California Gov. Jerry Brown is racing to convince lawmakers to extend his state's signature program to confront climate change. The cap-and-trade program has been closely watched around the world as a market-based way to reduce greenhouse gas emissions, but it expires in 2020.
It has implications far beyond the borders of the most populous U.S. state, which eagerly pushes the boundaries on environmental regulations and is looking to create a framework for climate policies that other states, provinces and countries can adopt.
The state Assembly and Senate are scheduled to take up the legislation on Monday.
Here's a look at how the cap-and-trade policy works, what it means for California residents and others, and why it's fired up critics on all sides.
WHAT IS CAP AND TRADE?
Cap and trade is one of several policies that California uses to drive down carbon emissions.
California places an upper limit on the state's carbon emissions and ratchets it down each year. That's the cap part.
The state gives away or auctions permits to emit one ton of carbon, which are known as allowances and can be bought and sold. That's the trade part.
The program was devised as a "market-based" solution to global warming, putting a price on carbon to create an incentive for polluters to reduce their emissions and save money.
As the number of available allowances declines, the price for each one is expected to rise, increasing the cost of pollution over time. At the most recent auction in May, allowances sold for $13.80.
California has linked its carbon auctions with the Canadian province Quebec and is in the process of linking with Ontario.
Companies can also meet a portion of their obligation by paying for "offsets" to mitigate carbon, such as forestation projects.
Auctioning allowances has raised billions of dollars for programs that address climate change, like electric-vehicle incentives and mass transit development. It's also a key funding source for a planned high-speed train between San Francisco and Los Angeles.
WHAT DOES IT MEAN FOR CONSUMERS?
The program raises costs for businesses that emit carbon, including oil companies and factories. Some of those costs are passed on to consumers.
The nonpartisan Legislative Analyst's Office estimated last year that the cap-and-trade has increased gasoline prices by about 11 cents per gallon and diesel prices by 13 cents.
Some consumers have benefited from incentives that pay for subsidized housing or help people buy zero-emission vehicles and weatherize their homes.
Cap-and-trade proponents say it's an economically flexible way to reduce greenhouse gas emissions that contribute to global warming.
WHY IS IT AN ISSUE RIGHT NOW?
California's current cap-and-trade program is authorized under a 2006 law signed by then-Gov. Arnold Schwarzenegger, but the authority expires in 2020.
Brown, a Democrat who has stoked a global reputation as a climate leader, badly wants lawmakers to extend the program before he leaves office following next year's election. He and top legislative Democrats said Monday they'd reached a deal to extend the program with modifications.
Some observers say the vote will get politically tougher as the election nears. Vulnerable lawmakers could become more wary of taking a vote that could be blamed for higher gas prices.
An immediate extension would also benefit Brown as he touts what he calls California's climate leadership. He met with Chinese President Xi Jinping in June, plans to attend a global climate summit in Germany in November and has announced a global climate conference next year in San Francisco.
WHAT ARE BUSINESSES SAYING?
Large business interests, including oil companies, and some Republicans have embraced cap and trade as the least costly way to reduce emissions. Without the ability to continue polluting—for a fee—they worry the state will force them to upgrade older equipment or make other expensive changes to their operations.
California lawmakers last year approved an ambitious goal to reduce carbon emissions 40 percent below their 1990 level by 2030 and gave the California Air Resources Board broad authority to achieve the goal.
The National Federation of Independent Business, which represents smaller firms, is opposed, warning about higher costs for business owners.
WHAT ARE ENVIRONMENTALISTS SAYING?
Large national environmental groups support the bill, including the Natural Resources Defense Council, the Environmental Defense Fund and billionaire Tom Steyer's NextGen Climate.
But local environmentalists, particularly environmental justice groups that work in neighborhoods around pollution sources like oil refineries and ports, have blasted the proposal.
Environmental justice advocates have long been skeptical of cap and trade, which they say saddles low-income neighborhoods with toxic air. They've pushed alternative legislation that would impose a much higher price on carbon and eliminate offsets and free allowances.
In an effort to assuage their concerns, Brown and legislative leaders have agreed to pass a separate bill that would require aggressive monitoring of air quality, stiffer fines and newer equipment at some of the dirtiest sources of pollution.
WHAT ARE THE PROSPECTS?
The bill requires a two-thirds vote in the Assembly and Senate—a high bar. Brown and the bill's other advocates have worked aggressively this week to line up votes but seemed to be struggling to secure them. Votes that had been expected on Thursday were pushed back to Monday.
Some lawmakers are leery of supporting the bill just three months after they voted to raise gas taxes to pay for road repairs.
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