July 13, 2017

Governor Brown and leaders from the Legislature announced a deal this week that extends the state’s cap and trade program. The deal would also create a new air quality program focused on reducing toxic air contaminants and criteria air pollutants in the most impacts areas of the state. The announcement comes after weeks of back and forth between the Legislature, Administration, environmental, industry and other stakeholder groups and requires a two-thirds vote.

While a vote on the package was originally scheduled for today, action has been delayed until Monday, in part to give leaders time to garner additional support, and so that the Administration and legislative leaders can simultaneously negotiate an affordable housing package that is expected to rely on, in part, cap and trade funding.

The bills were presented in the Senator Environmental Quality Committee today with the Governor giving impassioned testimony calling on legislators to make “the most important vote of their life.” A video of some of the Governor’s testimony is available here.

It remains unclear, at this point, if there is adequate political support to get these bills over the finish line as environmental groups, including the Sierra Club and Environmental Justice groups testified in opposition at the hearing stating that the bills don’t go far enough. The Governor’s press release announcing the agreement is available online.

Highlights of the package:

The cap and trade extension plan in AB 398 would:

• Extend the cap and trade system through December 31, 2030 with declining emissions limits
• Require California Air Resources Board (CARB) to set cost containment measures, including a price ceiling, speed bumps, offset credit limits, and industry assistance factors for allowance allocation;
• Establish a Compliance Offsets Protocol Task Force to advise CARB on establishing new offset projects that have direct environmental benefits, while prioritizing disadvantaged communities, Native American or tribal lands, and rural and agricultural regions;
• Establish an Independent Emissions Market Advisory Committee to report to CARB and the Legislature on the environmental and economic performance of cap and trade;
• Require the California Workforce Development Board to report on the need for increased education and job training to help transition labor-market changes;
• Require CARB to update the Scoping Plan by January 1, 2018;
• Establish funding priorities for the allocation of cap and trade funds until January 1, 2031 as follows: air toxic and criteria pollutants from stationary and mobile sources; low and zero-carbon transportation; sustainable agricultural practices that promote the transitions to clean technology, water efficiency, and improved air quality; healthy forests and urban greening; short-lived climate pollutants (such as methane); climate adaptation and resiliency; climate and clean energy research;
• Prohibit local air districts from adopting additional emissions reduction rules from stationary sources that are subject to cap and trade;
• Suspend the State Responsibility Area (SRA) fee effective July 1, 2017 until January 1, 2031;
• Extend the current exemption from sales and use taxes for certain purchases of property used for generation of electric power until July 1, 2030; exempts city and county sales and use taxes.

The new air quality program as proposed in AB 617 would:

• Require stationary sources to report annually emissions of criteria air pollutants and toxic air contaminants;
• Require CARB to prepare a statewide strategy to reduce air emissions in communities with a high cumulative exposure burden and update the strategy every five years, determine high priority locations to deploy community level air monitoring systems, and authorize the local air district in selected locations to require stationary sources to deploy fence-line monitoring systems;
• Require local air districts to develop and implement plans for the communities that have high cumulative emission burdens to achieve emission reductions from mobile and stationary sources. Plans will be required to have reduction targets, specific reduction measures, and an implementation schedule;
• Requires local air districts that have not attained air pollutant goals under the federal Clean Air Act to expedite retrofits of industrial sources;
• Increases the penalty for air pollution violations from $1,000 per day to $5,000 per day and increases the maximum penalty annually based on the Consumer Price Index.