An irritated chairman of a state Senate Budget subcommittee says he intends to thwart a recent move by the state Air Resources Board that could give California’s biggest polluters a cushion of more than $300 million.
In a sharp rebuke of the board, Sen. Bob Wieckowski said Thursday that he’ll insert language into next year’s budget bill instructing regulators to reduce the free compensation they’re giving oil refineries and other industries covered under cap and trade, California’s signature climate policy.
Addressing a hearing, the Fremont Democrat read aloud from last week’s CALmatters story detailing the air board’s July meeting, where it unanimously voted to consider abandoning a scheduled reduction in free pollution allowances given to state industries—against the advice of its own staff and outside experts.
The board’s move came on the heels of a much-celebrated deal the Legislature and Gov. Jerry Brown struck to pass legislation extending the state’s cap-and-trade program to the year 2030. The bill’s author acknowledged that the fight to get a two-thirds vote required a number of deals—and that the air board’s later move was one of them.
“It was part of the deal to make sure we could get a (two-thirds) vote to extend the cap-and-trade program,” Democratic Assemblyman Eduardo Garcia of Coachella told CALmatters.
Wieckowski said he was dubious about whether such a deal was made, but insisted that he would urge the Legislature to negate any such previous agreements by passing next year’s budget bill with explicit instructions to the air board.
“Whatever people are saying now, I could care less,” he said in an interview. “We do this all the time. We say, ‘This is not what we expected,’ so we fix it. Let’s give Jerry Brown a taste of his own medicine. We are going to use a budget trailer bill to legislate. Let me just throw it out there. How about language (in the budget bill) that says ‘You shall reduce the industry assistance level to 75 percent.’
“I want to make sure we put it in language that says (to the air board) ‘You will go down, you will demand that people make some changes, or pay for it,’ “ Wieckowski continued. “They don’t just get free allowances. At some point we have to say, ‘We don’t have to give them all free allowances in perpetuity.’ How do you change behavior when you do that?”
Air board spokesman Stanley Young emphasized that the board was merely considering the idea of continuing to give all companies covered by cap and trade the maximum possible assistance allowances—and that no final decision had been made.
As for the governor, his office declined to comment.
Some background: After the creation of the state’s cap-and-trade program, the so-called “industry assistance” that began in 2013 was designed to provide compensation to California industries that presumably would need to make costly upgrades to reduce their emissions. Without such compensation, they could face unfair competition from industries in other states not restricted by a cap-and-trade system.
But the assistance to California polluters was scheduled to drop next year from the highest level—100 percent—for many of the businesses covered under cap and trade. For the majority of them, including oil refineries, the state had planned to reduce its assistance by 25 to 50 percent during 2018 to 2020. Those final three years of the existing cap-and-trade program, before the extension takes effect in 2021, was known as the third compliance period.
“The third compliance period was when we were going to make them be big girls and boys, make them do some of the investment to reduce their carbon emissions,’ said Wieckowski, a self-described critic of the idea of allowances. “The criticism of (air board chair) Mary Nichols and the board has been they are coddling industry too much with all these free allowances.”
Nor was this the first time the air board had opted to cancel scheduled reductions in industry allowances. They did it in the second compliance period as well.
“Air board staff are the scientists and the experts on how we are going to achieve our carbon reduction,” Wieckowski said.
Just months ago the staff had recommended even further cuts—advice the board did not follow.
Earlier in the day, Wieckowski had opened a hearing considering how to divvy up billions of dollars collected from the state’s allowance auctions by going somewhat off script, saying he was displeased about the air board’s actions.
He then peppered air board staff with questions during the proceedings, asking if the agency could confirm that changing the assistance factors could result in a $300 million boon to industry. The staffer said he did not have that information. Young, the air board spokesman, said Friday that the board was working to get the senator the financial analysis he requested.
The $300 million estimate came from calculations by economist Danny Cullenward at Near Zero, a climate policy think tank at the Carnegie Institution. He concluded that oil refineries alone would reap that much over three years if the board kept the maximum allowances.
Catherine Reheis-Boyd, president of the Western States Petroleum Association, contended in a brief email that “the way the allowances are distributed has no impact on how the cap-and-trade program ultimately reduces emissions.”
But Wieckowski, who also chairs the Senate’s Environmental Quality committee, said continuing to give companies free allowances removes incentives for them to operate more cleanly. If the board instead followed the recommendation of staff and experts and scaled back industry assistance, he said that would likely encourage upgrades at polluting plants—providing greenhouse gas reductions that would persist, he said, even when the new law’s generous allowances come into effect.
“There was a window here,” Wieckowski said. “No one’s going to (install the technology to) reduce their emissions, and then in 2021, unhook it. This is supposed to be about reducing carbon emissions.”