California Lawmakers Approve Plan to Extend Cap-and-Trade System

Gov. Jerry Brown and state lawmakers celebrate the passage of legislation to extend California's cap-and-trade system. (Guy Marzorati/KQED)

California’s Legislature on Monday approved an extension of the state’s cap-and-trade program, ensuring the market-based system to limit emissions will continue -- a key tool aimed at allowing the state to meet ambitious goals to slow climate change.

On a bipartisan vote, the state Senate and Assembly approved an agreement that addressed both local air quality concerns and the marketplace through which the state limits greenhouse gas emissions. Under cap and trade, businesses buy and sell credits in order to pollute, allowing the state to cap overall greenhouse gas emissions and raise money to fight pollution.

“This is rising above party,” Gov. Jerry Brown said shortly after the final vote. “When you can lock something in with support of Republicans and Democrats, it has durability.”

Democratic and Republican lawmakers who supported the bills gathered after the vote, along with Brown, on the stage of a news conference room in the Capitol. It was a rare bipartisan victory lap.

“Republicans don’t get to stand on this stage very much,” said Republican Assembly Leader Chad Mayes, of Yucca Valley.

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Mayes helped broker the final deal to get some Republicans on board, authoring one of a trio of bills that together made up the climate change agreement.

"We didn’t come here to Sacramento to just be Republicans and to hate on Democrats," he said.

The votes and discussion on the floor of the state Assembly and Senate showed that California’s continued status as a world leader in the fight against climate change is contingent upon old-fashioned consensus politics back home.

The deal that guaranteed the extension of cap and trade required concessions from both liberal and moderate Democrats. The package also included provisions that helped secure the Republican votes needed to get the bill passed in the Assembly.

“I personally think cap and trade sucks,” said Assemblyman Devon Mathis, R-Porterville, who seemed to choke up as he spoke of weighing the decision in church on Sunday. “What we have before us is the opportunity to make something that many of us think is horrible a little bit better."

Assembly Bill 398, which passed the Assembly on a 55-22 vote, and the Senate on a 28-12 margin, will extend the cap-and-trade system until 2030, while making significant changes to the marketplace. The free emission allowances that help businesses compete with companies in other states will decrease over the life of the extension. So, too, will the free offsets that allow companies to pay for projects to compensate for their emissions.

Those provisions, and the maintenance of global climate leadership, were enough to win over many environmentalists.

Others took issue with provisions in the extension that will limit emission regulations outside the cap-and-trade program.

Most notably, local air districts will not be allowed to limit carbon dioxide emissions, leaving that responsibility wholly to the state.

But only four Democratic lawmakers voted against the extension, all in the state Assembly. On the left flank of the party, progressives Mark Stone of Santa Cruz and Monique Limon of Santa Barbara opposed SB 398. So did business-friendly moderates Adam Gray of Modesto and Sharon Quirk-Silva of Fullerton.

“On balance, I’m quite clear that supporting it is the superior choice,” said Richard Bloom, D-Santa Monica, one of the progressive Democrats who wrote to Brown last month asking that an extension take a tough stance against local pollutants.

Assembly Bill 617, the second bill in the package, sought to take on those local air quality concerns.

It will empower regional air districts to step up monitoring, retrofitting and enforcement actions against local polluters.

"This is personal to me," said Assemblywoman Cristina Garcia, D-Bell Gardens, who carried AB 617 and was a leading voice during Capitol negotiations for the environmental justice movement. “While I did not get everything that I wanted in this bill, we have moved the ball forward.”

The final piece to the cap-and-trade agreement was Assembly Constitutional Amendment 1, introduced late on Friday by Mayes, the Assembly Republican leader.

The measure addresses a key component of the cap-and-trade program that the first two bills were silent on: Revenue.

In an effort to give Republicans a future say in the spending of cap-and-trade auction proceeds, Mayes' bill would require a two-thirds vote after 2024 to appropriate funds raised through the sale of emission allowances.

ACA 1 proved to be the most difficult measure to push through the Legislature on Monday night.

In the Senate, Democrats Scott Wiener and Ricardo Lara were initial "no" votes, who changed to "yes" to keep the measure, and overall deal, alive.

Senate Republicans were less willing to join the governor and Democrats in extending a program they contend will increase costs for businesses, which will be passed along to California’s consumers.

"Today is the start of the next great California recession," said Sen. Ted Gaines, R-El Dorado.

Months of negotiations required a delicate balance of the concerns of business interests, environmentalists, moderate Republicans and liberal Democrats.

“It’s a rare bill,” said Senate President Pro Tem Kevin de León of Los Angeles. “A legislative unicorn, that can gain this type of support.”

The higher threshold to spend cap-and-trade funds wasn’t the only olive branch to Republicans. Assembly Bill 378 eliminates the Fire Prevention Fee largely paid by rural Republican areas. It also extends a tax credit for manufacturers.

Progressive Democrats were able to take home improved air quality rules in AB 617, and an assurance from the governor that he would address one of their top priorities later this year: affordable housing.

In a statement that was released by Brown's office during the Senate cap-and-trade vote, the governor promised to work on both affordable housing funding and streamlining of development regulations, when the Legislature returns from its summer recess in August.

The commitment may have been enough to convince some hesitant members of his own party to join him on cap and trade.

"Everything we did was needed to get it done," Brown said.