On 25 July 2017, Governor Brown signed the bill to extend the California Cap-and-Trade Program until 2030. As the LA Times reports, last week, the Californian State Assembly and the Californian Senate passed the bill with a two-thirds majority, garnering some Republican support, as well as support by many business and environmentalist groups alike. The legislation containing the cap-and-trade extension, AB 398, also gathered a two-thirds majority in the Assembly and Senate, protecting it from legal challenges.

Extending California’s cap-and-trade program was one of the foci of Governor Brown over the last months, as his last term as governor comes to an end in 2018. The passing marks a milestone for Californian climate policy as the continuation of the program has been an issue of political contention for some time. The program had been faced with legal uncertainty (resolved in April this year), concerns by some stakeholder groups that the program did not appropriately address environmental justice concerns, and less than expected revenue due to auctions not clearing.

In light of these and other challenges, prior legislative proposals contained significant departures from the existing program. Whereas AB 398 expresses a compromise including elements of prior proposals, e.g. a stronger focus on local pollution reduction, it maintains the main features of the current Californian cap-and-trade system.

The package consists of two bills: AB 398 extends and adjusts the cap-and-trade program, and AB 617, which targets local air pollution. Bill AB398 contains several changes to the program’s offsets, allocation mechanism, as well as a new price stability mechanism. Regarding offsets, the package stipulates a reduction of the admissible quota from 8% to 4% of an entity’s total compliance and requires that half of those offsets are generated in California.  Furthermore, it includes a new mechanism to limit price hikes and set a price ceiling.

The focus on local air pollution addresses concerns by the environmental justice community that the cap-and-trade program enables greenhouse gas emission reductions without necessarily reducing air pollutants. To alleviate this concern, the second bill, AB 617, includes several measures to address air pollution in disadvantaged communities.