California Environmental Justice Alliance

Building Healthy Communities from the Ground up

Justice Deferred: A Break Down of California’s Cap & Trade Bill from the Environmental Justice Perspective

Another contentious cap and trade battle has concluded in California with the signing of AB 398 into law. Despite the fanfare, it is important to look beyond the headlines to see what deal was actually struck.

The communities where CEJA’s members and partners work are on the frontlines of climate change. Low-income communities and communities of color are hit first and worst by changing climatic conditions, and live next to our state’s largest sources of greenhouse gas emissions, like refineries and power plants. Whether it is extreme heat, increased storms, or worsening air quality as a result of climate change, all of these impacts are and will increasingly be felt deeply in the exact communities that have the fewest resources to adapt. For our communities, and the planet, it is critical to have the most effective, equitable tools to achieve greenhouse gas emission reductions.

Last year, California passed SB 32, which established one of the world’s most ambitious goals for reducing greenhouse gases (GHG) by 2030. Along with SB 32, we worked to pass a companion bill, AB 197, which required the state to prioritize direct emission reductions, not just relying on the market-based mechanism of cap and trade. These types of reduction at the source are the most direct way to lower greenhouse gas emissions, and have an additional benefit of improving local air quality in frontline communities. The work in 2016 to pass these two bills set the stage for a big debate in 2017 over how to best meet the 2030 climate goals. Cap and trade was only authorized through 2020, and to re-authorize it required a two-thirds vote because of Proposition 26. Passed with a slim two-thirds vote and signed into law shortly thereafter, AB 398 now extends the cap and trade program through 2030.

Over the past several years, our coalition and our members have, through careful analysis and years of on-the-ground experience, documented many of the flaws in California’s cap and trade system. These include a lack of significant emission reductions, particularly from industrial facilities; the disproportionate location of these exact climate polluters in EJ communities; and documenting the clear link between GHG emissions and co-pollutants that are harmful for the health of surrounding communities. It was our hope that legislators, environmental groups and environmental justice organizations would work together to address these issues, rather than perpetuate them, as we discussed how to meet the 2030 goals. At the start of the legislative session, we outlined very clearly the outcomes we wanted to see from any carbon pricing legislation including:

  • Maintain and strengthen core regulatory programs, like those established by AB 197;
  • Direct emission reductions in environmental justice communities;
  • Close loopholes for polluters that make it easy and cheap to comply;
  • Achieve a higher price on carbon to incentivize quicker action by businesses.

After weeks of closed-door negotiations with industry, AB 398 was put into print late in the day on Friday July 10th, gutting another bill. It was pushed to a vote exactly one week later, under great pressure from the Governor and legislative leadership.

So does AB 398 achieve any of our desired EJ outcomes? Unfortunately, no.

While we recognize policy making is a process of compromise, our analysis is that AB 398 simply went too far. In the desperation to get a deal done, industry was able to extract nearly every demand they put on the table at the start of the year, at the expense of an effective program. Instead of innovating and learning from our mistakes, California doubled down on many of the exact policy tools that have failed thus far to drive greenhouse gas emissions down at the rate we need. At a time when our state needed to set the standard for aggressive, equitable climate policy for the rest of the country and the world, we created an alarming blueprint for climate policy that favors Big Oil, was crafted behind closed doors, and does not meet the crisis of climate change.

Most importantly, this blueprint builds a program that is at the expense of low-income communities and communities of color overburdened by pollution. The complex policy issues at stake in AB 398 have real-life consequences. Environmental justice communities will be left struggling with on-the-ground impacts as climate change worsens in our state, and live directly next door to the industries who will take advantage of AB 398’s many loopholes. While a companion bill, AB 617, was created to address air quality issues in environmental justice communities, it currently lacks the teeth and specificity needed to ensure that it will lead to improved health and air quality in our communities. With the range of concessions in AB 398, it was simply not enough to justify the full package.

This is sadly too often the case in environmental policy: for a win, compromises are made that negatively impact low-income communities and communities of color. While the environmental justice movement has grown over the past several years, we have more work to do in pushing our decision-makers and environmental allies to fight for the strongest possible policies, and stand with us when compromises that will directly impact the health of communities of color are on the table.

Above all, we must continue building the power of communities of color so that we can ensure equity and justice are at the center of California climate policy. We are working towards the day when our issues cannot be collateral damage to a political deal, and we have the muscle to realize community-led solutions to the climate and environmental crisis facing our state. Our spirit and our drive to achieve this vision is unbroken.

