Capitol Alert

Is Big Oil warming up to Jerry Brown’s climate-change effort?

Gov. Jerry Brown proposes a budget that eliminates a projected $2 billion deficit for the upcoming year. Brown wants the Legislature, where Democrats gained a two-thirds majority in both houses in the November election, to use that power to extend the cap-and-trade program beyond 2020.
Gov. Jerry Brown proposes a budget that eliminates a projected $2 billion deficit for the upcoming year. Brown wants the Legislature, where Democrats gained a two-thirds majority in both houses in the November election, to use that power to extend the cap-and-trade program beyond 2020. rpench@sacbee.com

Gov. Jerry Brown predicted last fall that new legislation and administrative actions essential to preserving the state’s ambitious climate strategy would give him leverage to negotiate a cap-and-trade extension.

“They’re going to get commands to do things,” Brown said, directing his remarks at the state’s powerful business interests, “and they’re going to plead for a market system called cap and trade so they can respond in a way that’s more beneficial to their bottom line.”

Now, the Democratic governor is urging lawmakers to renew the cap-and-trade program amid signs his forecast was prophetic. Soon after Brown released his proposal this month, the Western States Petroleum Association indicated that the oil industry prefers the flexibility of a market mechanism to more burdensome policies also being contemplated to reduce greenhouse gases.

Brown wants the Legislature, where Democrats gained a two-thirds majority in both houses in the November election, to use that power to extend the program beyond 2020. It remains a heavy political lift that will require the cooperation of Democrats with past sympathies to the oil industry’s concerns.

I think everything should be on the table. There are no sacred cows.

Assemblyman Jim Cooper, D-Elk Grove

But already a group of Assembly members, including Autumn Burke, D-Marina Del Rey, and Jim Cooper, D-Elk Grove, has introduced a bill expressing its intent to do so. Burke said the program is an “effective tool” to help fight global warming, noting its revenues go to pay for programs that reduce carbon emissions and create jobs.

Cooper, a recipient of heavy outside election spending by businesses and oil companies, said he’s behind the program “when it’s done correctly,” with more legislative oversight.

“I think everything should be on the table,” Cooper said. “There are no sacred cows.”

Brown’s budget priority comes at a time of deep uncertainty for the program, considered the cornerstone of the state’s landmark 2006 climate change law.

Under cap and trade, which established a statewide annual limit on carbon emissions, firms purchase carbon emissions credits at auctions administered by the Air Resources Board or on the open market. Each permit allows polluters to expel a ton of carbon.

Contributing to uneven auction results of late is the long-running legal challenge led by the California Chamber of Commerce, which asserts that the state auction amounts to an illegal tax. While a Superior Court judge ruled in favor of the air board in November 2013, oral arguments before an appeals court are set for Tuesday.

The case pits the chamber and industry interests against the state and environmental, utility and other businesses and is being closely watched for its far-reaching implications.

A retreat would be saying, ‘Trump is getting his way with California because we can’t figure out how to stay on our path.’

Nancy McFadden, executive secretary to Gov. Jerry Brown

The legal challenge hasn’t stopped Brown from pushing ahead. The legislation he signed last year prolonged California’s authority to enact extensive environmental policies beyond the nearing 2020 limit, requiring the state to reduce greenhouse gases to 40 percent below their 1990 levels by 2030.

Nancy McFadden, executive secretary to Brown, said extending cap and trade is especially necessary given the election of Republican Donald Trump, whose administration is seen as hostile to climate measures in place here.

“For us, the price should not be so high to do something that is right, and smart,” McFadden said in an interview, “And a retreat from (that) would be saying, ‘Trump is getting his way with California because we can’t figure out how to stay on our path.”

Brown’s new budget plan outlines $2.2 billion in cap-and-trade spending, assuming each auction will generate $500 million. The program’s precarious position made investors nervous last year, when May and August auctions brought in just $10 million and $8 million, respectively (November’s auction generated $364 million).

Among the projects targeted for funding are high-speed rail, affordable housing and public transit, an agenda lawmakers looking to their own districts’ welfare will be scrutinizing.

Assemblyman Sebastian Ridley-Thomas, D-Los Angeles, is one of those still opposing an extension, saying bluntly that “Southern California has been discriminated against in cap-and-trade spending” to “address some of the critical needs,” from affordable housing to transportation and homelessness.

He said the program, “would be much more justifiable if the resources were allocated in a method that’s advantageous to my constituents. We can recommit ourselves to climate resilience by not allowing bureaucrats and boards that are not reflective of (the entire) state to take resources and not make intelligent investments.”

Much of the political jostling over the next two years will likely happen in the Assembly, where a business-friendly bloc has helped stymie various past proposals.

Cap and trade is likely one of the most cost-effective programs that will help us meet those targets.

Sen. Bill Dodd, D-Napa

As an assemblyman, now-Sen. Bill Dodd, D-Napa, didn’t support a provision in priority climate change legislation to cut consumption of transportation fuels in half by 2030, suggesting there was no viable plan presented for how to achieve the reduction. But he said last week that the Legislature’s upper chamber would undoubtedly pass an extension.

“Just knowing with (Senate leader) Kevin (de León’s) leadership, and where he has been at, I don’t see a problem over here” in the Senate. “Cap and trade is likely one of the most cost-effective programs that will help us meet those targets,” Dodd said.

Assessing the Assembly, he said, “I don’t know where they are going to land.”

Some of that will depend on what the industry can support. In outlining the best ways to reach the new goals, the Air Resources Board released a recommendation Friday to extend the cap-and-trade program through 2030, as well as reduce greenhouse gases from refineries by 20 percent.

That drew a protest from the petroleum association. President Catherine Reheis-Boyd issued a statement calling the proposal “more costly,” arguing it contains “more economically harmful direct command-and-control regulations.” She urged the Brown administration to reconsider its plan to “implement economically harmful policies.”

Cooper, in an interview, said he looked forward to the discussions, indicating in response to a question that he’s open to talking about revising current regulations that require the industry to produce cleaner fuels.

Assemblywoman Cristina Garcia, chair of the Natural Resources Committee, said she expects everything will be considered, from a carbon tax to “reforming and changing” cap and trade. Garcia said the current system has not always benefited her Bell Gardens-based district.

“My air being cleaner is not enough. Do I have more jobs for my district? Do we have more electric vehicles in my area?” she asked.

Garcia said she’s spoken with Burke and Assemblyman Eduardo Garcia, D-Coachella, and expects additional legislation.

“I am happy that the oil companies are at the table,” she added, pointing to last year’s bills. “They are kind of being forced into now having a preference, so, I am going to try to capitalize on that situation.”

Christopher Cadelago: 916-326-5538, @ccadelago

Climate legislation

▪ Assembly Bill 32 (2006), required the Air Resources Board to reduce statewide emissions of greenhouse gases to 1990 levels by 2020.

▪ Senate Bill 32 (2016), requires the state to reduce greenhouse gas emissions to 40 percent below their 1990 levels by 2030.

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