California’s Cap-and-Trade Tax Extension Signed Into Law

SAN FRANCISCO (CN) – Undeterred by President Donald Trump’s rush to roll back federal environmental law, California on Tuesday extended its lucrative business tax on greenhouse gas emissions and renewed its commitment to fighting climate change.

In a signing ceremony below the San Francisco-Oakland Bay Bridge on Treasure Island, Gov. Jerry Brown reiterated the importance of renewing the state’s cap-and-trade system through 2030. Brown was flanked by state Democratic leaders as well as former Republican Gov. Arnold Schwarzenegger, who signed the original cap-and-trade bill in 2006 at the same site.

“You’re here witnessing one of the key milestones in turning around this carbonized world into a de-carbonized sustainable future,” Brown said after receiving a standing ovation from the crowd of business leaders and lawmakers.

Brown played a critical role in extending the program, spearheading negotiations with the state’s myriad powerful businesses groups and lobbies. The final deal includes sales tax exemptions on equipment purchases for oil and energy companies along with other compromises between business and agricultural interests.

California’s cap-and-trade program is a free-market model that requires businesses to buy permits for exceeding carbon emission standards. The system essentially creates a price for emitting greenhouse gases, and the revenue generated from the carbon permits goes toward clean air programs and infrastructure projects.

Supporters of the carbon tax argue it’s necessary to ensure that California meets its goal of reducing greenhouse gas emissions by 40 percent from 1990 levels by 2030. They hope forcing power plants and business to pay for polluting will encourage them to adopt clean energy methods.

The climate change deal eventually received bipartisan support from the Legislature, with just eight Republican lawmakers voting for Assembly Bill 398.

While many lawmakers argued that the bill was being rushed through the legislative process – the plan was voted on eight days after being introduced – it received a two-thirds majority in both statehouses on July 18.

The updated cap-and-trade plan includes plans for tracking air quality at the local level and a clause that gives the California Air Resources Board the ability to cap the price of carbon permits.

Lawmakers also agreed to place a constitutional amendment on the ballot in 2018 that would require the Legislature to hold a vote in 2024 to decide the future direction of cap-and-trade revenue spending. The Republican proposal would require a two-thirds majority in both statehouses if it’s passed by voters. State Republicans hope to play a larger role over how the cap-and-trade revenue is spent.

Critics including the Sierra Club and the National Federation of Independent Business said the final deal was filled with handouts for Big Oil and state utilities. Others said the bill was negotiated behind closed doors and without any real public comment.

State Sen. Jim Nielsen, R-Tehama, called cap-and-trade “a massive gas tax in disguise” that stands to punish Californians during the next economic slowdown.

“Will these taxes be repealed if, and when, our economy slumps and Californians begin to lose their jobs?” Nielsen asked in a statement after the signing ceremony.

In the wake of Trump’s election, Brown and Democratic leaders have found a climate ally in Schwarzenegger.

With a cloud-free view of San Francisco’s skyline dominating the background, the former Republican governor applauded the state’s Democratic leaders for continuing a climate change program he helped create.

“The state of California today is shining,” Schwarzenegger said. “This is a very important message not only for this state but for the country and for the whole world. It’s a message that we have a functional government here in California.”

Schwarzenegger added that the bipartisan agreement proves that Americans are still firmly committed to the Paris climate accord, despite Trump’s widely criticized decision last month to back out of the longstanding agreement.

“It shows the rest of the world that America did not drop out of the Paris agreement; America is fully in the Paris agreement,” Schwarzenegger said. “There’s only one man that dropped off, but America did not drop out.”

Brown called climate change the world’s biggest existential threat, next to nuclear war. He said the cap-and-trade plan is the first of its kind and that other states and nations are working toward similar plans.

“Other people will follow. China is copying this cap-and-trade plan, Quebec has already joined, Ontario is coming in, Washington, Oregon and I believe other states on the East Coast will follow,” Brown said.

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