We have much work to do ahead of us to ensure that state agencies use their full power to make AB 398 implementation as strong as possible, and that AB 617 leads to the air quality improvements that our communities desperately need. We hope decision-makers and allies join us, because the lives of our communities — and the planet — depend on it.

Here’s a more detailed analysis on the exact challenges we see within AB 398:

1. Regulatory rollbacks. AB 398 includes two provisions that tie the hands of our regulatory agencies. One provision prevents local air districts from enacting carbon dioxide regulations on all stationary sources covered by cap and trade. It is a direct attack on a years’ long organizing effort in the Bay Area to win a cap on refinery emissions. While local air districts maintain their other regulatory powers, local air districts can no longer be more proactive in addressing climate change and it sets an extremely bad precedent for superseding local control. The second provision prevents the California Air Resources Board (ARB) from enacting any additional, greenhouse gas-reducing regulations on oil and gas production facilities, outside of policies that are already in place. This will overturn a measure ARB has proposed as the main focus of its AB 197 implementation, requiring a reduction of refinery GHG emissions by 2030.

Both of these prohibitions will last for over a decade. Just imagine: in 2025, when who knows what havoc is being wreaked by climate change, because of AB 398, our state agencies will be unable to create any new policies that limit emissions from the very drivers of climate change. These provisions — pushed into the bill by Big Oil — are a direct attack on the hard work of the environmental justice community, from our efforts to pass AB 197 to the organizing of grassroots groups to achieve refinery limits in the Bay Area. It is truly a step backwards for California climate policy.

2. Making it harder, rather than easier, to achieve our 2030 greenhouse gas emission reduction goals. Instead of crafting a policy with the primary objective of achieving the most effective emission reductions, AB 398 is focused on making it as cheap as possible for industry to comply. There are a plethora of provisions that assist industry at the expense of environmental integrity, ranging from an escalating budget for offsets to dedicated times in the coming decade when the Air Resources Board will intentionally depress prices in the cap and trade market. AB 398 also locks into place free allowances. Allowances are permits to pollute, which under cap and trade, industries are supposed to buy and sell. However, industry is also given a large quantity of allowances for free, which is based on an assessment by ARB. AB 398 guarantees free allowances until 2030 at levels much higher than what the agency recommends is necessary. This is yet another give-away to Big Oil and gas, who receive the lions’ share of these free permits.

AB 398 also failed to grapple with the over allocation of allowances. As the Legislative Analyst’s Office found, the current cap and trade system has flooded the market with permits to pollute. This means businesses can just buy as many allowances as they want at cheap prices, and prevents us from getting more on-the-ground emission reductions, while keeping prices low. Instead of creating a clear mandate to ensure this does not continue past 2020, AB 398 gives ARB wide discretion to address it. In the face of severe industry lobbying, getting regulatory action to reduce over allocation will be an uphill battle.

3. Undermining climate revenues. Since cap and trade’s inception, prices per ton on carbon have hovered at the floor of the market. To reach our 2030 targets, we need a higher price to drive change at businesses. But AB 398 does nothing to help with that. With its abundance of cheap compliance options and allowances, we are more likely to continue seeing rock bottom prices. In addition, to court Moderate and Republican votes, the bill includes tax breaks and a fee repeal that will be backfilled by climate revenues, reducing investments by an estimated 15 percent, or approximately $300–500 million, annually. This is in addition to unknown millions in subsidies promised to Big Agriculture to bring them on board.

That’s not all of the bad news: in the quest for Republican votes, the Governor and legislative leadership gave the green light to a potentially dangerous ballot fight in 2018. The Friday evening before the AB 398 vote scheduled for Monday, the legislature introduced Assembly Constitutional Amendment 1. ACA 1 would require a ⅔ vote on cap and trade revenues starting 2024, and will go before voters in June 2018. If passed, ACA 1 would pull California climate policy back to the divisive days of ⅔ budget negotiations, where a small set of legislators can extract significant policy concessions in exchange for their votes. It would also most likely result in funding a range of dubious projects and programs that have very unclear — if none at all — climate or air quality benefits. And whether or not it passes at the ballot box, it creates a potential platform for Republican turn-out during critical 2018 primaries.

In the coming years, CEJA, our members and partners will be working to minimize the negative impacts of these provisions. We will continue our fight for equitable climate policy, and hope that legislative offices, agencies and environmental organizations join our effort.