Jerry Brown's Cap-And-Trade Is Really Pollute-And-Profit

Governor Jerry Brown made an impassioned plea today that Senators pass AB 398—his signature legislation to extend the state’s cap-and-trade program, saying: “This is the most important vote of your life.” He is right about that. 

Senators must choose whether they will get on board with the governor’s giveaway to Big Oil, or develop a functional climate policy that actually reduces emissions from refineries, power plants, and other fixed industrial operations in the state.

The Legislative Analyst’s Office official analysis of the bill finds that the cap-and-trade program, as structured right now under the proposed legislation, will prevent California from meeting its statutory mandate to cut carbon emissions to 40 percent below 1990 levels by 2030. 

Here’s how Brown’s legislation practically pays Big Oil to pollute. 

First, the legislation exempts oil and gas companies from direct regulation of their carbon emissions. Local air districts were directly regulating carbon emissions from refineries and the Air Resources Board did the same for cars and trucks, and was preparing to lower the boom on refineries. 

Refineries will no longer face the threat of new requirements forcing them to install equipment to cut emissions at their source.

The legislation bans ARB from directly regulating refineries, power plants and other “stationary” sources of carbon emissions, relegating it to using only the cap-and-trade program to slash emissions.

But it is precisely such direct regulation of greenhouse gas emissions from such sources as cars, trucks and refineries that the LAO credits for 80% of the emission reductions CA has achieved since the-cap-and trade program went into effect in 2012.

Then, Brown's legislation hobbles the cap-and-trade program, ensuring industry won’t have to make significant emission reductions.  

This is achieved, in part, by continuing to give more than a quarter of the pollution allowances available under the cap-and-trade program to industry for free.

Refineries, oil and gas producers and distributors get nearly three quarters of those freebies when a strong cap-and-trade program would make industry pay for those allowances in order to incentivize cuts to carbon emissions. Those freebies were worth $3.1 billion dollars to Big Oil from 2013 through 2016.

The cap-and-trade program is also hobbled by extending the “banking” of unused pollution allowances.

This means industry can use its stockpile of pollution credits to flood the market and delay real emission reductions they would otherwise have to make after 2020. 

The program also continues “offsets” that allow polluters to make small investments in various environmental projects instead of making emission reductions.

Energy economist Danny Cullenward estimates that if the legislature does not eliminate these loopholes, they could account for most, if not all, of the reductions required in the extended cap-and-trade program. That way industry gets to keep polluting with no incentive to stop.

Brown's plan extends tax breaks to manufacturers under the existing program and adds another industry to the mix—the electric power industry, including utilities building fossil-fuel power plants. 

The LAO estimates the total state tax break will amount to more than $300 million a year. That’s at least $3 billion over a decade. It will be paid for out of the funds that the carbon trading market will generate. Those funds should be used to cut carbon emissions or mitigate costs to consumers, not cover tax breaks for polluters so they can increase emissions.

In response to an outcry from environmental justice advocates and local air regulators who want to protect low-income communities of color that are largely home to refineries and other polluters in the state, Brown embraced a companion bill, AB 617. The bill is supposed to address concerns about toxic air pollution emitted together with carbon.

The legislation mandates that toxic air pollution be monitored in such communities, when we don't need monitoring to know that lead, sulfur oxide, nitrogen oxide, carbon monoxide and other chemical emissions lead to asthma, heart disease, and cancer. This is also an unfunded mandate, that does not place the costs of improving air quality where they should go—onto polluters. 

Jerry Brown's cap-and-trade program protects businesses by using tax breaks, free allowances, and other loopholes. But it leaves Californians in the dust with no rebates from cap-and-trade to protect them from the whims of refiners who love to use California's climate laws as an excuse to jack up prices for consumers.

Jerry Brown is spinning the story of his cap-and-trade extension as a “tragedy for the world” if he loses. But it will be a tragedy for California, if he wins it, because lawmakers will be voting for a plan that puts the bulk of the costs onto all Californians while falling short of the ambitious climate goals that Governor Brown himself ordered the state to achieve just a few short years ago.

Capitol Watchdog is owned and operated by nonprofit Consumer Watchdog. For more information about Consumer Watchdog visit