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Affordable Housing and Sustainable Communities

CA Legislature Passes Cap & Trade Bill; Questions Remain

Assemblymember Eduardo Garcia (D-Coachella Valley) testifies on his bill, A.B. 398, at yesterday’s Assembly hearing. Image: Screengrab from CATV

In case you hadn't heard, last night the California legislature passed a legislative package to extend the state's cap-and-trade system until 2030. It's a landmark victory for proponents and a rare bipartisan accord. It brings some certainty to the future of California climate change policy, and it leaves a lot of open questions still to be worked out.

The package consisted of two bills and a resolution, all three of which are likely to be quickly signed by Governor Brown. Last-minute jockeying for votes meant that in both the Senate and the Assembly, final votes were held open while largely invisible negotiations continued to get the two-thirds majority needed to pass each of the three pieces of legislation.

There's already been plenty written about what went down and how—see Today's Headlines for a quick education on the politics involved. A few aspects of the process are worth highlighting:

First was the addition to the package of a resolution, ACA 1, that would ask California voters to decide whether allocations of money raised by cap-and-trade should be decided with a 2/3 majority vote in the legislature. To date the allocations have been part of convoluted and highly political negotiations, conducted outside of the state's budget process, but there hasn't been the high bar of the 2/3 requirement. Currently only new taxes require a 2/3 vote, according to the California constitution.

California voters, especially those that remember the days when state employees got vouchers rather than paychecks, have agreed that the state's budget only needs a majority vote. In the case of the separate cap-and-trade revenue allocations, the Senate, Assembly, and the Governor's office were barely able to come to an agreement a few years ago on how to allocate only some the money, and that was after months of negotiations.

If the constitutional amendment proposed in ACA 1 is approved by California voters—it only needs a majority to pass—it would not take effect until 2024, so meanwhile programs currently funded by cap-and-trade can continue. ACA 1 was authored by Republican Assemblymember Chad Mayes (R-Yucca Valley), and when it passed he and a few other Republicans voted in favor of A.B. 398, the bill that extends cap-and-trade until 2030.

The move is seen as a way for Republicans to take cap-and-trade funding away from high-speed rail, which was referred to, once again, in yesterday's legislative speeches as “the governor's choo-choo train to nowhere.” However, the same Republicans have also disparaged other uses of cap-and-trade funding, including the Affordable Housing and Sustainable Communities program, because they say they don't see the connection between housing, transportation, and greenhouse gases. There is also no guarantee that transit would continue getting cap-and-trade money.

ACA 1 “just adds another layer to an already complicated process,” said Alvaro Sanchez, Environmental Equity Director at Greenlining Institute. “In the long term, it will make a highly political process even more political.”

“We should be moving away from a 2/3 requirement, not towards it,” said Bill McGavern of Coalition for Clean Air. “We oppose erecting new barriers to investing in fighting pollution. A 2/3 requirement can create a lot of mischief, as we've seen repeatedly in these negotiations,” wherein people withhold votes to get their special interests taken care of.

The entire question of cap-and-trade revenues is now very open-ended. In addition to the proposed 2/3 vote requirement, there is also the issue of how much money will be available for other investments in greenhouse gas emission reductions. While raising revenue was never supposed to be the point of cap-and-trade—pricing emissions is meant to be an incentive for polluters and consumers to change their greenhouse-gas-producing ways—it has nevertheless been a source of substantial funds. And many of the programs that currently get money from cap-and-trade are aimed at improving conditions for the most vulnerable residents of our state.

But A.B. 398 could change that, even without the added mischief of ACA 1. The bill includes a list of legislative priorities for cap-and-trade revenue, and industry has pushed its way onto that list. In addition, A.B. 398 continues the use of free emission allowances, adds a price ceiling to the cost of allowances, and will use the funds to backfill revenue lost from canceling the Rural Fire Prevention Fee and extending tax breaks to energy companies.

That will reduce the amount of money available, even in the short term, for those programs currently funded by cap-and-trade. Those programs are required by law not only to help reduce greenhouse gas emissions, but to invest a certain percentage in disadvantaged communities.

For some, the bill package was also a huge missed opportunity to strengthen California's climate change policies. Environmental justice advocates see A.B. 398's concessions to industry as a step backwards, and as a real risk to low-income communities located near polluting industries.

They have been raising the issue of whether cap-and-trade is the right policy for reducing greenhouse gas emissions, but proponents, including other environmental advocates, argued that this compromise is the best they could do. The author of A.B. 398, Eduardo Garcia (D-Coachella), has been an ally for environmental groups. He argued at the hearing that the bill “is a bipartisan collaboration that ensures the continuity of what we started in 2006” with the passage of California's landmark Global Warming Solutions Act.

“This bill,” he said, “is a hundred times better, because we've had an opportunity to learn what worked and what didn't work.”

“I leave tonight with the satisfaction of knowing that we did everything we could to look after everyone” in the state, he said, “and left no one behind.”

But others are not convinced. Greenlining Institute's Sanchez says that the bills could end up having a strong negative impact on the most vulnerable communities in the state—and says that to prevent that, much more work needs to be done.

“While we applaud the legislature for continuing California’s commitment to fighting climate change by putting a price on carbon, this bill leaves legislators and advocates with a huge responsibility to make sure it’s implemented in a way that protects communities hurt first and worst by pollution and climate change,” he said.

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