California’s top politicians are trying to fashion a new assault on greenhouse gas emissions, and what they decide, perhaps within a few weeks, will have immense effects on what consumers spend for gasoline and myriad other products and services.
While “cap and trade” – the issuance and trading of greenhouse gas emission allowances – is a relatively small part of the state’s strenuous efforts to combat climate change, it has been the most contentious. It indirectly affects consumers by raising prices and is designed to raise billions of dollars that Capitol politicians can spend without directly taxing constituents.
The current version of cap and trade has been plagued by political and legal uncertainty, it runs out in 2020, and recent auctions have generated almost no money for the long list of projects and programs Gov. Jerry Brown and legislators want.
Brown and legislative leaders want to renew it to help the state achieve a 40 percent reduction in the state’s carbon footprint from 1990 levels and also, of course, to jump-start the money flow.
Though the two legislative houses are both controlled by Brown’s fellow Democrats, there is a potentially serious split in their approaches. Assembly leaders appear to prefer simply extend the authority of the Air Resources Board to establish some kind of emission trading system beyond 2020.
Senate President Pro Tem Kevin de León says the current program, designed and implemented by the Air Resources Board, is “overly complex” and allows speculators to dominate the market.
A Senate plan unveiled last week would limit trading in emission allowances to narrow bands of prices, ban carryover of allowances from one year to the next, and raise those prices, now $13.57 per metric ton, to eventually well over $100, generating more than $30 billion a year.
A few billion would be set aside for programs supposedly related to climate change, though their connection is often tenuous. The remainder, Senate leaders say, would be rebated back to consumers to offset the higher costs that rising allowance prices would impose on gasoline – more than $1 per gallon – and other consumer goods. However, the rebate mechanism has not been spelled out.
The Senate proposal resembles a carbon tax, and one issue that must be resolved is whether a new cap-and-trade program, whatever its details become, would require only a simple majority legislative vote or, as a tax, require a harder-to-achieve two-thirds vote.
The current program has survived, so far, legal challenges that it’s an illegal tax, but a post-2020 extension would face a much tighter constitutional definition of a tax enacted by voters via business-backed Proposition 26 in 2010.
Brown and the Senate want two-thirds votes to preclude any legal cloud, but unless they can get some Republican support, they would need virtually unanimous backing from all Democratic legislators.
Brown tried and failed to get two-thirds legislative backing for cap-and-trade re-authorization last year. His budget contains several billion dollars in cap-and-trade spending, but unless auction activity picks up, the money won’t be there to spend.
However, it could be a very hard political sell among legislators who just voted to sharply increase fuel taxes to bolster road maintenance and other transportation services.
No matter how it is written, an extension of cap and trade will raise emission allowance prices refiners must buy or offset and therefore boost Californians’ prices of gasoline, already among the nation’s highest.