Republicans Voting for Cap-n-Trade Say it’s Good for Business

Laurel Rosenhall

Reporter, CALmatters


Minutes after a bipartisan coalition of California lawmakers voted to extend the state’s landmark climate change policy for another decade, Democratic Gov. Jerry Brown stood in front of a bank of television cameras and compared the plan to one championed 30 years ago by GOP icon Ronald Reagan.

Back then, the Republican president helped negotiate the Montreal protocol to curb the release of gases that were destroying the ozone layer, persuading Republicans to join Democrats in approving “an insurance policy” that made economic sense in case environmentalists were right. Brown said the California cap and trade program the Legislature approved Monday night won support for a similar reason.

“This is an insurance policy,” he said. “I think the business community, to a great extent, sees that and agrees with where we’re going.”

Indeed, though major business groups have fought against California climate policies in the past, they backed the plan to extend cap and trade—a five-year-old marketplace in which companies buy and sell permits to emit greenhouse gases. Business support prompted some Republicans to favor the legislation as well, leading to a bipartisan vote that notches a win for Brown’s environmental agenda. In fact some progressive groups complained that the bipartisan negotiations had resulted in a monstrosity of a plan overly favorable to corporate interests.

That the Democratic governor celebrated its passage by invoking Reagan, the legendary conservative, signals the political surprise underlying the fight over how to stem global warming: the Republican case for cap and trade. It’s hard to imagine it on the national stage, with Republicans in Washington challenging the veracity of climate science and President Donald Trump pulling the country out of an international agreement to slow global warming.

But in California, a deep blue state leading the charge to curb climate change, the question for many Republicans isn’t whether global warming is happening—it’s what kind of policies are best to address it.

“I know for some, they’re going to look at this and say what in the world is going on? Why are Republicans talking about something like cap and trade?” Assembly Republican Leader Chad Mayes of Yucca Valley said following the vote Monday night.

“Well I’ll tell you, we believe that markets are better than Soviet-style command and control. We believe that markets are better than the government coercing people into doing things that they don’t want to do. We believe that businesses in California want to do the right thing, which is why we supported cap and trade.”

Most Republicans disagreed with him—the bill won support from just eight of 38 Republican legislators, and all but a handful of Democrats. The GOP divide revealed a split between business-aligned Republicans who favored cap and trade, and others who rejected it with a Trump-style message of economic populism.  Assemblyman Travis Allen, a conservative Republican from Huntington Beach who is running for governor next year, called cap and trade “a continuation of California Democrats’ attack on the working middle class and the poor of this state,” because it will cause fuel prices to go up.

But polluting industries that participate in cap and trade—oil companies, utilities, food processors and others—broadly agree that cap and trade will cost less than the alternatives. That’s because last year, California enshrined in state law a goal to slash greenhouse gas emissions by a whopping 40 percent between 2020 and 2030. Business groups fought hard against the bill establishing that goal because it will make operations more expensive for companies that send climate-warming gas into the air. But they lost that fight, and with the target now set, cap and trade appeals to businesses as a way to maintain some flexibility while they work to reach the collective emissions reduction goal.

“Once (the law) was in place and we had the goals that we must reach, it was all about finding the least expensive path for our economy,” said Gino DiCaro, vice president of the California Manufacturers and Technology Association, which opposed the plan to lower emissions last year but supported this year’s cap and trade bill.

Without cap and trade, many business groups said, the state could impose requirements for slashing emissions that would be more onerous on business, speculating that air board bureaucrats could cook up tougher regulations or a new carbon tax that would cost a lot more than cap and trade.

DiCaro pointed to research showing that costs would go up three times as much without cap and trade if the state came up with other ways to reduce emissions. The California Chamber of Commerce also supported the cap and trade extension, even though it’s been challenging the program in court for years. Spokeswoman Denise Davis said the Chamber has backed cap and trade since it was first envisioned in 2006 and that its lawsuit only focused on whether the auction component of cap and trade amounted to an illegal tax—an argument the courts rejected.

Even though most Republican lawmakers opposed the bill to extend cap and trade, those who voted for it argued that it was good for business. And by negotiating with Brown over many months, Mayes, the Assembly Republican leader, was able to extract key concessions that made a vote for cap and trade more enticing to some GOP lawmakers. The package of bills includes the repeal of a firefighting fee on rural homeowners that Republicans have long tried to scrap, a tax break for energy companies pursuing clean energy projects, the extension of a sales tax break for manufacturing companies, and a constitutional amendment that could give Republicans more say in 2024 on how to spend cap-and-trade revenues.

After the bill passed, the California Business Round Table—a consortium of the state’s largest employers—launched a series of social media ads thanking the eight Republicans who voted for cap and trade. But a bitter backlash was brewing among conservative Republicans, with one publicly calling on Mayes to resign.

Yet former Gov. Arnold Schwarzenegger, the Republican who signed the 2006 bill that led to the creation of California’s cap and trade, took to Facebook to thank Mayes “for following in the footsteps of great Republicans like Teddy Roosevelt and Ronald Reagan, who fought for his own cap and trade program to repair the ozone layer.

“I hope Republicans around the country can learn from the example of Assemblyman Mayes and his fellow Republicans that we can fight for free market policies to clean up our environment for our children at the same time we fight for a booming economy.”

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