What’s Behind the Cap and Trade Urgency Budget Proposal

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The governor’s budget calls for $2.2 billion in spending from revenue secured under the Cap and Trade law—but there’s a catch. The money would only be released if the legislature passes an urgency measure, which requires a two-thirds vote, thus confirming the Air Resources Board’s authority to administer the Cap and Trade program beyond its expiration date in 2020.

Why is an urgency vote necessary when four years remain before the expiration date? A simple majority vote could eliminate any uncertainty for the immediate future.

However, the governor has grander goals. In 2015, he introduced a plan to extend deeper greenhouse gas reduction targets to 2030. In support of achieving the targets, the Air Board offered up three potential plans that included a carbon tax, a business sector specific emissions program, and continuation of the Cap and Trade program.

The Brown Administration opted for the Cap and Trade continuation. The governor’s budget summary stated: “The Cap and Trade Program clearly represents the most flexible and cost‑effective approach to continue reducing greenhouse gases by allowing the state’s private sector to determine appropriate paths to meet emissions reductions over the next 13 years.”

But a shadow hangs over Cap and Trade in the form a lawsuit filed by the California Chamber of Commerce challenging the Cap and Trade law as a tax. The measure creating Cap and Trade passed with a majority vote. Under the state constitution, a tax requires a two-thirds vote.

The Air Board has battled the lawsuit claiming the revenue-raising feature of the Cap and Trade law is only incidental to the measure and should not be considered a tax. A lower court agreed but when an Appellate Court considered the case, judges had tough questions for those defending this interpretation of the law. A ruling is expected soon.

However, if the governor’s proposal sails through the legislature, the legal challenge to Cap and Trade is moot. Since an urgency measure needs a two-thirds vote, if the urgency measure confirming the Cap and Trade is passed, it also secures the required two-thirds vote for a tax increase.

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.