California POUs Advocate Successfully to Pass Cap and Trade

CMUA
CMUA
Jul 21, 2017 · 5 min read

Lawmakers voted Monday evening to extend the Cap and Trade program to 2031, continuing what has become California’s signature initiative in the fight against climate change. The POU Coalition, consisting of CMUA, NCPA and SCPPA, played a key role in helping shape the legislation and push it over the finish line.

The bill to extend Cap and Trade, Assembly Bill 398, passed with two-thirds supermajority votes (55 to 21 in the Assembly and 28 to 12 in the Senate) that should insulate the Program from future legal challenges. Eight Republicans voted for the bill in the Assembly.

Discussion and negotiation on Cap and Trade continued up until the final hours, and the vote’s outcome was far from certain as leaders in the Legislature rallied last-minute support and Gov. Jerry Brown cautioned that climate change is a “threat to organized human existence.”

Brown has been a vocal proponent of Cap and Trade and he urged the program to continue:

“You’re going to be alive in a horrible situation where you’re going to see mass migrations, vector diseases, forest fires, Southern California burning up,” Brown said at a July 13 committee hearing. “That’s real, guys. That’s what the scientists of the world are saying. I’m not here about some cockamamie legacy that some people talk about. This isn’t for me. I’m going to be dead. It’s for you.”

Monday’s successful vote was the capstone of several months of hard work and advocacy. The POU Coalition participated with broader industry groups, the Investor-Owned Utilities and other stakeholders, the governor’s staff and the regulatory agencies — working through weekends, late nights and holidays on this important issue.

Justin Wynne, counsel for CMUA; Sarah Taheri and Tanya DeRivi from SCPPA; Mario De Bernardo from NCPA; Josh Weimer of Turlock Irrigation District, Tim Tutt from SMUD and others represented POU interests.

Their hard work paid off: The POU Coalition successfully advocated to include and maintain top priorities in the Cap and Trade legislation, Wynne said.

“The most important thing for POUs was continuing Cap and Trade and the direct allocation allowances that enable consumer protections,” Wynne said. If Cap and Trade had not passed, the POUs said that consumers would face dramatically higher bills. “We worked together to get language into SB 398 that will continue those GHG emission allowances for POUs beyond 2020.”

NCPA and SCPPA echoed the importance of the allocation allowances: De Bernardo called the allowances the №1 priority for NCPA members; and Taheri said their inclusion in SB 398 also was crucial for the Southern California POUs.

The utilities also supported price point protections and price containment mechanism within AB 398, a continued role for offsets, and opportunities to link Cap and Trade to other programs.

Beyond those details, the accepted Cap and Trade agreement ultimately was a compromise that wouldn’t have happened without continual engagement and discussion, Taheri said. There were countless phone calls, in-person meetings and email strings. Along the way, legislative and regulatory processes were hard to separate as Taheri and others sought constant feedback from subject matter experts about technical language in the bill. The Cap and Trade proposal changed daily and sometimes, even hourly.

“I think it was a pretty big feat for all California utilities to come to consensus,” Taheri said.

De Bernardo noted that POUs have been working tirelessly in support of Cap and Trade since 2016, when the Legislature passed AB 197, which could have imposed a “command and control” solution rather than Cap and Trade to curb GHG emissions. Soon after, NCPA urged a “journal letter” containing intent language and began educating legislators about how its members spend their allocation allowances.

“We knew then that we needed a legislative fix in 2017, and I was impressed how stakeholders came to realize Cap and Trade is a more attractive, economical option,” De Bernardo said.

Implementation of AB 398 and other bills in the Cap and Trade package (see below) will begin soon and continue for years. The Air Resources Board is scheduled to consider the 2016 Cap and Trade amendments on Thursday, July 27.

“We’re fortunate to have such a dedicated POU community, working hard on behalf of our citizens and businesses,” said Barry Moline, CMUA executive director. “That’s exactly what our POU Coalition team did. It was impressive, and accomplished a great result for our members and their customers.”

What Is Cap and Trade and AB 398?

California started the Cap and Trade program in 2012. It’s essentially a marketplace for industry to buy and sell (trade) carbon emissions, and is designed to reduce greenhouse gas (GHG) emissions by setting a ceiling (cap) on emissions that is reduced year-to-year. Hence, the program called Cap and Trade.

The total amount of the cap is divided into allowances each one a tradable permit to emit one metric ton of a carbon dioxide equivalent greenhouse gas emission. Companies and industries (such as utilities) that reduce their emissions faster may sell allowances to companies and industries that want to buy them.

AB 398 accomplishes the following:

  • Extends the Cap and Trade program from 2021 to 2031.
  • Requires the California Air Resources Board (CARB), the state agency in charge of the Cap-and- Trade program, to include price ceilings, offset credit compliance limits, and industry assistance factors for allowances allocation. It also gives CARB the authority to adjust the program as needed to avoid adverse impacts on residential households, businesses, and the state’s economy.
  • Requires CARB to increase offset projects that are within California. These projects are used to ensure that vouchers claiming greenhouse gas emissions reductions are verified.
  • Establishes the Compliance Offsets Protocol Task Force, the Independent Emissions Market Advisory Committee and the California Workforce Development Board, to conduct meetings, advise and report to CARB and the Legislature on matters related to specific provisions and impacts of the regulations.
  • Requires the Legislative Analyst’s Office (LAO) to annually report to the Legislature on the economic impacts and benefits of specified greenhouse gas emissions targets.
  • Prohibits local air districts from adopting their own emission reductions rules for refineries, factories, and utilities that currently fall under CARB’s program.
  • Also advancing out of the Legislature is AB 617 by Assemblywoman Christina Garcia, the companion measure to AB 398. AB 617 requires CARB to establish a uniform, statewide system for refineries, factories, food processors and utilities to report their emissions of air pollutants and allows local air districts to create an expedited schedule for certain facilities to implement best achievable retrofit control technology for reducing air pollution in specific pollution “hotspots.”
  • ACA 1, from Assembly Republican leader Chad Mayes, also was approved. ACA 1 creates a state ballot measure that, if approved by voters, will require a two-thirds vote by the Legislature in 2024 to approve the expenditure of Cap and Trade auction revenues generated by the state.
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