California Gov. Jerry Brown Is Backing a Climate Bill Full of Giveaways to Polluters

Regulators say the measure would make it impossible to meet the state’s greenhouse gas reduction targets by 2030.

Kate Aronoff July 14, 2017

California Gov. Jerry Brown, who has touted his state as a global leader on climate, speaks at the UN Climate Change Conference (COP21) in Paris in December 2015. (Jonathan Raa/Pacific Press/LightRocket via Getty Images)

Cal­i­for­nia Gov. Jer­ry Brown and sev­er­al state Demo­c­ra­t­ic leg­is­la­tors unveiled leg­is­la­tion Mon­day evening that would extend the state’s con­tro­ver­sial cap-and-trade pro­gram, which is set to expire in 2020. Pro­gres­sive law­mak­ers and envi­ron­men­tal jus­tice groups from around the state were quick to fire back, say­ing the pro­pos­al is too gen­er­ous to California’s biggest polluters.

"It's industry that has been at the center of this negotiation for the entire time.”

Assem­bly Bill 398 was craft­ed in an attempt to gar­ner the sup­port of Repub­li­cans and busi­ness-aligned Demo­c­ra­t­ic law­mak­ers, and with them, a two-thirds vote. A 2010 bal­lot ini­tia­tive, Propo­si­tion 26 (the Stop Hid­den Tax­es” Ini­tia­tive), amend­ed the Cal­i­for­nia con­sti­tu­tion to require that rev­enue-rais­ing pro­pos­als — like cap-and-trade — be passed by two-thirds of the legislature.

Over 50 nation­al and Cal­i­for­nia-based groups, like the Cal­i­for­nia Envi­ron­men­tal Jus­tice Alliance (CEJA) and 350​.org, say that Brown’s push to get a com­pro­mise by any means nec­es­sary has yield­ed a mea­sure that pri­or­i­tizes pol­i­tics over pol­lu­tion con­trols. Under AB 398, the Cal­i­for­nia Air Resources Board (CARB) — now entrust­ed with over­see­ing the state’s emis­sions reduc­tions — would lose its author­i­ty to reg­u­late car­bon diox­ide from sources sub­ject to cap-and-trade rules. Accord­ing to Diane Tack­vo­rian, a mem­ber of CARB and the Envi­ron­men­tal Health Coali­tion, the bill would “[make] it impos­si­ble for [CARB] to accom­plish our man­date, which is to reduce green­house gas 40 per­cent below 1990 lev­els of 2030,” a goal passed into law last year via SB 32. While mar­ket-based pro­grams like cap-and-trade can incen­tivize com­pa­nies to pol­lute less, they tend to be most effec­tive at bring­ing down emis­sions when paired with strong reg­u­la­tions on heav­i­ly pol­lut­ing industries.

AB 398 would also dras­ti­cal­ly cur­tail local air qual­i­ty dis­tricts’ abil­i­ty to reg­u­late emis­sions from the state’s many oil refiner­ies. Miya Yoshi­tani, Exec­u­tive Direc­tor of the Asian Pacif­ic Envi­ron­men­tal Net­work (APEN), calls the bill com­plete and utter give­away to the oil indus­try.” She believes the pro­posed restric­tions are a direct response to APEN and oth­er groups’ col­lab­o­ra­tion with the Bay Area Air Qual­i­ty Man­age­ment Dis­trict (BAAQMD) to rein in refin­ery emis­sions more aggres­sive­ly than CARB has at the state lev­el. The BAAQMD has come out in offi­cial oppo­si­tion to the bill.

We worked direct­ly with our air dis­trict to pro­duce some of the most ground­break­ing rules to date…with regard to refin­ery emis­sions,” Yoshi­tani said on a press call Tues­day. Those rules are now at risk.

We think that over­all this is an enor­mous missed oppor­tu­ni­ty [for] Cal­i­for­nia to lead the world in an equi­table approach to address the imme­di­ate impacts of local pol­lu­tion, and an equi­table approach to dra­mat­i­cal­ly reduc­ing green­house gas emissions.”

In these and oth­er pro­vi­sions, the bill’s lan­guage close­ly mir­rors that con­tained in draft leg­is­la­tion obtained by In These Times in late June that had been cir­cu­lat­ing in Sacra­men­to among par­ties involved in the exten­sion nego­ti­a­tions, includ­ing the gov­er­nor’s office. That pro­pos­al lift­ed sev­er­al sug­ges­tions near-ver­ba­tim from an indus­try wish­list — draft­ed by a law firm con­tract­ed by the West­ern States Petro­le­um Asso­ci­a­tion — of pro­pos­als for how to con­tin­ue the cap-and-trade pro­gram. In response to that report­ing, a rep­re­sen­ta­tive of Gov­er­nor Brown’s office claimed that, Our role from the start has been to con­vene par­ties with dif­fer­ent inter­ests and to facil­i­tate the exchange of ideas and lan­guage to see where we can find com­mon ground.”

