Coincidence? Just moments after the state Assembly approved legislation setting a new 2030 target for reducing greenhouse gas emissions Tuesday, the Air Resources Board released results of its latest quarterly auction of emission allowances, and they were another financial debacle for the state.
While the August auction generated four times as many emission allowance sales as the May auction, only a handful were state-owned, so the state realized just $8.4 million, even less than the $9.6 million it saw in May.
The cap-and-trade auctions had been projected to generate about $600 million each quarter and Gov. Jerry Brown and legislators had been dickering over how to spend the windfall, including a big chunk to keep Brown’s financially challenged bullet train project alive.
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With the latest auction results, however, the financial futures of the program and the bullet train are very shaky.
Those who follow the cap-and-trade system, a cornerstone of the state’s carbon emission reduction strategy, say that a glut of allowances in the secondary market and uncertainty about its legal and political status have soured potential buyers.
Cap and trade and other elements of the anti-carbon program were authorized in 2006 legislation and geared to reducing state emissions to 1990 levels by 2020. Brown wants to extend it to 2030 and beyond, but has run into legislative resistance, even among his fellow Democrats.
Last year, the Assembly rejected Senate Bill 32, which would have extended authorization to 2030, and this month, with the Legislature nearing adjournment, Brown tried to insert language specifically authorizing continuation of cap and trade, but was rebuffed by Assembly Speaker Anthony Rendon.
Rendon took SB 32 the other way, stripping it down to a few words setting a 2030 goal of a 40 percent reduction from 1990, with a companion bill giving the Legislature a stronger role in overseeing the ARB. And in that form, it passed on Thursday on a 42-29 vote after a contentious debate and with Tom Steyer, a billionaire backer of carbon reductions and potential candidate for governor, watching from a back hallway.
The future of cap and trade, however, remains uncertain.
A state appellate court is expected to rule soon on a business-backed lawsuit challenging cap and trade as an illegal tax, and based on the court’s questions, many observers expect it to void the program.
The ARB, in a draft “scoping plan” for 2030, suggests that it could continue cap and trade without specific legislative authorization or shift to another strategy, such as specific industry emission caps, to reach the 40 percent goal.
Continuing cap and trade without authorization could run afoul of a 2010 ballot measure that more narrowly defines fees and taxes and invites further litigation. It also would continue to make potential emission allowance bidders leery.
However, abandoning cap and trade would cut off billions of potential dollars for the bullet train, for subsidies to prop up the faltering “zero emission vehicle” program and myriad other activities.
It’s a fine mess.