California approves cap-and-trade market until 2030
California lawmakers voted to extend the state’s cap-and-trade program another 10 years on Monday night. The bill includes language that would gradually tighten restrictions on businesses, reducing the amount of greenhouse gases they’re allowed to put in the atmosphere by 40 percent by 2030.
California’s cap-and-trade market puts a limit on the amount of greenhouse gas (GHG) emissions that companies are allowed to put into the atmosphere, and it allows companies to buy and sell GHG credits. That means that a company whose business requires additional GHG emissions over the limit would have to buy credits in an auction. The more polluting that companies are collectively, the more credits are in demand, and the more costly it is to do business individually as a polluter.
The first cap-and-trade rules were passed in 2012 and went into effect in 2013. California has linked its market with Québec and has had moderate success with the program, although the most recent carbon auction in February saw low demand—regulated businesses only purchased 18 percent of the auctioned credits compared to the previous auction in November when 88 percent of the credits up for auction were sold. The money raised in the auctions goes to a greenhouse gas reduction fund.
Many said the weak sales reflected an uncertainty in the market about whether the cap-and-trade program would continue. Several legal challenges were launched in California courts against the cap-and-trade program, and it was far from settled that Governor Jerry Brown would get the two-thirds vote he wanted to approve an extension. But in the end, eight Republicans across the state’s Assembly and Senate voted in favor of keeping the cap-and-trade system, and only three Democrats voted no.
According to the Los Angeles Times, Assembly Republican leader Chad Mayes (R-Yucca Valley) told reporters that “California Republicans are different than national Republicans. Many of us believe that climate change is real and that it’s a responsibility we have to work to address it.” Federally, the Republican Trump administration has opposed measures to mitigate climate change.
The bill wasn’t a slam-dunk for Democrats, either, as some saw it as too accommodating of industry. The California Environmental Justice Alliance and the Sierra Club opposed the bill for that reason. Some Republicans opposed the bill because oil companies are required to participate, and they argue that the cap-and-trade program will increase the cost of gas for American families. Interestingly, the Los Angeles Times reports that oil companies have said little about cap-and-trade and were in favor of it behind closed doors because they view it as a less-costly option than any other more stringent regulations California could impose.
Many low-carbon energy industry players were in favor of cap-and-trade. Graham Richard, the CEO of an energy technology business group called Advanced Energy Economy, said in a statement, “Today, California leads in the $200 billion US advanced energy market, supporting more than half-a-million jobs in the state. By extending cap-and-trade on a bipartisan basis, the California Legislature, working with Governor Brown, has taken action to keep the momentum going for jobs and the economy.”
Similarly, Nina Kapoor, the manager of Legislative & Regulatory Affairs for the Coalition for Renewable Natural Gas (that is, gas made from biofuels) wrote that “The passage of the cap-and-trade extension package is a win for the RNG industry and the production of low-carbon biofuels in California.”
In June, Governor Brown traveled to China and opened up the possibility that California could also link its cap-and-trade market to Jiangsu Province, although that remains a formality, as a senior member of China’s National Centre for Climate Change Strategy and International Cooperation said last month that linking markets is a complex process and would “take a long time” to do. China plans to implement its own national cap-and-trade system later this year.