Brown’s office did not respond by dead­line for a request to com­ment on this sto­ry. In a response to a pre­vi­ous sto­ry, a rep­re­sen­ta­tive from Brown’s office told In These Times that there had been weeks of dis­cus­sions between the admin­is­tra­tion and leg­isla­tive lead­ers with Repub­li­can and Demo­c­ra­t­ic leg­is­la­tors, envi­ron­men­tal jus­tice advo­cates, envi­ron­men­tal groups, util­i­ties, indus­try and labor rep­re­sen­ta­tives, econ­o­mists, agri­cul­tur­al and busi­ness orga­ni­za­tions, faith lead­ers and local gov­ern­ment officials.”

An alliance of 50 of California’s envi­ron­men­tal groups say that AB 398 is over­ly friend­ly to inter­ests like WSPA — which rep­re­sents some 27 extrac­tive com­pa­nies and is among the state’s most influ­en­tial lobbyists.

In addi­tion to pre-empt­ing reg­u­la­tion, the bill car­ries over cred­its and allowances from the cur­rent mar­ket into the next ver­sion of the cap-and-trade pro­gram. Sev­en­ty-two per­cent of allowances under the cur­rent cap-and-trade go to the oil indus­try. If an exten­sion of the pro­gram pre­serves these allowances, any­where from 100 – 300 mil­lion tonnes worth of unsold car­bon cred­its could be avail­able for sale in its sec­ond phase from 2020 to 2030, accord­ing an analy­sis of poten­tial exten­sion sce­nar­ios by the non-par­ti­san Cal­i­for­nia Leg­isla­tive Analyst’s Office, or LAO. An over­sup­ply poten­tial­ly increas­es emis­sions and puts down­ward pres­sure on [cred­it] prices,” the LAO concluded.

Accord­ing to Stan­ford econ­o­mist Dan­ny Cul­len­ward, over­sup­ply of cred­its con­sti­tutes a struc­tur­al flaw in the exist­ing cap-and-trade pro­gram, and one AB 398 would not resolve. An ear­li­er ver­sion of the bill, obtained by E&E Newss Debra Kahn, shows that as of July 3 nego­tia­tors had includ­ed pro­vi­sions to address over­sup­ply issues. That lan­guage was redact­ed from the final draft that became AB 398. In addi­tion to allow­ing rollover, the bill — as it stands now — would per­mit the con­tin­ued, unlim­it­ed bank­ing” of cred­its, which, because of the car­bon mar­ket’s over­sup­ply prob­lem, will allow emis­sions to stay high­er for longer. The com­bi­na­tion of bank­ing and over­sup­ply means that com­pa­nies could sim­ply pur­chase a pile of off­sets or cred­its instead of bring­ing down their emis­sions for that quar­ter. (Cred­it auc­tions are held every three months).

In May, state assem­bly mem­bers state Sens. Bob Wieck­ows­ki (D‑Fremont) and Kevin de León (D‑Los Ange­les) intro­duced anoth­er cap-and-trade exten­sion mea­sure, Sen­ate Bill 775, which was backed by many of the groups now oppos­ing AB 398 (see here and here for more details). If passed, that bill would have elim­i­nat­ed such bank­ing of car­bon cred­its, along with all off­sets and allowances for pol­luters, and dis­trib­uted a siz­able por­tion of the rev­enue gen­er­at­ed from the pro­gram to Cal­i­for­nia res­i­dents through a year­ly dividend.

Much like the rev­enue from the cur­rent cap-and-trade sys­tem, mon­ey gen­er­at­ed by AB 398 will be direct­ed toward a series of green infra­struc­ture projects around the state. Some por­tion would also be devot­ed to fill­ing holes in the state bud­get left by tax breaks built into the bill.

AB 398 would elim­i­nate the state’s fire pro­tec­tion fee, now paid large­ly by rur­al landown­ers, and fill in the lost funds with those gained through the cap-and-trade pro­gram. Addi­tion­al­ly, it could extend an addi­tion­al $100 mil­lion in annu­al tax breaks to the ener­gy sec­tor, on top of the $220 mil­lion in tax breaks that sec­tor already receives.

