California’s leadership on climate change

California Capital building in Sacramento

Later today, California’s Senate will vote on new laws to tackle climate change, including an extension to its successful cap-and-trade programme until 2030.

It is expected to be a close call with the new Bills needing some support from Republican lawmakers.

Bill AB 398 was first introduced in February by Democrat Assembly Member Eduardo Garcia, with the support of California’s Governor, Jerry Brown. It now has the explicit support of other members of the Assembly and Senate.

It would extend the cap-and-trade programme beyond its current duration by 10 years until 2030.

The programme took effect in early 2012 with the aim of helping to achieve California’s goal of reducing its annual emissions of greenhouse gases by 2020 to the same level as in 1990. The cap has been reducing by about 3 per cent each year since 2013.

According to the latest figures, California’s total emissions in 2015 were about 2.2 per cent higher than in 1990.

More than $4 billion had been raised as of 31 December 2016 from the sale of State-owned allowances that have been deposited in the Greenhouse Gas Reduction Fund.

The new extension would increase the chances of California reaching its goal of reducing its annual emissions of greenhouse gases by at least 40 per cent by 2030 compared with 1990. This is the same as the target in the collective ‘nationally determined contribution’ to the Paris Agreement by the 28 Member States of the European Union.

The cap-and-trade programme has faced opposition from some lobby groups including the California Chamber of Commerce.

In April, the State’s Third District Court of Appeal rejected the Chamber of Commerce’s claims that the cap-and-trade programme was an illegal tax.

California’s cap-and-trade programme is widely regarded as successful because its design has taken into account lessons from older schemes, such as the European Union Emissions Trading System (EU ETS), by including both a price floor and ceiling, for instance.

The current carbon price in the California cap-and-trade programme is about $15 per metric ton of carbon dioxide.

One recent analysis suggests that the average carbon price could reach about $73 per metric ton by 2030.

This would be in line with the recommendations of the High-Level Commission on Carbon Prices, the final report of which in May concluded that the explicit carbon price level that would be consistent with achieving the goals of the Paris Agreement would be $40-80 per metric ton by 2020 and $50-100 per metric ton by 2030.

The report of the Commission, which was co-chaired by Professor Nicholas Stern and Professor Joe Stiglitz, stated: “A well-designed carbon price is an indispensable part of a strategy for reducing emissions in an efficient way. Carbon prices are intended to incentivize the changes needed in investment, production, and consumption patterns, and to induce the kind of technological progress that can bring down future abatement costs.”

It also noted: “Efficient carbon-price trajectories begin with a strong price signal in the present and a credible commitment to maintain prices high enough in the future to deliver the required changes”.

If the new cap-and-trade legislation is passed, it will be another example of significant leadership by Governor Brown, who has criticised the confused speech by President Trump in which he declared his wish to withdraw the United States from the Paris Agreement.

In June, Governor Brown was named as Special Advisor for States and Regions by Fijian Prime Minister Frank Bainimarama ahead of the 23rd session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, to be held in Bonn, Germany, in November.

Earlier this month, Governor Brown announced that a global summit on climate change would be held in San Francisco next year.

And he followed it with the launch, jointly with Michael Bloomberg, of America’s Pledge on climate change, a new initiative to compile and quantify the actions of States, cities and businesses in the United States to reduce their greenhouse gas emissions in line with the goals of the Paris Agreement.

Few people would disagree that the State of California, the economy of which would be ranked the sixth biggest in the world if it were a country, is demonstrating that federal inaction in Washington DC on climate change does not extend throughout the United States.

 

Bob Ward is policy and communications director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science.