Cap-And-Trade Deal Passes California Legislature

UPDATE 3:04 a.m.: California lawmakers have passed a major piece of climate change legislation with a rare bipartisan vote.

“A legislative unicorn,” Senate President pro Tem Kevin de León (D-Los Angeles) called it, after supermajorities of Assembly and Senate lawmakers voted Monday evening to extend the state’s cap-and-trade program to 2030.

The complex, wide-ranging package not only extends the state’s signature climate change program past its slated 2020 expiration date, it also includes several major side deals to lower industry taxes and fund affordable housing.

The deal brought together strange bedfellows, with the California Chamber of Commerce and the Natural Resources Defense Council siding together in support, against the Sierra Club and the conservative Howard Jarvis Taxpayers Association.

Of all the speeches during the lengthy Senate and Assembly debates over the extension of California's cap-and-trade program, one stood out for both its counter-intuitiveness and its raw emotion: Asm. Devon Mathis (R-Visalia), an Iraq War veteran who served in the Army National Guard, spoke in support of cap-and-trade despite his district's Republican roots. "This sucks," he told his colleagues, "but there’s other things that suck more." Click on the audio player above to listen to Mathis' speech

Gov. Jerry Brown has been the program’s chief supporter. He views the cap-and-trade system as the most practical way for California to fight climate change, as well as an example for other states and countries.

“Japan can look at this. China can look at it, India. That’s what’s important,” Brown said at a press conference following the vote. “It’s not just what we do, it’s what other people can follow.”

The program essentially creates a pollution market, where businesses buy and trade the right to emit greenhouse gases. As the state’s targets for reducing greenhouse gases tighten, the amount of pollution “credits” available for businesses decreases, driving the price of credits up due to supply and demand.

While the side deals (discussed below) helped secure support of both Democrats and Republicans, another key factor was that the state’s emissions targets are already in place, regardless of whether the cap-and-trade program continues. Tighter targets approved last year by Democrats require emissions to decrease to 40 percent below 1990 levels by 2030.

Assembly Republican leader Chad Mayes (R-Yucca Valley) opposes those targets. “It’s going to be very costly, very expensive to get there,” Mayes said. But now that they're in place, “I want a market-based system to be able to get there versus a command-and-control system.”

The Chamber of Commerce shares this view, supporting the extension as less costly than new regulations. Brown negotiated changes to the program included in the deal with business groups and the oil industry, as well as environmental organizations.

Still, Mayes initially withheld support for the deal, until further concessions from Democrats over the weekend. On Monday, he was one of seven Assembly Republicans who cast crucial votes to extend cap-and-trade. Sen. Tom Berryhill (R-Twain Harte) was the lone GOP vote in the Senate.

Most Republicans still opposed the measure, because the state's emission limits will likely increase energy prices over the next decade.

“The climate doesn’t even know it’s in this war,” said Senator Ted Gaines (R-El Dorado). “It’s been changing forever, and will continue to do so regardless of what we do today.”

Some Assembly Democrats representing communities with poor air quality also opposed the deal as a giveaway to industry. They, along with community-focused “environmental justice” groups and some academics, favor regulations -- and argue concessions to industry in the measure will keep the price of pollution credits too low, resulting in businesses making few cuts to their emissions.

Ultimately, Brown, Democratic legislative leaders and the Republican Assembly cast a wide net in the deal that struck near the Legislature's ideological center. It captured the support to pass from the bulk of the Legislature's Democrats and some Republicans, despite opposition from lawmakers on both ideological wings, and similarly aligned interest groups.

The legislation heads to the governor, who will sign it.

-- Ben Bradford, Capital Public Radio

The Side Deals: Industry Tax Breaks, Affordable Housing, And More...

The side agreements struck by Brown, de León, Assembly Speaker Anthony Rendon (D-Paramount) and Mayes proved sufficient to reach the requisite two-thirds supermajorities in both chambers.

“All these interests that we negotiated with drove bargains that represented their perception of what was needed for the people they represent,” the governor said. “Threading that needle was the challenge.”

Pulling back on taxes

There are sales tax exemptions for new equipment purchases for industries whose backing proved crucial to picking up swing votes in both parties. The deal extends an exemption for manufacturers that costs the state $170 million a year and would have expired in 2022. In addition, it expands that break to the agriculture industry and energy utilities, at a new cost of $90 million per year.

The cap-and-trade measure “holds all regulated industries accountable to reduce emissions, while also ensuring our agricultural industries get the support they need to make those reductions,” read a statement from Asm. Cecilia Aguiar-Curry (D-Winters), who vowed she would only vote to extend cap-and-trade if the agriculture industry were on board.

There’s also the elimination of a fire prevention fee on rural property owners that raises $80 million for the state each year but has long drawn Republican scorn.

