Cap and trade is looking more and more like a tax

The veneer that keeps everybody from seeing that the cap-and-trade program is really just a tax is coming unglued.

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Last weekend, Mayor Eric Garcetti blasted out an email newsletter happily announcing that the Jordan Downs public housing development in Watts will be refurbished with money from the hidden tax you’re paying for gasoline and electricity.

Photo courtesy of Eric Garcetti, Flickr.

Photo courtesy of Eric Garcetti, Flickr.

Watts will receive a $35 million grant of cap-and-trade funds, which Garcetti said will help make “dreams come true” with “improved quality of life, a renewed focus on public health, and better access to affordable housing.”

The city said the work on Jordan Downs will include rebuilding “distressed” units, creating recreational programs, and opening “about 165,000 square feet for retail.”

The funds will also pay for solar panels, a food waste prevention program, and 10 electric buses.

The cap-and-trade money comes from the state’s Greenhouse Gas Reduction Fund, which takes in revenue from the sale of allowances to emit greenhouse gases. The allowances, sold at state auctions, are purchased by companies that generate electricity, refine petroleum, make cement and process food. The prices of those things in California now include the cost of buying these permits to emit greenhouse gases.

Other states don’t do this, but in 2006, to save the planet from global warming, California passed a law to require a reduction in greenhouse gas emissions. Under the mandate now set in current law, greenhouse gas emissions statewide must be 40 percent below 1990 levels by 2030.

To achieve this goal, the California Air Resources Board developed the cap-and-trade program. It puts a statewide limit on GHG emissions, and businesses that are under the law are required to have a permit for each ton of GHG emitted. Every year fewer permits are issued, and the minimum price is a little higher.

The money that’s paid to the state for these permits looks a lot like a tax. But a state appeals court ruled that it’s not a tax, because it’s not compulsory. Any business that doesn’t want to pay it, the court reasoned, could simply go out of business.

Now you know why other states don’t do this.

For California politicians, the cap-and-trade funds are like a gift from heaven. Gov. Jerry Brown is spending them on the bullet train, which is barred by law from being funded with a tax increase. And the Legislature can hand out the rest of the loot to local governments and organizations seeking funding for pet projects.

To help spend the money, lawmakers created a committee called the California Strategic Growth Council and tasked it with advancing the revitalization of local communities. The SGC oversees the Transformative Climate Communities program, which considers grant applications from community groups, like the Watts Rising Collaborative, an advocacy organization made up largely of departments of the city government.

So your city tax dollars are being spent to lobby for cap-and-trade funds that come from the extra money you’re paying for electricity, gasoline and anything that’s made or moved in California.

Some of the $35 million grant for Watts will be spent to connect residents with new jobs created by TCC projects, and in a hint of how the spending will work out in practice, the funds will also be used for a “displacement avoidance plan” which will provide resources to “educate residents about their housing rights.” In other words, gentrification.

But nobody’s admitting that. It’s all under the banner of fighting climate change.

The president and CEO of the Housing Authority of the city of Los Angeles, Douglas Guthrie, said the Housing Authority is “proud to be leading this transformational initiative to build a healthier Watts” with “greenhouse gas reduction strategies.”

It’s just a tax. All of California accounts for only 1 percent of worldwide greenhouse gas emissions, so cutting emissions to 40 percent below 1990 levels is an exercise in futility, if what you’re really worried about is climate change.

Politicians are not really worried about climate change.

The cap-and-trade program is turning into a tax for community redevelopment and for a plain old slush fund. It doesn’t help Earth’s climate, but it does real damage to California’s business climate. Cap-and-trade is a hidden tax on energy that is making everything in California more expensive than in other states.

The biggest challenge for regulators is to prevent the prices of the allowances from going up too sharply. It might bring the game to a crashing end if people noticed the economic damage they’re enduring. When the voters put two and two together, things can heat up fast.

Susan Shelley is an editorial writer and columnist for the Southern California News Group. Reach her at and follow her on Twitter: @Susan_Shelley.

This article was originally published by the Orange County Register


  1. If Mayor Eric Garcetti needs this money for his constituents he should
    allow the voters to address this issue with Bonds. It’s a city issue. Hell,
    it was the occupants of Watts that burned down the area.

  2. The Captive says

    Gee – Don’t those rioters need the funds of Soros? Isn’t he the guy that backs all the destruction of a city ?? Oh yeah Soros destroys and DOES NOT REBUILD AND SO the Mayor will sock-it -to -us! Jerry Brown has done this every one of his disgraceful years in DIS-SERVICE —cap-n-trade -means take our hard earnings to SCAM US!

  3. Time to replenish the fish in the barrel. Soma’ dem’ fish been jumpin’ outta’ da’ barrel.

  4. “Politicians are not really worried about climate change” All too true. Only worried about re-election. This does sound like another slush fund to be misused just like bonds.

  5. I’m so glad we moved out of Kalifornia. It gets nuttier every day…..

  6. Well, it should – as it always was a TAX!

  7. Gotta Gedada Displace says

    I just checked the Executive Summary, and the funds were supposed to be used for “limiting Greenhouse Gas Emissions”….. and projects were supposed to be approved by a panel on those grounds. How does apartment rehab fall into that category ? Did Garcetti just ignore that part, or is this JUST ANOTHER LIE WE ARE TOLD by State Government (hardly a surprise anymore! ) ????

  8. Does the Democat-majority legislature have to worry about the tax-paying voters that live in the quasi-communist state of California? I think not. We are powerless. The commie seeking majority can do whatever they want.

  9. This article should be REQUIRED READING for every California resident, voter, legal or not…
    If they became aware of, and fully understood the lies and chicanery that their elected officials are applying against them, the voting habits and patterns ofor this formerly great state would change QUICKLY…
    I miss my home state deeply, but after reading this article, it makes me realize that it’s going to take major changes, and probably major upheaval, before it’s going to be economically viable to consider moving back “home” to the 805…
    In the meantime, guess I’d better learn to adapt to colder winters and appreciate the snow that is falling outside…
    But I really miss playing golf in February…

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