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California Legislature OKs Budget, Orders Cap-and-Trade Revise

June 16, 2020, 12:02 AM

California’s Legislature passed a $143 billion general fund spending plan Monday that includes an order to revise the state’s cap-and-trade program and defer overhaul of the troubled toxics oversight agency.

The deal is not final. Gov. Gavin Newsom proposed a $133 billion spending plan and has not agreed to the legislature’s version. Newsom has the authority to sign and reduce or veto specific appropriations.

That state is wrestling with a $54 billion projected deficit brought on by falling tax revenue and increased spending related to the coronavirus pandemic.

Newsom’s budget assumes no more federal coronavirus aid coming while the legislature’s version accounts for additional coronavirus asistance, and sets triggered cuts if that money does not materialize. The Legislature also uses more rainy day fund money. Both versions transfer money between specified funds and loan money to the general fund.

The governor said during a Monday call with reporters that he was in close talks with the Legislature but would not divulge if they were nearing an agreement. “We’re making a real progress and I’m very pleased at the conversations we’ve been having,” he said.

Changes could also come in July because the state income tax deadline was extended to July 15, from April 15 due of the pandemic.

‘Right Budget’

“This is the right budget for the right time,” said Assembly member Phil Ting (D), who chairs that house’s budget committee.

The Legislature’s budget also differs from Newsom’s in that it stalls a planned overhaul of the Department of Toxic Substance Control, which has been criticized for a lack of transparency and is underfunded because fees have not been updated in decades.

The budget bill, in agreement with the governor, withdraws a $4.8 billion climate resilience bond proposed for the November ballot, $250 million to create a new Climate Catalyst Fund, and $25 million for Tijuana River improvements.

The Legislature’s budget includes a provision that would require the California Air Resources Board to consider changes to its cap-and-trade program, which has raised $12.5 billion for greenhouse gas reduction efforts. It also grants $133.7 million for ongoing cap-and-trade programs and defers action on approving $965 million as originally approved.

Cap-and-Trade

Cap-and-trade launched in 2013 and is a key part of the state’s strategy to reduce emissions. It requires certain polluters to buy credits if their greenhouse gas emissions are over specific caps.

Critics say too many free emissions credits are available. The most recent credit auction brought in about $25 million as polluters sought less emissions permission and traded on a secondary market. Typical auctions bring in about $600 million.

Sen. Bob Wieckowski (D), who chairs a budget subcommittee, said the budget forces the Air Resources Board to look at existing regulations and make them more transparent.

Assembly member Jay Obernolte (R) opposed the cap-and-trade provision saying it was a move to increase revenue when the program’s purpose it to reduce emission. “These changes would raise the price of energy in California,” he said.

The budget bill also includes:

• $85.6 million in general fund spending approving 172 firefighting positions for surge capacity staffing, but cuts nearly $29 million for fire protection and training enhancements, a Wildland Firefighting Research program, and capital projects at fire bases.

• $19.25 million for a pilot project at the Salton Sea, which is shrinking and where the exposed playa is contributing to air pollution.

• $50 million for community air pollution projects and $5.51 million for a pilot program to build wildfire smoke clean air shelters.

• Defers action on a $51-million proposal for electric vehicle charging infrastructure.

To contact the reporter on this story: Emily C. Dooley at edooley@bloombergindustry.com

To contact the editor responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com

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