Don’t believe naysayers: Carbon market is working

Gov. Jerry Brown speaks during a 2014 climate summit at the United Nations headquarters in New York.
Gov. Jerry Brown speaks during a 2014 climate summit at the United Nations headquarters in New York. Associated Press file

A funny thing happened on the way to California’s carbon market collapsing – it didn’t.

It’s no coincidence that we are hearing predictions that the state’s world-renowned cap-and-trade program is doomed to failure just as the governor and Legislature are wrangling about how best to extend our greenhouse gas reduction targets and cap and trade beyond 2020.

We have seen this strategy to undermine our state’s climate policies before. In 2010, it was a failed ballot measure funded by out-of-state oil companies to kill our landmark law, Assembly Bill 32. In 2013, the Western States Petroleum Association spent millions claiming that the state’s low carbon fuel standard would lead to price spikes and fuel shortages. In fact, the standard has led to a 36 percent increase in clean fuels use and $650 million invested in clean fuel production.

In 2014, the petroleum association and related groups warned that gas prices would skyrocket from transportation fuels coming under cap and trade. Instead, gas prices fell. And last year, the oil industry spent more than $25 million on misleading ads and lobbying to derail a policy for lower petroleum use and cleaner air in California.

Exaggeration is what we have come to expect from industries that know that California’s continued success in reducing carbon while growing the economy means other states and nations will follow suit. That propels these industries to spend tens of millions to misinform the public and delay progress rather than innovate. The recent downturn in demand in the carbon market is being used by these same opposition groups to suggest that we have yet another “conversation” about policies such as the fuel standard.

What we need to remember about California’s cap-and-trade program is that it’s one component of a larger set of policies to reduce carbon emissions. It’s the declining “cap” in cap and trade that matters most; raising revenue is not the purpose. So one undersubscribed auction does not a collapse make.

Quite the contrary, the program is functioning exactly as intended. It has features to account for what happened in the last auction. At the same time, there is uncertainty around cap and trade due to a pending lawsuit by longtime opponents who claim it is a tax.

There also is lack of political action to put the program on firm footing beyond 2020. From a business perspective, lack of certainty is a death knell. A five- or 10-year plan is commonplace for businesses; not knowing what will happen three years from now would cause chest pains for even the most seasoned business executive. We need Gov. Jerry Brown and the Legislature to address the uncertainty by moving the policy process forward and coming up with a game plan beyond 2020.

Year after year, poll after poll, AB 32 and cap and trade enjoy broad support with businesses, consumers and, of course, the environmental community. A single auction has not affected that support, and it isn’t leading to the program’s demise.

Scott Hauge is president of Small Business California and can be contacted at Susan Frank is director of the California Business Alliance for a Clean Economy and can be contacted at