California cap-and-trade program extended through 2030

By Keith Goble, Land Line state legislative editor | Thursday, July 27, 2017

Elected officials and other prominent people in California are championing a deal worked out by state legislators to extend a one-of-a-kind program known as “cap-and-trade.”

The program is most notable to truck drivers and others due to associated fuel tax rate increases that are estimated to add another 70 cents per gallon.

Democratic Gov. Jerry Brown has signed into law a bill to extend the state’s cap-and-trade program through 2030. The program counts among supporters many statehouse Democrats, key Republicans, and former GOP Gov. Arnold Schwarzenegger.

Schwarzenegger signed into law the program in 2006 through passage of AB32 – the California Global Warming Solutions Act. The program allows the California Air Resources Board to cap greenhouse gas emissions and require companies to buy permits to exceed those caps.

California law requires the state to cut greenhouse gas emissions to 40 percent below 1990 levels by 2030. The program in place to achieve that threshold, however, had a sunset date of 2020 barring legislative approval to extend it.

By a one-vote margin for passage in both statehouse chambers, AB398 allows continuation of the program that is opposed by people on the left and right, as well as environmentalists who say it is too kind to industry.

A companion measure, AB617, also signed into law is intended to increase monitoring of industrial air pollution and toughen penalties for polluters.

Supporters say the cap-and-trade system could raise billions of dollars in revenue each year to fund programs that include low-carbon transit infrastructure and electric vehicles. They add it will encourage Californians to be more energy efficient.

The cap-and-trade system initially applied solely to power plants and other heavy manufacturers. Since Jan. 1, 2015, the program also includes oil companies.

CARB has estimated the program could eventually result in a fuel tax increase between 15 cents and 73 cents per gallon as oil companies pass on costs to consumers.

In the past two and one-half years, the state’s Legislative Analyst’s Office found the program has added 11 cents per gallon in additional costs for gas and 13 cents more for diesel. In all, consumers are paying $2 billion more per year for fuel.

Sen. Ted Gaines, R-El Dorado, said the burden of higher fuel taxes is only getting worse with Gov. Brown signing into law earlier this year a separate bill to raise vehicle taxes and fees.

Effective Nov. 1, the excise rate on gas will increase by 12 cents and the diesel rate will be raised by 20 cents. The gas rate will increase another 7.5 cents in July 2019.

The excise rates on gas and diesel will also be adjusted for inflation beginning in July 2020.

“(The cap-and-trade extension) is going to ripple through every area of the economy and wreck small businesses and family budgets,” Gaines said in prepared remarks.

Sen. Toni Atkins, D-San Diego, countered that the extension marks an important milestone in the fight against climate change.

“Without this extension, California would have been in serious danger of failing to meet our ambitious, world-leading climate goals,” Atkins stated.

Sen. Andy Vidak, R-Hanford, said the cap-and-trade program has many shortcomings. While speaking on the Senate floor in opposition, he highlighted the billions of dollars from the program that will be used for the governor’s planned bullet train from Los Angeles to San Francisco.

“Let’s be honest, this is a tax – and a regressive one at that,” Vidak said. “Billions will go to the boondoggle that is high-speed rail, which is a gross polluter, now and for decades to come.”

A measure related to cap-and-trade sought by Republicans, ACA1, will put a question on the statewide ballot to require a one-time, two-thirds vote of the Legislature to appropriate money raised by the program.

To view other legislative activities of interest for California, click here.

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