Politics & Government

California’s cap-and-trade market could gain partners under new plan

Mary Nichols has led the California Air Resources Board as chairwoman since 2007. The agency on Tuesday released a proposal showing it might achieve aggressive greenhouse gas reduction targets favored by Gov. Jerry Brown. (AP Photo/Eric Risberg)
Mary Nichols has led the California Air Resources Board as chairwoman since 2007. The agency on Tuesday released a proposal showing it might achieve aggressive greenhouse gas reduction targets favored by Gov. Jerry Brown. (AP Photo/Eric Risberg) AP

California’s groundbreaking cap-and-trade program designed to rein in carbon emissions will grow into the next decade and include partners in Toronto and parts of the Brazilian Amazon under a proposal released Tuesday by the state Air Resources Board detailing how the agency plans to hit Gov. Jerry Brown’s greenhouse gas reduction targets.

The board released the proposal at a make-or-break moment for the state’s cap-and-trade program.

A state appeals court is expected to rule sometime this summer on a lawsuit from the California Chamber of Commerce that challenges parts of the program. Some lawmakers also believe they have to renew the program’s authority for it to continue.

Today, the market operates under a 2006 law that sets greenhouse gas reduction targets through 2020. Under cap and trade, the state sets a cap on greenhouse gas emissions and requires businesses to either reduce their emissions or pay for credits letting them exceed their limit.

“The future of the program is going to be decided in the next six weeks,” said Jon Costantino, an adviser at the Manatt law firm who closely follows the state’s climate change policies.

The Brown administration hopes to reach agreement with lawmakers to extend the program before the Legislature adjourns at the end of August.

“We will not meet our world-leading clean air and emission reduction targets unless we solidify and redouble our commitment to the state’s cap and trade program and climate goals beyond 2020 and we will work hard to get that done,” according to a statement from the Governor’s Office. “An extension will not only provide market certainty, but will ensure ongoing funding for clean energy programs, especially in vulnerable communities.”

Still, both the report and board members say the program is on solid footing well beyond 2020.

“The Air Resources Board and (the Brown) administration have concluded they don’t need a new law to extend cap and trade and to set post-2020 climate targets,” said board member Dean Florez, a former state senator.

The 443-page proposal would admit the Canadian province of Ontario to California’s market sometimes next year, as long as a pending review shows they can work well together. The province of Quebec already participates in California’s market.

The report also opens the door to potential partnerships with Washington state and Mexico, each of which is developing its own carbon trading programs.

Under the plan, the state could let California industries offset their carbon footprint by paying to preserve Amazonian rainforests in the giant Brazilian state of Acre.

The board developed the plan to demonstrate how it planned to reach Brown’s goal of cutting greenhouse gas emissions to 40 percent below 1990 levels by 2030. The agency has held public hearings for much of the past year as it developed the proposal. An outline of the plan last month drew more than 60 written comments from environmental advocates and business groups trying to shape the board’s decision.

“We have seen them be successful and allow the economy to thrive while implementing and achieving carbon reduction,” said Erica Morehouse, a senior attorney for the Environmental Defense Fund, which favors the Air Resources Board’s current policies such as requirements for utilities to use more green energy and the cap-and-trade program. The fund wrote a letter urging the agency to extend its programs.

The proposal is expected to appear before the board for a first vote early this fall. It likely won’t take effect until next summer even if approved.

Rob Lapsley, president of the California Business Round Table, said the proposal would continue to burden businesses already coping with state regulations.

“The stakes have never been higher for the business community as we bear the billions of dollars in compliance costs for climate change,” Lapsley said. “We will be reviewing the new proposed regulations with a microscope to ensure that they balance jobs and achieve greenhouse gas reductions.”

A taxpayer advocacy group released a statement criticizing the board for releasing its draft report before a ruling was made on the program in relation to a lawsuit filed by the state Chamber of Commerce.

“Instead of addressing the legal issues related to the auction program, (the board) is ignoring them and moving forward unilaterally without oversight or input from the Legislature,” said Californians Against Higher Taxes.

The proposal includes technical changes to how the air board might regulate a range of industries, from dairy farms to almond roasters.

The plan would bring California law into compliance with the federal Clean Power Plan, the Obama administration’s greenhouse gas reduction program. The Supreme Court has delayed that law’s adoption.

The proposal also continues a tightening of free pollution credits that the state has handed to industries since it opened a cap-and-trade market in 2012, meaning it could become more expensive for businesses to meet the state’s climate change goals.

Adam Ashton: 916-321-1063, @Adam_Ashton

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