Extension of California’s Cap-and-Trade Program Entails Tough Balancing Act

The Nicholas Institute for Environmental Policy Solutions at Duke University

On Monday California Governor Jerry Brown and legislative leaders released a plan to extend through 2030 the state’s cap-and-trade program, which limits carbon emissions and requires polluters to buy allowances for greenhouse gas emissions—that is, permits to pollute. The deal updates how carbon emitters can use pollution allowances and offsets, empowers the California Air Resources Board to set a price cap on permits, and prevents local air districts from placing additional carbon emissions restrictions on polluters already regulated under the cap-and-trade program. A vote on Assembly Bill 398 and AB 617, a companion bill to increase local air pollution monitoring and pollution penalties, could come as early as today; the former will need approval of two-thirds of the Senate and Assembly.

The deal represents a difficult—and some say, imperfect—balancing of environmental and business interests.

The deal’s price cap provision is meant to guard against energy price spikes, but there are concerns it might undermine the purpose of limiting emissions. Thus far, permit prices have hovered near the program’s price floor and emissions have been within the state’s targets, but if demand spikes and prices hit the ceiling, emissions could rise. The proposal includes provisions to ensure that emissions goals are still met when the price ceiling is hit.

The offsets provision would decrease the amount of emissions reductions businesses can achieve through environmental projects in other sectors, and it would require that half of such projects be sited in California. Industry and environmental justice groups have sparred over the offsets, because although they can be a potentially cheaper alternative to achieving emissions reductions at regulated sources they are often without benefit to local air quality.

The two camps also do not see eye to eye on the number of free emissions allowances businesses should receive to keep them from being disadvantaged against out-of-state competitors not subject to the cap-and-trade program. In the deal announced Monday, companies will continue to receive free allowances, though the total number of allowances will shrink as the emissions cap is lowered to meet the state’s goal of cutting greenhouse gas emissions to 40 percent below 1990 levels by 2030.

The deal prioritizes state programs that could receive allowance auction proceeds. First in line: efforts to control toxic air pollution from mobile or stationary sources, followed by low-carbon transportation projects and sustainable agriculture programs.

Nine northeastern states are contemplating the future of their own cap-and-trade program. Since inception of the Regional Greenhouse Gas Initiative (RGGI) in 2008, the states’ aggregate emissions have decreased 37 percent—spurred in part by the cheap cost of natural gas (subscription). But RGGI advocates say that the program hasn’t sent electric bills soaring; instead, electricity costs have fallen 3.4 percent, again with help from natural gas prices. The program is set to release a plan for reducing the region’s carbon cap later this year, and there are signs that New Jersey may rejoin the program and that Virginia may link up with it—an expansion with both symbolic and market significance.

G20 Meeting Highlights Rift with the United States Over Its Climate Change Stance

Last week’s G20 meeting in Hamburg concluded with leaders of 19 nations renewing their pledge to implement the Paris Agreement and German Chancellor Merkel reiterating those nations’ consensus that “the Paris agreement is irreversible.”

Negotiations over the wording of the final communiqué from Germany hit a snag when the United States insisted on a line that read, “USA will endeavor to work closely with other partners to help their access to and use of fossil fuels.” The final language reads, “The United States of America states it will endeavour to work closely with other countries to help them access and use fossil fuels more cleanly and efficiently and help deploy renewable and other clean energy sources, given the importance of energy access and security in their nationally-determined contributions.”

The G20 declaration noted the U.S. withdrawal from the accord but said that the United States affirmed its “strong commitment to an approach that lowers emissions while supporting economic growth and improving energy security needs.” The U.S. exit from the accord will become official in November 2020—the year of the next presidential election.

Regarding climate change mitigation, Inside Climate News laid out “six degrees of U.S. isolation” from the other G20 members: the need for increased ambition, the economic benefits of climate action, the coming energy transformation, the need for international finance, the need to end inefficient fossil fuel subsidies, and the vestigial role for fossil fuels.

On Tuesday, the Trump administration appointed a renewable energy critic and former spokesman for a Koch Industries-funded campaign promoting fossil fuels to the post of senior adviser in the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy.

Study Offers Bad News on Extreme Flooding, Good News on Planning for That Phenomenon

A new study published Tuesday in Nature Communications suggests that extreme flooding currently expected to occur on average once every 100 years could, by 2050, occur every decade or even every year along the world’s vulnerable coastlines. The good news? Use of newly available data and advanced models offers the promise of improving global predictions of extreme sea levels.

“Up to 310 million people residing in low elevation coastal zones are already directly or indirectly vulnerable to ESL”—or extreme sea levels—“and coastal storms are causing damages in the order of tens of billions of dollars per year,” said the researchers. “These numbers could increase dramatically with SLR”—or sea-level rise—“and other changes, leading to annual damages of up to almost 10% of the global gross domestic product in 2100 if no adaptation measures are taken.”

As the climate changes, according to the study, category I hurricanes could do the same amount of damage as category II or III hurricanes did when sea levels were lower. But extreme sea levels, which often arise from a combination of high tides and storm surges, are often underrepresented in high-profile climate change documents such as those of the Intergovernmental Panel on Climate Change. To quantify the uncertainty of current extreme sea-level estimates, the study used newly released tide gauge data to conduct a meta-analysis of some 20 advanced climate models and found that predicted flood rates were underestimated for the West Coast of North and South America as well as for southern Europe and Australia.

According to researchers, including extreme sea levels in coastal impact studies is vital to helping vulnerable areas to protect themselves.