Cap-and-Trade Program Debated, New Climate Smart Ag Programs Launch

Posted on Wednesday, May 31st, 2017 by Jeanne Merrill

California’s efforts to avoid the worst impacts of a changing climate continue apace, despite rollbacks at the federal level. New Climate Smart Ag programs launch this summer, while the legislature debates the future of climate investments and policy.

Last year, Governor Brown signed SB 32, which requires the state to reduce greenhouse gas emissions by 40 percent by 2030. Also signed into law last year was SB 1383, which requires a 40 percent reduction in methane emissions from the dairy industry by 2030.

Andrea Davis-Cetina, Assm. Jim Frazier, Dave Runsten and Rich Rominger. March 2017.

This year the legislature and the Governor are debating the future of the cap-and-trade program, which sunsets in 2020 unless the program is extended. The cap-and-trade program requires the largest emitters of greenhouse gas emissions, e.g. refineries, cement plants, large food processors, etc., to reduce their emissions over time. It sets up the California Carbon Market where greenhouse gas emissions permits, known as allowances, are bought and traded. Importantly, the auction of allowances generates funding for many climate change programs. Click here for more background on the program.

To date over $3 billion in cap-and-trade auction proceeds have been invested in climate change programs, including over $180 million in the state’s Climate Smart Agriculture programs. After several anemic auctions, the recent May auction generated over $500 million for investment in FY 2016-17.

The cap-and-trade program, however, is not without its flaws and detractors. Many are considering how to reform the cap-and-trade program to better achieve greenhouse gas emission reductions and related air pollution reductions.

CalCAN recently released our statement of principles on climate change policy, including the future of the cap-and-trade program. We call for the following:

  • Continue climate change program investments in working lands and rural communities.
  • Prioritize co-benefits, sustainable agricultural solutions.
  • Prioritize multi-benefit offsets in California.
  • Ensure a stable market that achieves real greenhouse gas emission reductions.
  • Seek environmentally just, equitable climate policy.
  • Ensure a just transition for workers.

Click here to read the letter and full set of principles.

Cap-and-Trade Bills Up for Debate

Three bills are currently in play in Sacramento to extend the cap-and-trade program to the year 2030. All take different approaches.

AB 378, authored by Assemblymember Cristina Garcia (D-Bell Gardens), would extend the cap-and-trade program to 2030, but with changes to the program that attempt to address high air pollution burdens in low-income communities. The bill would allow the California Air Resources Board (CARB), which administers cap-and-trade, to directly regulate industrial facilities that fail to meet their greenhouse gas emission reduction targets. It also sets up possible new air pollution standards for those facilities participating in the cap-and-trade program.

AB 151, authored by Assemblymember Autumn Burke (D-Marina Del Rey), is the industry-favored bill. It allows for the extension of the cap-and-trade program with few directed changes to the program. It sets up the Compliance Offsets Protocol Task Force to provide guidance on offset protocols and requires a report on job training and just transition issues for workers impacted by the transition to more renewable energy sources.

SB 775, authored by Senator Bob Wieckowski (D-Fremont), is the biggest departure from the current cap-and-trade program. The bill would allow the current program to expire and would take a new approach starting in 2021. SB 775 would eliminate the use of offset credits, create a new, higher floor price for allowances, put in place a cap on the price of allowances, eliminate any free allowances to industry and require a quarterly increase in the reserve price, among other changes.

Significantly, SB 775 would create a climate dividend that would go to every California to help offset future increases in energy prices. The bill would also create smaller funds for infrastructure, research and climate adaptation investments. It is not clear how the bill will impact current climate change program funding. The bill would increase the amount of revenue generated by the program, but likely divert most of the funds to the climate dividend.

Governor Brown continues to push for a vote on the cap-and-trade program when the legislature approves the state’s budget in mid-June. The Governor wants a two-thirds vote to extend the program and put to rest any legal challenges to the program. However, few in the legislature think that the June vote is likely to happen. It is possible the decision on the future of the program and related climate change program investments will be delayed until the end of the legislative session (mid-September).

New Healthy Soils, Alternative Manure Management Programs Get Underway

The Department of Food and Agriculture (CDFA) will soon release a draft Healthy Soils Program request for proposals (RFP) for public comment. The program will provide financial incentives to farmers and ranchers who use new healthy soils practices that increase carbon storage in soils and woody biomass and reduce greenhouse gas emissions overall. The program will also fund demonstration projects to promote the use of healthy soils practices. The final RFP will likely go out sometime in July. Sign up for CalCAN’s blog to track timely developments on this launch. To view a webinar providing a preview of the Healthy Soils Program, click here.

CDFA will also release a draft RFP for the Alternative Manure Management Practices (AMMP) Program this summer. The program will fund manure management practices on dairy operations that reduce methane emissions and help improve air and water quality. CDFA proposes that projects may receive up to $1 million. You can read our recent joint comments on the program here.



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