Renewal of CA cap and trade program fraught with issues

Welcome to CalMatters, the only nonprofit newsroom devoted solely to covering statewide issues that affect all Californians. Sign up for WeeklyMatters for a Saturday morning digest of the latest news and commentary from the Golden State.

This story is part of California Voices, a commentary forum aiming to broaden our understanding of the state and spotlight Californians directly impacted by policy or its absence. Learn more here.

*,.ca-voices-intro > h4:first-child{margin: 0;}.ca-voices-intro p{padding-block-start: 4px;font-size: 14px;line-height: 130%;}.ca-voices-intro a{color: #075E73;font-weight: 700;}@media screen and (min-width: 781px){.ca-voices-intro p{font-size: 16px;}}]]>

While the Capitol is fixated on Gov. Gavin Newsom’s drive to rearrange California’s congressional districts in order to counter a pro-Republican gerrymander in Texas, there are several other pithy issues to resolve and just three weeks remaining in the legislative session.

They include a new effort to jumpstart housing construction, whether California should merge its electrical power grid with those of other Western states, regulation of artificial intelligence and renewal of the state’s cap and trade program for reducing emissions of greenhouse gases.

All are fraught with political conflict, but those of cap and trade are particularly complex.

Each quarter, the state Air Resources Board auctions emission permits with proceeds being used, at least in theory, to reduce greenhouse gases. The program is due to end in 2030 and Newsom wants to renew it for an additional 15 years, albeit with some tweaks.

The issue’s macro-politics are that while gas-emitting industries and business groups favor its renewal as a predictable way of meeting emission reduction goals, environmental groups see it as business buying exemptions from pollution. They would prefer direct company-by-company regulation.

Within that conflict are other issues, such as steadily dropping proceeds from the emission auctions, which emitters with vital products should be given permits without cost, and how auction revenues should be spent.

Newsom wants the program to be renamed “cap and invest.” In the state budget he signed in June, it declared the establishment of “a stable and predictable price on carbon pollution to drive deeper investments in carbon reduction and clean technologies.”

However, the more than $30 billion generated by the auctions to date are not always being spent on effective emission reduction programs. Some are being used instead to finance programs that are strapped for money.

Californians have a lot to say

Californians have a lot to say

There are plenty of commentators in the Capitol and on TV — we prefer fresh perspectives from different voices across our state. If you want to hear from them, share your email. 

There are plenty of commentators in the Capitol and on TV — we prefer fresh perspectives from different voices across our state. If you want to hear from them, share your email. 

For instance, Newsom wants to keep setting aside at least $1 billion a year in auction funds to keep the state’s much-troubled bullet train project alive. In theory, electric-powered trains would reduce carbon emissions by replacing auto and airline travel, but the data behind that rationale are shaky.

By the state’s own projections several years ago, a fully constructed north-south system would reduce auto travel by 16.3 million vehicle-miles each day. That sounds impressive but is just shy of 2% of the nearly one billion miles Californians drive each day. Meanwhile, bullet train construction itself is emitting carbon.

Newsom also wants auction funds to pay for fighting the state’s many wildfires, which are major sources of pollution. It would relieve the general fund budget of that burden, but would do little or nothing to prevent those fires.

One of the biggest issues, at least politically, is the impact on Californians’ living costs. It’s well-established that emitters pass on their costs as higher prices — 23 cents per gallon of gasoline, the Legislative Analyst’s Office has calculated.

Chevron executive Andy Walz told a Public Policy Institute of California forum on the issue Thursday that refiners consider cap-and-trade costs as a major factor in deciding whether to continue operating in the state. California once had dozens of refineries but only nine remain and two of them have announced closure plans. Newsom and legislators, who only months ago were denouncing refiners as price-gougers, now are pleading with them to remain in business to avoid big price increases during the conversion to a zero-emission economy.

Meanwhile, a recent poll by the PPIC found that while a majority of Californians want the state to reduce carbon emissions, they also don’t want to pay higher energy costs from that effort.

That bifurcated attitude colors whether cap and trade will be renewed and how its costs will be borne.

.wp-block-group__inner-container > :not(h2){margin: 16px 40px !important;}.cm-cta.long-ask .wp-block-group .wp-block-group__inner-container{display: flex;gap: 12px;align-items: center;}.cm-cta.long-ask figure{max-width: 40px;flex-shrink: 0;}.cm-cta.long-ask .wp-block-group p{font-size: 18px;font-weight: 700;line-height: 120%;letter-spacing: -0.36px;width: 100%;}.cm-cta.long-ask .wp-block-group .wp-block-buttons{flex-shrink: 0;}.cm-cta.long-ask .wp-block-button__link{padding-left: 40px;padding-right: 40px;}@container long-ask (min-width: 601px){.cm-cta.long-ask *{font-size: 16px;}}@container long-ask (max-width: 600px){.cm-cta.long-ask h2,.cm-cta.long-ask .wp-block-group p{text-align: center;}.cm-cta.long-ask h2{background: linear-gradient(90deg,#FFE094 0%,#FFB500 100%);padding: 12px 20px;font-size: 20px;letter-spacing: -0.4px;}.cm-cta.long-ask .wp-block-group .wp-block-group__inner-container{flex-direction: column;}.cm-cta.long-ask > .wp-block-group__inner-container > :not(h2){margin: 16px 20px !important;}}]]>

Nonpartisan, independent California news for all

We’re CalMatters, your nonprofit and nonpartisan news guide.

Our journalists are here to empower you and our mission continues to be essential.

We are independent and nonpartisan. Our trustworthy journalism is free from partisan politics, free from corporate influence and actually free for all Californians.

We are focused on California issues. From the environment to homelessness, economy and more, we publish the unfettered truth to keep you informed.

We hold people in power accountable. We probe and reveal the actions and inactions of powerful people and institutions, and the consequences that follow.

But we can’t keep doing this without support from readers like you.

Please give what you can today. Every gift helps.