July 25, 2017 – – The California Legislature remained in Sacramento prior to summer break for an extra week this year and they made the most of it.  The Governor worked a bipartisan deal on Cap and Trade.  The three bill package was hailed as world leading.  AB 398, California Global Warming Solutions Act of 2006 and market-based compliance mechanisms passed out of the Senate on a 28 to 12 vote, Senator Berryhill (R) voted yes. The bill was then sent back to the Assembly for a final vote, where it passed 55 to 21.

Last year, SB 32 was enacted, extending California’s Global Warming Solutions Act requiring 40% reductions of carbon emissions below 1990 levels by 2030. It is important to note that SB 32 extended ARB’s authority to use command and control mechanisms to regulate greenhouse gas emissions (GHGs) into the future, with little consideration given to the costs of that measure to California’s citizens, consumers and economy. SB 32 was opposed by the agriculture industry and the larger job creation community in California because it did not attempt to balance its mandate with its economic impacts.

AB 398 finds this balance by creating a market-based mechanism that allows food processors, regulated under SB 32, to meet their compliance obligations for reducing GHGs in a cost effective manner.

Specifically, AB 398:

  • Maintains current industry assistance levels that help food processors affordably comply with California’s GHG reduction mandate;
  • Develops a mechanism to establish a price ceiling to contain the cost of the sale of allowances purchased by food processors to meet their compliance obligations and limit the increased cost of the Cap and Trade Program to the agricultural industry and consumers;
  • Develop a Compliance Offset Protocol Task Force to create new offset opportunities in California, including in the agricultural industry;
  • Improve accountability of the California Air Resources Board by mandating additional oversight including an annual economic impact report by the Legislative Analyst’s Office;
  • Prioritizing spending of money collected through the Greenhouse Gas Reduction Fund by creating a specific order of projects to prioritize, starting with reducing air pollutants from stationary and mobile sources, sustainable agriculture and short lived climate pollutants. AB 398 also suspends the State Responsibility Area (SRA) fee as of July 1, 2017, until January 1, 2031.

Along with AB 398. AB 617, Non-vehicular air quality measure that’s a companion to the cap-and-trade bill, has also passed the Senate on a 27 to 13 vote. The bill was sent back to the Assembly for a final vote, where it passed 50 to 23. AB 617 was not supported by agriculture, but it requires community based air monitoring system with mandated air quality improvements.  Also included in the measure was ACA 1.  This measure was promoted by the Republicans and will require a “reset” for the funding portion of cap and trade in 2024.  It is important to note that ACA 1 will need to be voted upon by the general public at the next election and pass by a majority of those voting.