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California lawmakers pass bill extending cap-and-trade program

From the July 19, 2017 issue of Public Power Daily

Originally published July 18, 2017

By Paul Ciampoli
News Director

California lawmakers on July 17 passed legislation that would extend the state’s greenhouse gas cap-and-trade program, as well as a measure that would impose air monitoring requirements in polluted areas.

The bills now head to Gov. Jerry Brown, a Democrat, for his signature. Brown was joined by key lawmakers in the California Assembly and Senate earlier this month in unveiling the measures.

The California Senate passed the cap-and-trade bill (AB 398) by a vote of 28-12 and the Assembly cleared the measure 55-21.

The state’s current program, which ends in three years and aims to help reduce carbon dioxide (CO2) emissions to 1990 levels by 2020, requires generators, large industrial facilities and fuel distributors to cut their GHG by 3 percent a year.

Regulated entities can meet their requirements by purchasing allowance credits in quarterly auctions and the secondary market or investing in CO2 offset projects, such as forestry programs, as an option to lowering their emissions.

With the legislation, the cap-and trade program will remain a centerpiece in California’s effort to cutting its GHG emissions by at least 40 percent below 1990 levels by 2030.

In a change from the current program, the bill requires the California Air Resources Board to set a limit on the price of CO2 allowances. At the moment, the program has a floor on allowance prices but no cap.

The bill would require half of CO2 offset projects to be in California.

Under the bill, local air districts couldn’t set their own limits on emissions from facilities that are covered under the statewide program.

The bill keeps the existing levels of free allowances for oil refineries, which had been set to decline.

The bill directs CARB to set a declining cap and will decrease free allowances by 40 percent by 2030.

The bill also establishes an “Independent Emissions Market Advisory Committee” to report on the environmental and economic performance of the cap and trade program and other relevant climate policies.

California's program is linked to a cap-and-trade program in Quebec and Ontario intends to join the program next year. Washington state is considering linkages to other cap-and-trade programs and Oregon is considering measures to allow it to join California’s program.

AB 398 drew support from a wide range of interests in the state including members of California’s public power community.

“We applaud lawmakers and Governor Brown for extending California’s cap-and-trade program with important cost containment protections,” said Michael Webster, executive director of Southern California Public Power Authority, on July 18.

“We continue to stress the importance of providing long-term regulatory and market certainty so our utilities can appropriately plan for and make strategic investments towards meeting California’s ambitious climate change goals,” he said. 

The Los Angeles Times reported that that eight Republican lawmakers sided with Democrats to extend the cap-and-trade program. The newspaper also noted that Brown was pushing for a two-thirds vote for the legislation “to insulate cap and trade from legal challenges” and that AB 398 “received the supermajority vote Brown hoped for.”

In April, the California Court of Appeal in Sacramento upheld the cap-and-trade program, a decision that was affirmed by the state’s Supreme Court when it declined to review the lower court’s decision in June.

Lawmakers also pass AB 617

California lawmakers also passed AB 617. The Senate passed it by a vote of 27-13, while the Assembly cleared it with a vote of 50-24.

This measure requires increased air emissions monitoring for various emissions in high priority areas.

Under the bill, stationary sources would be required to report their emissions of criteria pollutants and toxic air emissions.

On a finding by an air district, certain facilities covered under the state’s cap-and-trade program would be required to put in place “best achievable retrofit control technology” for certain types of air pollution.

The bill also increases maximum criminal and civil penalties for non-vehicular air pollution violations to $5,000 from $1,000.

California lawmakers also passed ACA-1, a constitutional amendment that requires a midway check in the next decade of the program on how cap-and-trade generated dollars are spent.

California voters will need to sign off on ACA-1 next year and, if approved, ACA-1 “would require a one-time two-thirds vote to continue spending the money in 2024,” the Los Angeles Times noted.


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