California cap-and-trade at crossroads; billions at stake

As California pushes toward its ambitious goals for addressing climate change, the fate of its signature program is hanging in the balance.

- HAYLEY SMITH

THE MARATHON Petroleum refinery in Wilmington. The oil and gas industry is also pushing for reforms - but in the opposite direction.

For months, lawmakers, industry groups and environmental advocates have been mired in negotiations over whether and how to extend the cap-and-trade program, which limits planet-warming emissions, beyond its 2030 expiration date. Without a reauthorization well in advance, companies are less likely to make the expensive investments necessary to reduce their effluent.

The cap-and-trade program was nation-leading when it was authorized by state law in 2006. It requires major polluters such as power plants, oil refineries and other industrial facilities to purchase allowances, or credits, for each ton of carbon dioxide they emit, and lets those companies buy or sell their unused allowances at quarterly auctions. Each year fewer credits are created, lowering the total annual climate pollution in the state.

Gov. Gavin Newsom is advocating for the program to be extended to 2045, and hopes to see it reauthorized before the end of the legislative session on Sept. 12. Cap-and-trade currently covers about two-thirds of California’s greenhouse gas emissions, and its auctions generate billions of dollars for the state each year.

Most experts agree the program must continue in order for California to reach its goal of carbon neutrality by 2045. But while Newsom is pushing for it to be reauthorized largely in its current form, critics say considerable reforms are needed to address concerns about how cap-and-trade is run and where the money is spent.

The California Air Resources Board, which administers the program, is involved in a halting rulemaking process to evaluate changes, including how the program is structured.

"It is hugely consequential it is a decadal decision," said Barry Vesser, chief program officer at the nonprofit Climate Center.