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New Cap-and-Trade Extension Plan Introduced

Vote Expected as Early as Thursday

July 11, 2017
Gov. Jerry Brown, Senate President Pro Tem Kevin de Leon (D-Los Angeles) and Assembly Speaker Anthony Rendon (D-Lakewood) on July 10 announced a new Cap-and-Trade extension plan and accompanying air quality program. The proposal was introduced in bill form late Monday.
The two-bill package comprises AB 398 by Assembly Member Eduardo Garcia (D-Coachella), which sets forth the extension plan, and AB 617 by Assembly Members Cristina Garcia (D-Bell Gardens), Eduardo Garcia (D-Coachella) and Miguel Santiago (D-Los Angeles), which would create the new air quality monitoring program. A vote could be taken as early as Thursday.

This announcement comes following weeks of discussion between the Administration, legislative leaders, and stakeholders from industry, business, environmental, agricultural labor, faith, economists, and local government. Lawmakers and stakeholders continue to weigh in with the language in print.
In addition to extending the Cap-and-Trade program through 2030, AB 398 would establish funding priorities for how the state would spend auction revenues over the next decade from the 40 percent share of proceeds that have been previously subject to annual allocations.    
Details of both measures are outlined below.
The Cap-and-Trade extension plan in AB 398 would:
  • Extend the cap and trade system through Dec. 31, 2030 with declining emissions limits;
  • Require State Air Resources Board (ARB) to set cost containment measures, including a price ceiling, “speed bumps” to limit excessive price spike, offset credit limits, and industry assistance factors for allowance allocation;
  • Establish a Compliance Offsets Protocol Task Force to advise the ARB 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 the ARB 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 the ARB to update the Scoping Plan by Jan. 1, 2018;
  • Establish funding priorities until Jan. 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); and
    • 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 existing fire prevention fees that apply to rural landowners until Jan. 1, 2031; and
  • Extend an exemption from the state portions of sales and use taxes for certain purchases of property used for generation of electric power until July 1, 2030, but does not affect the collection of local shares of 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 the ARB to develop a new air monitoring plan and determine high priority locations to deploy community level air monitoring systems; authorize the local air district in selected locations to require stationary sources to deploy fence-line monitoring systems;
  • Require the ARB to prepare a statewide strategy to reduce air emissions in communities with a high cumulative exposure burden and update the strategy every five years;
  • Requires local air districts that have not attained air pollutant goals under the federal Clean Air Act to expedite retrofits of industrial sources; and
  • 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. 
Next Steps
Given the 72-hour print rule, the expected date for a vote for this package is Thursday. Many of the affected groups and organizations continue to review the language. It remains unclear if this proposal, absent changes, will garner the bi-partisan, two-thirds vote support desired by the Governor. Also unclear is if other legislative issues are part of the overall agreement. For instance, several legislators requested the passage of a major housing package, including funding and process streamlining measures, in conjunction with the cap and trade extension. Whether these of other conditions are attached to the package remains to be seen.

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