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State Senate Proposes Restructured Cap-and-Trade System

Governors Urge President Trump to Keep Paris Climate Agreement

May 9, 2017
Last week, Senate President pro Tempore Kevin De Leon (D-Los Angeles) and Sen. Bob Wieckowski (D-Fremont) unveiled a plan to pass a restructured Cap-and-Trade program.
The proposal in SB 775 (Wieckowski), which requires a two-thirds vote of the Legislature, establishes a new Cap-and-Trade system beginning in 2021 to be operated by the California Air Resources Board (ARB). The legislation requires certain changes to the existing system, which is expected to operate through 2020.

SB 775 proposed Cap-and-Trade system:
  • Continues Cap-and-Trade system beyond 2020 with quarterly auctions;
  • Requires ARB to set a declining annual cap to meet the state’s 2030 goal of 40 percent reduction in emissions (SB 32);
  • Sets floor and ceiling for the price of allowances;
  • Prohibits carbon offset credits;
  • Establishes an Economic Competitiveness Assurance Program to maintain economic parity between in-state producers and other producers that sell in California (replaces the current system of providing free allowances to in state entities); and
  • Distributes auction proceeds to three funds:
    • California Climate Dividend Fund, which will provide dividends to all California residents.
    • California Climate Infrastructure Fund.
    • California Climate and Clean Energy Research Fund. 
Gov. Jerry Brown has yet to weigh in on the restructured Cap-and-Trade proposal in SB 775. However the FY 2017–18 budget the Governor proposed in January does advise the Legislature undertake a two-third vote to extend the current Cap-and-Trade system operated by ARB.
Paris Agreement
In a letter dated May 3, the governors of 12 states including Gov. Jerry Brown sent President Trump a letter calling on him to maintain involvement in the Paris Climate Agreement. The Governors collectively seek to maintain the U.S. goal of reducing greenhouse gas emissions to 26 to 28 percent below 2005 levels.
Furthermore, the letter suggests that if the United States does not maintain its global leadership on this issue, China and India will, placing the U.S.at a competitive disadvantage.

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