What we’re see­ing is two very dif­fer­ent the­o­ries of how to get to two-thirds,” Cul­len­ward says. The the­o­ry behind SB 775, Cul­len­ward told me, was to gar­ner pub­lic sup­port by giv­ing con­stituents a finan­cial rea­son to sup­port the pro­gram — the poten­tial to receive hun­dreds of dol­lars in year­ly div­i­dends. To gar­ner indus­try sup­port, it also fac­tored a bor­der-adjust­ment mea­sure into the cap-and-trade pro­gram, which would effec­tive­ly levy a car­bon tax on imports to keep Cal­i­for­nia-based com­pa­nies com­pet­i­tive with those oper­at­ing in states with­out one.

By con­trast, what you see in AB 398 is a com­pro­mise direct­ed at bring­ing indus­try on board,” he says. This is large­ly the cur­rent mar­ket design with a few minor tweaks, most of which direct­ly address indus­try con­cerns and ben­e­fit spe­cif­ic indus­tries with the inten­tion of bring­ing them on board.”

Amy Van­der­wark­er, Co-Direc­tor of CEJA — which rep­re­sents 11 envi­ron­men­tal jus­tice orga­ni­za­tions around the state — says the first time the governor’s office shared draft cap-and-trade exten­sion lan­guage with her group was in a meet­ing with CEJA and sev­er­al oth­er envi­ron­men­tal groups on July 3. That lan­guage, she says, looked sim­i­lar to that which appears in AB 398. CEJA told the governor’s office it could not sup­port” the draft.

Van­der­wark­er notes that the group was more fre­quent­ly con­sult­ed and asked to give feed­back on AB 617, a com­pan­ion bill to AB 398 relat­ed to air pol­lu­tion, which is more friend­ly to the state’s envi­ron­men­tal jus­tice communities.

AB 398 con­tains one con­ces­sion to envi­ron­men­tal jus­tice groups: Like­ly in reac­tion to envi­ron­men­tal­ists’ crit­i­cisms that out-of-state car­bon off­set­ting projects do lit­tle to ben­e­fit Cal­i­for­ni­ans, the mea­sure also includes a pro­vi­sion to ensure that 50 per­cent of those projects hap­pen in state.

Reac­tion to AB 398 has exposed a divide between larg­er green groups and envi­ron­men­tal jus­tice orga­ni­za­tions, which are gen­er­al­ly small­er and work close­ly with com­mu­ni­ties being direct­ly impact­ed by pol­lu­tion. The Nat­ur­al Resources Defense Coun­cil and the Envi­ron­men­tal Defense Fund (EDF) came out in strong sup­port of AB 398. Quentin Fos­ter, who directs EDF’s work in Cal­i­for­nia, wrote in a blog post that the bill sets a nation­al exam­ple for oth­er states to follow.”

The envi­ron­men­tal com­mu­ni­ty needs busi­ness­es to thrive so California’s econ­o­my remains strong,” he said. Busi­ness needs the envi­ron­men­tal com­mu­ni­ty to hold them account­able. The Leg­is­la­ture needs all of us to help con­tin­ue set­ting the stan­dard on cli­mate pol­i­cy. We don’t get to take our ball and go home because things aren’t going our way.” The EDF could not be reached for com­ment on this sto­ry, and NRDC declined In These Times’ inter­view request.

Final details of the bill were being hashed out as Gov. Brown gar­nered praise from greens for announc­ing that Cal­i­for­nia would host a Glob­al Cli­mate Action Sum­mit, to be held in San Fran­cis­co in Sep­tem­ber 2018. Brown him­self put the impor­tance of the cap-and-trade exten­sion in a glob­al con­text this week. If we don’t get it, it’d be a tragedy for Cal­i­for­nia and for the world,” he said in an inter­view with the Sacra­men­to Bee. From Chi­na to the Euro­pean Union, peo­ple are look­ing to the Cal­i­for­nia cap-and-trade program.”

Look­ing at the deal they’ve nego­ti­at­ed,” Van­der­wark­er tells In These Times, it’s hard for me to rec­on­cile California’s claims to cli­mate lead­er­ship with what is in AB 398 because of the give­aways to indus­try in the bill. … Unfor­tu­nate­ly, it’s indus­try that has been at the cen­ter of this nego­ti­a­tion for the entire time.”

The Cal­i­for­nia Senate’s Envi­ron­men­tal Qual­i­ty Com­mit­tee passed AB 398 on Fri­day, and a vote in the full leg­is­la­ture is expect­ed on Monday.

Kate Aronoff is a Brook­lyn-based jour­nal­ist cov­er­ing cli­mate and U.S. pol­i­tics, and a con­tribut­ing writer at The Inter­cept. Fol­low her on Twit­ter @katearonoff.
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