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A discussion of cap-and-trade in California

From left to right, moderator Dan Morain and panelists Dave Jones, Catherine Reheis-Boyd, V. John White and Ross Brown.

Cap and trade is either a sensible effort to reduce pollution in California without undue damage to the state’s economy, or it is a circumvention of the drastic action that is really needed to safeguard the environment.

That chasm, separating environmentalists from much of California’s business community, was on full display at Capitol Weekly’s recent “Carbon Free California” conference in downtown Sacramento.

“There is so much at stake for us to not get this right,” Catherine Reheis-Boyd, president of the Western States Petroleum Association, told a diverse audience of environmentalists, Capitol policy wonks and business representatives on March 8. She said the challenge facing policy makers is to balance emission controls with economic viability.

Brent Newell, legal director for Oakland’s Center on Race, Poverty and the Environment, argued that cap and trade wasn’t working, and that a head-on effort to reduce pollution was needed.

California is the first state in the nation to adopt a comprehensive cap and trade program.  The system in California imposes a limit on the amount of carbon dioxide emitted by industry.  Permits allowing a certain level of emissions (the cap) are auctioned off by the state Air Resources Board four times a year. Proceeds from the permit auctions are expected to be a key funding source for Brown’s beloved high-speed rail system. According to the state Air Resources Board, various agencies and programs have received about $2.27 billion in cap-and-trade revenues.

Each permit allows emission of a ton of carbon.  If a firm manages to reduce its emissions below its cap — the number of permits it has purchased — it can sell the unused portion to an entity that needs the permits (the trade).  Its backers say cap and trade is a way of using market forces to reduce pollution.

Reheis-Boyd also unloaded some figures on the size of California’s appetite for fossil fuel, telling the audience California has 27 million vehicles, burning 2 million gallons of gasoline and diesel fuel every day.

It is not a good idea to overburden motorists in an effort to clean up the environment, Reheis-Boyd argued.  “There is a point where people begin to question how much they wish to bring upon themselves,” she said.

The Association supports cap and trade, fearing a more draconian measure to cut emissions through direct taxation will loom if it is not successful.

But Brent Newell, legal director for Oakland’s Center on Race, Poverty and the Environment, argued that cap and trade wasn’t working, and that a head-on effort to reduce pollution was needed.

The impacts of the weaknesses of cap and trade, must take into account “the costs to people’s health.” The effects of pollution have an outsized impact on the health of poorer people, he said.

During four panel discussions, the liveliest back-and-forth came between Kip Lipper, the chief policy advisor on energy and environment to state Senate Leader Kevin de León, and Rob Lapsley, the president of the California Business Roundtable.

Gov. Jerry Brown signed two measures last September aimed at reducing greenhouse gas emissions throughout the state.

Lapsley noted that he had been in Washington recently, talking with entrepreneurs who had considered beginning enterprises in California but were dissuaded by what they regarded as an over-regulated climate for business. Regulators, he suggested, have no sense of the needs of the business community and don’t truly understand the issues facing businesses, especially small businesses.

Lipper rejected at Lapsley’s overregulation claim.

“California has the sixth largest economy in the world, with low unemployment,” he said, contesting Lapsley’s claim that for the most part, jobs created by the renewable energy industry were relatively low-paying.

“A carpenter is a carpenter, a plumber is a plumber, whether it’s working on a renewable energy project or something else,” Lipper said.

“You ought to get out of the building more and see what’s happening to real people,” Lapsley responded.

Gov. Jerry Brown signed two measures last September aimed at reducing greenhouse gas emissions throughout the state.  Senate Bill 32 requires California to slash greenhouse gas levels to 40 percent below their 1990 levels by 2030.  It  extends the state’s authority to put in place climate policies beyond the previously set 2020 limit. A companion measure, Assembly Bill 197, is designed to give legislators more power over the Air Resources Board.

“This is a real commitment backed up by real power,” Brown said in signing the bills.

No one on any of the four panels questioned the science behind climate change and the need to do something about it.

The California Chamber of Commerce has sued to prevent the state Air Resources Board from conducting the auction, which the Chamber contends is an illegal tax.  A Sacramento superior court ruled for the state, but the Chamber appealed to the 3rd District Court of Appeal.  A ruling is expected within the next 60 days.  Whatever that appeals court ruling might be, the case is expected to wind up before the California Supreme Court.

If there was any lingering doubt remaining that California is in a different universe than the Trump administration in environmental policy, it went away during the series of panel discussions.

No one on any of the four panels questioned the science behind climate change and the need to do something about it.  The arguments revolved principally around cap and trade versus “command and control,” a more direct way of penalizing greenhouse gas emitters, using tools that potentially include fines, fees and taxation.

“We believe in science,” state Insurance Commissioner Dave Jones said.

John White, executive director of the Center for Energy Efficiency and Renewable Technologies in Sacramento and one of the panelists, summed up the fight against greenhouse gases.

“We’re talking about how, not whether,” he said.


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