Extension of California’s Cap-and-Trade Program: Three-Bill Package Extension Leaves Unanswered Questions

Last year, under SB 32, California increased its greenhouse gas (GHG) reduction goal to 40% below 1990 levels by 2030.  One-third of that reduction goal is anticipated to be achieved through the State’s pioneering cap-and-trade program.  However, the existing cap-and-trade program has been controversial, subject to several legal challenges, and was set to expire in 2020.  In response, recent legislation extends the cap-and-trade program to 2030 through a three-bill package that is needed to secure support for its passage.  The three measure are AB 398, AB 617 and ACA 1 (a proposed constitutional amendment).

In addition to the extension itself, the bill package addresses four primary points of controversy: (1) measures to address local air quality issues in the state’s most polluted communities, (2) restrictions on local air district regulation of pollutants regulated under the cap-and-trade program, (3) a requirement for future legislative approval of the use of cap-and-trade funds, and (4) tax cuts.  The extension of the program is a major milestone for the State’s GHG reduction program.  However, it leaves important issues unresolved, including the types of programs that may be funded by cap-and-trade revenue and how the California Air Resources Board (a State agency) will regulate industrial emissions to address health impacts on adjacent communities.

Despite the challenges, the significance of the passage of the cap-and-trade extension should not be underestimated.  It was accomplished through a bipartisan agreement and could serve as a model in other states and nations.  It remains to be seen whether the extended and revised cap-and-trade program can be successfully implemented and become a key component of California’s aggressive GHG reduction goals. For an explanation of the three-bill package, the unresolved implications of the extension, and the challenges ahead, please click here to read an article published in the Daily Journal by Meyers Nave Principals Tim Cremin and Josh Bloom.