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What’s Next for California’s Cap-and-Trade Program?

These are not times for the timid when it comes to climate change regulation. The Trump administration announced that it is pulling out of the Paris Accords and China and the European Union are stepping into the void and taking the lead for the global community; the California Clean Energy Act of 2017, introduced by California Senate President pro Tempore Kevin de León, would establish a target of 100 percent clean, renewable energy for California by 2045; Governor Brown continues to spearhead discussions with other countries and states to press full steam ahead on reducing greenhouse gas emissions; and numerous bills are working their way through the California Legislature, including Senate Bill 775 which would significantly revamp California’s groundbreaking 2006 GHG cap-and-trade program.

In early 2017, State Sen. Bob Wieckowski introduced SB 775, which would change the market-based compliance structures designed to reduce GHG emissions. There are a number of elements to the proposed legislation that are noteworthy:

  • The trading program under SB 775 would start from the ground up with no carryover from the current system.
  • Allowance prices will be bound by a floor and ceiling “price collar.”
  • It places conditions on “linkage” to “compliance instruments” issued by any other state, province, or country.
  • The revamped program would prohibit any carbon offset allowances.
  • SB 775 would impose what amounts to a border adjustment tax designed to maintain “economic parity” between producers of GHG-intensive goods subject to the California law and those who are not.
  • A significant portion of program revenues will be disbursed quarterly to California residents on a per-capita basis, and the remainder will go toward public infrastructure, disadvantaged communities, and climate and clean energy research. Mechanisms are built into the bill to ensure that the homeless, undocumented immigrants, and those without bank accounts are not bypassed.

Meyers Nave Principal Joshua Bloom published an article in the Daily Journal that analyzes SB 775 and its changes and impacts. Please click here to read his article.