the program helping the state to cut carbon pollution, it’s also injecting billions of dollars into new and innovative clean energy and green technology projects that create good-paying jobs.”

Earlier this year, California declared that it would strive to reduce its greenhouse gas emissions by 40 percent below 1990 levels by 2030. Gov. Brown and his allies have touted California’s cap-and-trade program as a market-friendly approach to curb the state’s climate footprint while helping to boost jobs necessary in a twenty-first century economy.

The economic development angle appealed to some Republicans, including Assembly Minority Chad Mayes. His district represents parts of Southern California’s Inland Empire and High Desert, which suffers from some of the highest levels of air pollution in the state and country. Following Shultz’s footsteps in evoking Reagan, Mayes posted on Twitter that bipartisan passage of AB-398 “is something Ronald Reagan would be proud.”

[embed]https://twitter.com/ChadMayesCA/status/887098365304950784[/embed]

The bill’s passage means that carbon-heavy industries will still be required to purchase permits in order to pollute. Supporters often argue that cap-and-trade is necessary in order to incentivize companies to make their operations leaner and greener. Debate over its extension continued over several months, as opponents of the system argued that the program was more of a regressive tax than a climate change curb.

The result of the ongoing debate was that California’s cap-and-trade program began to suffer as participants became doubtful of its long-term viability. “Previously, with cap-and-trade in jeopardy, quarterly auction results were mixed, because participants weren't sure if the program was going to continue,” argued Katie Fehrenbacher on GreenTech Media, who added, “The extension will bring more long-term funding certainty for cleantech.”

Environmental groups were quick to applaud AB-398’s passage, and were quick to point out than an imperfect bill was preferable to letting the cap-and-trade program lapse.

"Businesses depend on market certainty to invest, grow and hire new workers,” said Mary Solecki, Western States Advocate for the national, nonpartisan business group E2. “No legislation is perfect, but this vote provides much-needed certainty to California's clean energy businesses and investors and the nearly 520,000 Californians they employ.”

Sig Anderman, executive chairman and co-founder of the mortgage technology company Ellie Mae, is one business leader who argued that passing AB-398 would be a boon for business in California. “The new 2030 targets build upon California’s legacy of ambitious, leading-edge climate and clean energy policy that catalyzed our booming clean tech economy,” he wrote in an op-ed posted last weekend.

With 18 months left in his tenure, Gov. Brown has been successful at working with the California Legislature to cement his environmental legacy. On Monday night, both houses passed AB-617, a law that seeks to improve air quality in the state’s more polluted communities.

Image credit: Pedro Szekely/Flickr