On Monday, Senate Bill 775 was amended to introduce a new proposal to overhaul California’s carbon Cap-and-Trade program and extend it beyond its current 2020 sunset. The bill, authored by Senator Bob Wieckowski (D-Fremont) and backed by a number of high-ranking Democratic legislators, including Senate President Pro Tempore Kevin de León (D-Los Angeles), would extend the program indefinitely and change a number of provisions in the current Cap-and-Trade structure.
Among the most glaring changes is the elimination of free allowances in future carbon credit auctions. Currently, the program offers a number of free carbon allowances at each quarterly auction for smaller facilities that might have difficulty competing in an auction scenario with larger businesses. SB 775 will eliminate free allowances, but place a cap on the price of carbon credits in the auction. The proposal will also eliminate the ability of participants in the program to purchase offset credits from “green projects,” such as forest restoration projects, unless they are controlled by the State. Finally, the proposal would create a rebate program for California residents that the author hopes will offset the pass-through of cost increases to capped industries that the new program would impose.
Governor Brown has said that he will not sign a Cap-and-Trade expenditure plan until the program is extended until at least the year 2050, but has not yet publicly weighed in on SB 775. The bill must be passed by a two-thirds vote, and would take effect immediately.