Bipartisan vote extends California’s cap and trade programme until 2030

On Monday, July 17, the two houses of the Californian parliament have passed the bill AB 397 with a supermajority to extend the state’s cap and trade programme until 2030, as the Los Angeles Times reports. So far, the system, which includes GHG emissions from refineries, power plants and factories, ran only from 2013 until 2020. The cap and trade programme is the central key measure for achieving California’s climate goals.

The amendment of the California Global Warming Solutions Act of 2006 was already envisaged under a Scoping Plan published by the California Air Resources Board (ARB) in January 2017. This Scoping Plan delineated measures to contribute to the 2030 target of reducing GHG emissions by 40 percent below 1990 levels, which was set in 2015 and codified into law in 2016. The respective analysis for the Scoping Plan had revealed that the cap and trade programme would be the most cost-effective approach for reaching the 2030 target.

The bill for the extension of the cap and trade programme was passed after months of engagement to find a compromise. The clear intention was to pass the law with a supermajority, because the cap and trade system can be seen as an instrument of taxation and because the Californian State Law requires a threshold of two-thirds for creating new taxes, according to the Mercury News. The existing programme running until 2020 was challenged in court by the California Chamber of Commerce, arguing that the auctioning represents an illegal tax. In April 2017, a state appeals court upheld the cap-and-trade programme. However, the case could still be brought in front of the California Supreme Court. For the time up to 2030, the supermajority prevents any legal challenge of the programme in court.

In the Senate, one Republican joined the supermajority of the Democrats for passing 28 to 12, according to the Los Angeles Times. In the Assembly, 55 of 80 deputies voted in favour, including seven Republicans, while 21 opposed, thereof three Democrats who consider the plans not far-reaching enough. To achieve a supermajority, several compromises were made. Tax breaks and other incentives for the industry were set to convince some business-friendly moderate deputies from both Democrats and Republicans, as depicted by the Mercury News. Further, a constitutional amendment (ACA 1) was passed that gives Republicans more say in how the revenues from the auctions will be used, as the amendment requires a two-third majority on this issue. Additionally, another bill (AB 617) was adopted to strengthen the monitoring and regulation of air pollution. This can be seen as a concession to some Democrats that were unsatisfied with the ambition level of the cap and trade bill.

The Mercury News also lists the supporters of and opponents to the law. Most of the Republicans have criticised that the measure would increase energy prices and that it would not have any impact on climate change. In contrast, many grass-roots environmental groups lamented that the plans are insufficient, particularly because local air regulators would be prevented from setting rules on GHG emissions.[1] Also the Canadian province of Ontario pushed California to go further, as the two entities plan to merge their carbon markets next year. The trading schemes of California and Canadian province Québec are already linked.

In contrast, major NGOs like the Environmental Defence Fund and the Natural Resources Defence Council backed the legislation despite initial concerns over its sufficiency. In addition, many businesses have supported the plans, including even the California Chamber of Commerce and many other associations. However, their support is linked to the perception that the alternative – direct regulation of GHGs – would be worse than the cap and trade system.

According to Reuters, the new legislation for the world’s third largest emission trading scheme confirms the pioneering role of California within the US and the promise of Governor Brown to adhere to the Paris Agreement. Brown generally endeavours to tackle climate change. He already travelled to China this year, where he met Chinese president Xi Jinping and signed a non-binding agreement to collaborate in emission reduction efforts with China. Moreover, Brown has announced that he will host a summit of leaders from around the world on climate change in San Francisco in September 2018. The summit shall gather leaders of states, cities and businesses that have pledged to curb their GHG emissions under the Paris Agreement.


[1] The Natural Resources Defence Council has stated in this regard that the new law would indeed prevent local air districts from making any regulations under the cap-and-trade law. However, local air districts would still be able to regulate certain pollutants of facilities, which is considered more relevant by the NRDC.


(Image: Downtown Los Angeles. Source: Steve Boland/flickr)