The California Air Resources Board (ARB) has released a preliminary draft proposal to extend the State’s controversial Cap-and-Trade Program (Program) beyond its original 2020 sunset date to 2050, and to also broaden the program by linking with Ontario, Canada and expanding the market in which capped industries can trade. The proposal has been released despite ongoing legal challenges from industry on whether the Program represents an unconstitutional tax, and also in the wake of the most recent Cap-and-Trade auction in April which yielded a disappointing 2 percent of the expected revenue. The State Legislature has also expressed its doubts about the effectiveness of the Program, failing to allocate 40 percent of the available Cap-and-Trade revenues in the 2015-16 State Budget, and again waiting to make those decisions for the 2016-17 State Budget until later this summer.
While revenues from the Program could provide valuable funding for greenhouse gas emissions reductions programs around the State, which was the statutory purpose for the funds, many feel that the funds have thus far been dedicated to projects that do not achieve the greatest climate change benefits for the State. Rural forested communities have also been largely left out of funding allocations, as auction revenues have generally been spent in heavily urbanized areas or areas with heavy criteria pollutant burdens. The Administration’s intent to continue the Program has been clear, however, even in light of the ongoing controversy.
The ARB is not yet taking public comment on the proposal, but expects to release a formal draft regulatory package on July 19. The preliminary draft proposal can be accessed here.