“I'm pretty tired of partisan politics,” Mayes said after the vote. “We didn't come here to Sacramento to just be Republicans and to hate on Democrats. That's not who we are. We came up here to Sacramento to try to make people's lives better.” 

(Correction: An earlier version of this story incorrectly stated that the legislation suspended the fire protection fee, rather than eliminated it.  In fact, the legislation suspends the fire fee until the cap-and-trade program 's new expiration date in 2030, and then eliminates the fee entirely. Our earlier story also quoted a Republican Board of Equalization member criticizing the lack of a full repeal; we've removed that quote, as it's inaccurate. We regret the error.)

A promise on affordable housing

Legislative Democrats won the promise of a three-pronged deal to address California’s housing affordability crisis. That's after their efforts over the last year to reach agreement with the governor fell short; as Democrats pushed for more funding for affordable housing projects, Brown insisted on streamlining regulations for new housing developments.

Lawmakers have made housing affordability a key priority this year, with more than 100 different bills on the issue introduced in the Senate and Assembly.

The governor dearly wanted a cap-and-trade deal, but provisions inserted at the behest of the oil industry were proving unpopular among liberals. So Democratic leaders saw an opportunity to leverage the governor. They insisted on bringing housing into the negotiations.

Monday afternoon, as the Senate debated the cap-and-trade package, Brown, De León and Rendon issued a statement. It promised a housing affordability package once lawmakers return from their summer recess in mid-August.

The deal “will include a general obligation bond, a permanent funding source for affordable housing and regulatory reform,” the statement said.

The inclusion of the bond is noteworthy because the governor has opposed every previous bond effort but one -- the 2014 water bond, at the peak of the drought. Brown has argued that bonds are poor public policy because they push the cost back to future generations.

The affordable housing funding source could potentially include a real estate document fee, which passed the Senate earlier this month but whose fate in the Assembly has been unclear.

Two companions

Two other bills accompanied the cap-and-trade measure in order to win votes for the deal.

One addresses air quality. To win over Democratic lawmakers aligned with community environmental groups, the legislation would require increased, local monitoring of air pollution in communities where air quality is worst. It would also empower regional air quality districts to require retrofits to factories and plants in those communities.

“This package shows that we can take care of our global community while ensuring better air quality in our own backyards,” the bill's author, Asm. Cristina Garcia (D-Bell Gardens), said in a statement.

The other measure is a constitutional amendment from Mayes, intended to give GOP lawmakers a say in how cap-and-trade revenues are spent a few years down the road by requiring a one-time, supermajority approval in 2024.

Mayes touted his amendment as providing an important check and balance, but it drew scorn from conservative critics as being inadequate.

“Improbably, Assembly Republicans have actually found a way to negatively leverage their leverage!” the Howard Jarvis Taxpayers Association wrote to GOP lawmakers urging their opposition.

-- Ben Adler, Capital Public Radio

UPDATE 8:51 p.m.: Lawmakers have approved a three-bill package that extends the state's cap-and-trade program Monday night. 

UPDATE 6:40 p.m.: The cap-and-trade extension has passed the California Senate with 28 votes. It now moves on to the Assembly.

UPDATE 4:57 p.m.: Opponents from the left and the right are making last-ditch efforts to beat back Gov. Jerry Brown’s proposal to extend California’s cap-and-trade greenhouse gas emission reduction program ahead of a showdown Monday afternoon.

Environmental justice and grassroots liberal groups gathered on the Capitol steps Monday morning chanting “People over profits! Courage over profits!”

They urged legislative Democrats to reject a bill they say was written for the oil industry.

“The bill has gotten this bad by chasing Republican votes, and that is not necessary,” said Eddie Kurtz with the advocacy group Courage Campaign. “News flash: The Democrats have a supermajority in this Legislature! The Democratic supermajority must have the courage to pass a bill by itself.”

CapRadio's Cap-And-Trade Explainers: 

• What The Heck Is 'Cap-And-Trade,' Anyway?
• Brown Lobbies For Cap-And-Trade, Loses Republicans
• Calif. Cap-And-Trade Deal Hasn't Wooed The Groups It Intended

Meanwhile, David Wolfe with the Howard Jarvis Taxpayer Association Republicans backing the deal were “taken to the cleaners” because they didn’t use their leverage to win any permanent tax relief for families.

“This is a 71-cent gas tax increase by the year 2030, which results in a $600 gas tax increase every year for a family of four.”

Wolfe is citing the high end of a non-partisan analysis that found cap-and-trade is the most economical way to meet the state's greenhouse gas goals.

The deal does have broad support from groups on both sides of the aisle. Backers include labor unions and other environmental groups on the left, and the business, agriculture, manufacturing and oil industries on the right.

-- Ben Adler, Capital Public Radio