California Senate Democrats want to put the brakes on a new program by Gov. Gavin Newsom’s administration that steers free pollution permits to oil refineries and other major polluters — and they’re using the state budget to force the issue.
In the spending proposal they released last month, the senators moved to block the program until the state funds a three-party climate deal the governor struck with the Legislature last year, an agreement they say Newsom is now breaking. They call their counterplan “Deal is a Deal,” signaling a standoff that could stretch through the summer.
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“We really need to stay to the deal,” said Sen. Eloise Gómez Reyes, a San Bernardino Democrat and chair of the Senate’s climate budget subcommittee.
At stake are billions of dollars earmarked for public transit, safe drinking water and affordable housing raised from climate market auctions. The Senate is also threatening to hold up many of Newsom’s own priorities, including funding for high-speed rail and wildfires, electric-car tax credits and a clean jet fuel subsidy.
At issue is a new incentive program created last month by the California Air Resources Board, which overhauled the state’s carbon market under pressure from Newsom and heavy lobbying by the oil industry. It offers free pollution permits worth as much as $4 billion to companies that pledge to invest in clean energy and efficiency initiatives, with half slated for the fossil fuel industry.
That program threatens to drain funds for a series of air quality, housing and transit programs that lawmakers and Newsom agreed to fund last year, when they extended the state’s carbon market through 2045, rebranding it “cap and invest.” The overhaul also puts up to $1 billion guaranteed to the Legislature for discretionary projects in jeopardy.
A climate bargain under threat
California’s carbon-trading program, launched in 2013, is California’s way of putting a price tag on greenhouse gas emissions responsible for climate change.
Last year’s late-session deal set a new pecking order for the billions of dollars the program raises by auctioning pollution permits.
Under the deal, high-speed rail gets $1 billion a year before many other climate programs are funded; another $1 billion annually is dedicated to lawmakers’ priorities.
Last in line are the programs that turn carbon-market money paid by polluters into tangible benefits for some of California’s most burdened communities: affordable housing projects near transit, cleaner buses and rail, safe drinking water, wildfire protection and neighborhood air monitoring.
Last month, following intense lobbying by the oil industry and ballooning gas prices, the air board adopted rules to cut the number of auctioned pollution permits drastically through 2030 with Newsom’s blessing. It also created a new incentive for oil and gas refineries and other industries investing in decarbonization.
“It’s unfortunate that the state of California empowers the oil industry to freak everyone out and adopt bad policies,” said Sen. Scott Wiener, a San Francisco Democrat.
