Establishing Cap-and-Trade: The Climate of Subversion

[Todayʻs post recalls some of the earliest history of AB 32 - The Global Warming Solutions Act - and the conflicts surrounding both its passage as well as its implementation. More than simply a historic footnote, this history would eventually connect to the early policy discussions inside the Trump regime, including Congress, and the direction of ʻcontrolsʻ established on major industrial sources]

On September 27, 2006 Governor Arnold Schwarzenegger signed the California Global Warming Solutions Act into law, to impose a graduated cap on emissions of specific greenhouse gases; and, to allow those facilities responsible for such emissions to utilize market mechanisms to achieve the required reductions. Despite the Legislatureʻs extensive, time-honored tradition of crafting laws where words had specific meanings, the Solutions Act left considerable uncertainty as to the degree to which Californiaʻs climate change policy would be governed by regulatory controls that typically spelled-out who was responsible for reducing toxic emissions, in what amounts, the penalties for failures, and enforcement actions to including citizen ability to file legal actions against corporations… all versus market mechanisms.

At a time when climate scientists increasingly insisted that everyone needed to move decisively to quell the fossil-fueled storms of the 21st century, California was embarking on an uncertain path. Amidst celebrations by the stateʻs actor-governor, Hollywood stars and politicians proclaiming Californiaʻs new law, many public interest advocates wondered how many of the same corporations that had for so long been responsible for the largest market failure in history, were now going to be a part of a market “solution” to global climate change? Community activists in Los Angeles described the recent history of emissions trading as a disaster where public health was sacrificed amidst supposed benefits, far outside their neighborhoods. In places such as Wilmington, California, with its prominent oil refinery, activists wondered about the consequences for their community when Shell began trading emissions credits. In addition to concerns about greenhouse gases, They asked, how could emissions trading curb the use of other pollutants affecting the health of nearby communities?

Assessing the ‘trading’ provision of cap-and-trade in the Solutions Act struck many as theater of the absurd. Regulators, business owners, community activists, environmental lawyers, and private sector financial analysts were openly skeptical about the state’s entry into the world of emissions trading. Even though traditional command-and-control regulatory laws had many flaws, as businesses often complained about regulatory paperwork, many noted that AB 32 now required them to be savvy traders in a new commodity market. 

The relationship between the Solutions Act and other California law was by no means a trivial matter. The Golden State had already enacted a multiplicity of laws and regulations severely restricting the release of toxic chemicals into the air, and a larger array of laws placed California on a path toward eliminating fossil fuels as a source of energy in the 21st century. To all outward appearances the authors of the Solutions Act, breezed through the requisite policy committee. Behind the scenes, however, were serious misgivings about an ill-conceived approach whereby many of the same corporations responsible for emitting hazardous substances into the air should then benefit by credits for reducing emissions elsewhere. Over the previous two decades many activists had played a central role in advancing a series of laws placing California, not simply at the forefront of clean air legislation, but more important, placing significant restrictions on the use of fossil fuels in the state energy supply. Were these hard-earned gains to be undone?

As later reported by an high-ranking administrator in one of Cal EPAʻs agencies, Governor Schwarzeneggerʻs political leanings were clear before AB 32 was even signed into law:

“Governor Schwarzenegger and his staff were intent on delaying substantive work on climate mitigation [in order to protect] California industry - major Republican party donors - from any competitive disadvantage. Schwarzenegger wanted it both ways: to be a climate hero and to avoid alienating the business community. Likewise, the Administration made strenuous efforts to steer the draft legislation away from regulation and toward market trading. That put Schwarzenegger in direct conflict with Democratic leaders who insisted on ʻearly action measuresʻ and who strongly preferred direct emission controls. The latter is precisely why the Air Board was given the lead implementation role: it was world renown for adopting ambitious, technology forcing rules. The Administrationʻs counter proposal for a squishy, non-accountable, multi-agency implementation body was soundly rebuffed. The conflict boiled over once the bill was enacted.”

The early ʻtraitsʻ of Californiaʻs Global Warming Solutions Act would reverberate for years to come.