Cap-and-Trade Deal Could Woo GOP Support, Anger Environmentalists

Updated with statement from the Governor's Office. 

In recent months, Gov. Jerry Brown has made clear that an extension of the state's cap-and-trade program will need GOP support.

"It's going to take some Republicans," he said at a California Chamber of Commerce breakfast last month.

He echoed the sentiment weeks later when he said Republicans were "the key" to extending the program (set to expire in 2020) that allows companies to buy and sell credits that allow them to pollute.

It now looks like Brown has gotten the Republican support he's been courting.

Lawmakers, staff members and outside stakeholders with knowledge of the cap-and-trade negotiations said Thursday that current draft language is friendly enough to businesses that it could draw in large numbers of Republicans -- and alienate some environmentally friendly Democrats.

Sources close to the Assembly Republican leader said as many as 15 members of the caucus could support the current proposal. The GOP caucus has been engaged on cap-and-trade talks for months, even though Republicans at the national level largely oppose cap and trade.

Republicans in California say that a market-based approach to reducing emissions is better than the alternative system of mandates.

The latest version of the deal, according to sources with knowledge of the draft, has many provisions that are friendly to businesses that traditionally opposed emission regulations.

One proposal would continue the practice of giving some businesses free pollution allowances. Another would allow companies to carry the pollution credits purchased in auctions before 2020 into the post-2020 system. This would lower the incentive for industries to buy allowances in the future, when prices are expected to rise.

The provisions have raised red flags among environmentalists, who question whether the system would be tough enough on polluters to help California meet its goal of reducing greenhouse gas emissions 40 percent below 1990 levels by 2030.

Brown and legislative leaders from the Senate and Assembly held meetings during the Independence Day holiday in an attempt to reach agreement on an extension, and negotiations remain in flux.

"The administration is working with everyone: legislators, environmental groups, utilities, industry, economists, agriculture and business organizations, the environmental justice community and many others," said Brown press secretary Evan Westrup in a statement. "Our goal is to reach an agreement and that means facilitating the exchange of ideas and language."

Last month, a group of Assembly Democrats sent the governor a letter urging him to extend cap and trade "in a manner that maintains environmental integrity."

This included an emphasis on reducing local pollutants in the air. That environmental justice priority was not included in the draft proposal, but could be worked out in a side bill.

One of the Democrats who signed the letter expressed dismay on Thursday at the victories that business-friendly groups were able to secure in negotiations. The draft exempts oil companies from any new state regulation outside of the cap-and-trade program.

"You're giving them a gift," the lawmaker said.

Reaching a compromise this week would allow a vote on Monday, before Assemblyman Jimmy Gomez, a Los Angeles Democrat, moves to Congress and takes a potential "yes" vote with him.

Finalizing an extension before the next scheduled allowance auction in August could also spur demand among businesses to buy credits, especially if they will remain valid past 2020. Revenue from the program funds a number of state programs, including high-speed rail, energy efficiency projects for low-income Californians and affordable housing.

A number of Democratic lawmakers said Thursday that they don't share that timeline, and instead hope to reach an agreement before a recess begins on Sept. 15