Gov. Brown and Democratic leaders offer plan to extend cap and trade, with aim for approval this week

After weeks of back-and-forth between environmentalists and business interests, Gov. Jerry Brown and legislative leaders introduced a proposal Monday evening to reauthorize California's cap-and-trade program, the centerpiece of the state's efforts to battle climate change.

The plan consists of two bills: Assembly Bill 398, which would extend the life of the program until 2030 and modify how the cap-and-trade market operates, and AB 617, which aims to address concerns about air quality in communities by increasing monitoring and imposing stricter penalties on polluters.

“The Legislature is taking action to curb climate change and protect vulnerable communities from industrial poisons,” Brown said in a statement.

Democratic leaders in both houses endorsed the plan. Senate leader Kevin de Léon (D-Los Angeles) said the package represents “California’s leadership on climate and air quality. Extending California’s cap-and-trade program will protect consumers and businesses alike from high energy costs, while reducing the greenhouse gasses and air pollutants choking our communities throughout the state.”

The proposal would make several significant changes to how the system operates, including giving the California Air Resources Board authority to set a ceiling on the price of carbon — which determines how expensive emissions permits will be — as a way to guard against price increases at the pump.

It would also decrease the amount of offsets — environmental projects that businesses pay for in California and throughout the country to ease the cost of complying with the program — and require that half of such projects take place in California, a mandate that doesn’t currently exist.

Free allowances, or permits to pollute — which are meant to keep California companies competitive with those in states without such regulations — would continue to be used to try to prevent businesses from polluting more outside the state. The overall allocation of these permits would decline over time, although some industries could get more allowances than they otherwise would have.

Brown is seeking a two-thirds vote on the cap-and-trade proposal, which would guard the program against potential legal challenges. The plan includes several provisions to lure Republicans, whose support could be pivotal for supermajority approval, including an extension of a tax credit for manufacturers and a repeal of a fire prevention fee, which primarily hits rural landowners. The GOP has long attacked the fee as an illegal tax.

The measure on air pollution would require a majority vote. The proposal, which aims to address concerns from environmental justice advocates, would require companies to retrofit their equipment to comply with the state's environmental goals.

“With its strong air quality provisions, this agreement ensures that Californians in underserved communities — and communities most impacted by air pollution — will receive the greatest benefit,” Assembly Speaker Anthony Rendon (D-Paramount) said in a statement.

The bills were introduced at the close of business Monday, paving the way for a potential Thursday evening vote, thanks to a new rule approved by voters requiring legislation to be publicly available for 72 hours before final action is taken.

The package does not explicitly say how the money from the cap-and-trade auctions would be doled out, but the legislation does offer a list of priorities, including projects that reduce air pollutants from stationary sources, such as refineries, as well as cars and trucks, and sustainable agriculture practices.

Revenue from the program is being used to pay for the bullet train, a pet project of Brown’s, and affordable housing, along with other programs to reduce greenhouse gas emissions.

The measures’ introduction caps off feverish negotiations that seesawed between environmental advocates and industry, including oil companies, agriculture interests and manufacturers. It remains to be seen whether the package will sufficiently appeal to business-aligned Democrats and Republicans without peeling away progressive Democrats who are wary of a deal too friendly to industry.

As a counterweight, the Democrats’ left flank sought the air quality measure, which would revive the effort to combat air pollution after a previous attempt sputtered in the Assembly last month.

Assemblywoman Lorena Gonzalez Fletcher (D-San Diego), who is part of the progressive faction, signaled Monday that she was on board.

“We're going to get a chance to extend Cap & Trade & pass some of the strongest air quality legislation in CA history!” Gonzalez Fletcher wrote on Twitter. “Count me in!”

melanie.mason@latimes.com and chris.megerian@latimes.com

Twitter: @melmason and @chrismegerian

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UPDATES:

10:21 p.m.: This article was updated with additional information about permits to pollute.

This article was originally published at 8:35 p.m.

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