Under the new scoping plan, California would almost eliminate oil and shift to renewable sources. But where’s the update on the controversial polluting-trading market known as cap and trade?
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California’s clean-air regulators on Tuesday unveiled a highly anticipated roadmap packed with strategies for tackling the climate crisis. But it falls short on a key component: the role that its signature environmental policy — cap and trade — will have in cutting greenhouse gas emissions.
The California Air Resources Board’s draft of its ambitious proposal, called a scoping plan, outlines policies that focus on reducing reliance on oil, capturing carbon dioxide emitted by industries and increasing dependence on renewable power sources, such as wind, solar and electric cars. The plan makes a bold commitment to eliminate 91% of oil used in the state by 2045.
The purpose of the plan is to fulfill state mandates that require reducing carbon dioxide and other climate-warming emissions 40% below 1990 levels by 2030 and achieving carbon neutrality by 2045. The strategies would cost an estimated $18 billion in 2035 and $27 billion in 2045.
In their earlier version of the plan, adopted in 2017, air board officials had estimated about 38% of gas reductions would come from the state’s emissions-trading program, called cap and trade. According to the new plan, cap and trade will play a smaller role in meeting the state’s goals as it transitions to renewable energy.
But just six pages of the 228-page document address cap and trade, without providing a detailed analysis of how significant that role will be. That’s a problem, one expert said, because the modeling that air board staff used to make projections for each measure doesn’t provide any evidence of how cap and trade is working.
“They haven’t given us the basis for how much work cap and trade has to do over the next decade,” said Danny Cullenward, an economist and vice chair of the Independent Emissions Market Advisory Committee, a group of five experts who assess the effectiveness of the program. “Their projections show emissions that are significantly lower than what’s in the official emissions inventory. There’s not enough here to go on.”
In order to meet its goals, the state needs 27% less emissions reductions from cap and trade than what was initially expected in 2017, according to the plan.
Air board officials said they will be evaluating the cap-and-trade program in 2023 and providing more details after the plan is finalized and voted on by the board this summer.
They said they need additional data because of regulatory changes that went into effect in January 2021, which included reduced offsets and a new price ceiling for allowances.
“We need additional data — potentially another years-worth of data — into this new program before we go into that level of detail,” Rajinder Sahota, the board’s deputy executive officer of climate change and research, said in response to a CalMatters question during a press conference on Tuesday. “That also means that the scoping plan is not meant to be a design or a change to an existing program, it is meant to be a high-level planning document that serves as a guidepost.”
Cullenward disagreed, saying the staff shouldn’t need to wait because those regulations were written and available to the staff in 2018. Instead, he said, they’re “delaying the process.”
Too many allowances in the bank, critics say
The state’s landmark cap-and-trade program, which launched in 2013, has long been hailed as a crucial strategy to help California curb climate change. But it also has been widely criticized by legislators, analysts and environmentalists.
At a hearing in February, Ross Brown of the nonpartisan Legislative Analyst’s Office told lawmakers that the current design of cap and trade presents “a very real risk” that California’s climate goals will not be met. Sen. Bob Wieckowski, a Fremont Democrat who chairs the Senate’s environmental budget subcommittee, pressed the air board to be more transparent about cap and trade.
The program works by putting a price on carbon. The state sets caps on the volume of greenhouse gases that companies are allowed to emit, which reduce over time. Major polluters such as refineries and power plants must operate below those caps or buy and trade carbon credits, called allowances, from companies that already meet their limits.
The goal is to incentivize companies to reduce their carbon footprint. But one big problem stands in the way — the oversupply of allowances. For years, companies have been stockpiling allowances that environmental justice groups say undermines the notion that a price on pollution could reduce planet-warming emissions.
As of 2020, air board officials estimate that 310 million unused allowances were left, representing 5% of the total number since cap and trade first went into effect, according to the report.
Critics say that so many banked allowances is a problem because it could allow companies to keep polluting past the state limits in later years. That means those companies would have little incentive to cut emissions.
“Cap and trade began with too many allowances and millions more were given away,” said Marie Choi, who is the communications director for the Asian Pacific Environmental Network. “Offsets and allowance banking are essentially accounting gimmicks that enable big polluters to continue fueling climate disasters and concentrate even more pollution in working class communities of color while papering over their contributions to climate change.”
A plan to minimize job losses but slow climate gains
The new plan includes measures that would require a massive shift away from the state’s reliance on fossil fuels.
The air board’s plan relies on a strategy that aims to minimize job losses and costs while achieving net zero emissions by 2045 rather than earlier, as some options would have accomplished.
Air board officials in April recommended an option, known as Scenario 3, that has the least impact on the state’s economy rather than accelerating the pace of achieving carbon neutrality. Net zero emissions or carbon neutrality means achieving a balance between the greenhouse gases that are emitted and those that are eliminated or removed.
The state’s scoping plan aims for an 80% reduction of greenhouse gases below 1990 levels by 2050. Among its strategies are strengthening the low-carbon standard for fuels and increasing investments in engineered technologies that remove carbon from companies’ emissions.
The plan is designed to counter job losses in industries reliant on fossil fuels while promoting job growth in other industries as the economy increasingly is powered by renewable energy.
It emphasizes the transportation sector’s transition to clean energy as a crucial component to achieving its carbon goals and clean air standards, including the phase-out of new gas powered cars by 2035. If adopted by the board this summer, the mandate for 100% zero-emission car sales would be the first-of-its-kind and could set a nationwide standard.
Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, which represents oil and gas companies, said the scoping plan places too heavily on mandates and regulations rather than beefing up market-based approaches to cut emissions.
Oil industry officials have expressed concern about the lack of charging stations for electric cars and other changes needed before the state can shift away from fossil fuels.
“The plan would impose more bans, mandates and expensive regulations that are designed to affect, as the report says, ‘every aspect of how we work, play and travel,’” she said in a statement. “A new scoping plan needs to take into account how Californians really live, and not rely on theory and infrastructure that does not exist.”
The public has 45 days to comment on the plan. A public hearing is scheduled for June 23, while the board is expected to vote on the plan in the fall.
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