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California Legislature

Companies would face tighter environmental restrictions in California under new cap-and-trade proposal

State Sen. Bob Wieckowski is working on new climate legislation. (Rich Pedroncelli / Associated Press)
State Sen. Bob Wieckowski is working on new climate legislation. (Rich Pedroncelli / Associated Press)

State Senate Democrats on Monday will announce a new proposal to toughen California's cap-and-trade program in hopes of providing a more dependable revenue stream and greater incentives for industries to clean up their operations.

The legislation, Senate Bill 775, would set a higher price for the permits companies are required to purchase to release greenhouse gas emissions, and it would eliminate the distribution of free permits, which are provided in limited quantities to help companies comply with cap-and-trade's requirements. In addition, companies would no longer be allowed to pay for offsets, or green projects such as forest preservation, to meet their obligations to reduce emissions.

The changes would likely increase the cost of complying with state regulations, and the new legislation would set aside some cap-and-trade revenue for rebates to Californians to balance out higher costs for consumer goods such as gasoline.

"We feel comfortable where this is threading the needle," said Sen. Bob Wieckowski (D-Fremont), the bill's author. Also backing the measure is Senate President Pro Tem Kevin de León (D-Los Angeles).

The legislation also includes a limit on how expensive emission permits can become, a provision intended to guard against the possibility of price spikes as the state moves toward its ambitious climate goals.

By restricting the potential for sharp fluctuations in the price of permits, companies can "plan and make the kind of investments they need to for a low-carbon economy,” said Michael Wara, a Stanford University environmental law professor who was one of several experts advising senators on their proposal.

Monday's announcement adds to the ongoing debate over the cap-and-trade program, California's most high-profile initiative for fighting climate change. Gov. Jerry Brown and supportive lawmakers are aiming for a two-thirds vote to extend the program to eliminate any legal uncertainty surrounding its future.

While the Senate measure deals primarily with how the cap-and-trade market functions, separate legislation from Assembly Democrats would modify the program so it also targets other pollutants besides greenhouse gases and improve public health.

Both bills will be advancing through various committees before reaching votes in the Assembly and the Senate. Brown has expressed interest in wrapping up the issue in June, when the state budget is due.

This post has been updated with an interview with a Stanford professor. The bill number has also been corrected.

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