Cap & Trade Promises vs. Facts

Monday, July 24, 2017

Promise #1

“The Cap and Trade extension will maintain current industry assistance levels that help food processors affordably comply with California’s Greenhouse Gas (GHG) reduction mandate.”

Fact #1:  This is correct, but its importance is overstated. The food processors will continue to receive the same amount of free carbon allowances that they currently receive under the Cap and Trade program.

However, processors will still be affected by the inevitable price increases in electricity, natural gas, and transportation fuel that will result from the passage of AB 398 (Cap and Trade extension) – along with all other businesses within the agricultural sector.

For example, in Nevada and Arizona, the price of fuel, natural gas, and electricity are substantially lower than in California, so this bill will likely increase pressure on the food processors to leave California for these states, despite the free allowances they will receive under the program.

Promise #2

“The Cap and Trade extension requires that the California Air Resources Board (CARB) develop a mechanism to establish a price ceiling to contain the cost of the sale of allowances purchased by food processors to meet their compliance obligations and limit the increased cost of the Cap and Trade program to the agricultural industry and consumers.”

Fact #2:  The extension gives CARB total authority to establish the price ceiling for the price of allowances. The Legislature has no say in the process and cannot change them, other than by statute. There is no guarantee that those prices will be reasonable or affordable.

The original language for the Cap and Trade mechanism contained language about cost-effectiveness, limiting harm to the economy, etc., and it still sucked billions of dollars out of the state’s economy, added 11 cents to the price of gas, and 14 cents to the price of diesel.

Per the Legislative Analyst Office (LAO): “increased gasoline prices associated with Cap and Trade are an intentional design feature of the program.” Its primary goal is to change how consumers buy products, and to increase the price on items that are deemed “too carbon intensive.”

Promise #3

“The Cap and Trade extension will develop a Compliance Offset Protocol Task Force to create new offset opportunities in California, including in the agricultural industry.”

Fact #3:  Again, it creates a pathway to possibly create offset opportunities – there is no guarantee that this will help the agricultural industry. It simply says that if CARB, and other California bureaucrats choose to help agriculture they can… But it is not required.

In addition, offsets can only cover up to 6% of a covered entities obligations, so these will have a minimal effect on keeping costs down.

Promise #4

“Cap and Trade extension will improve accountability of the CARB by mandating additional oversight including an annual economic impact report by the LAO.”

Fact #4:  This “accountability” is simply a state report with no enforcement mechanism should waste, fraud, and abuse be uncovered.

The extension also does not require that CARB share their data and methods of analysis, so it will be impossible for anyone to independently verify their conclusions.

Promise #5

“The Cap and Trade extension priorities spending of money collected through the GHG Reduction Fund by creating a specific order of projects to prioritize, starting with reducing air pollutants from stationary and mobile sources and sustainable agriculture.”

Fact #5: This extension “prioritizes” spending of money to include agriculture only as the 3rd priority on the list.  It doesn’t unfortunately prevent future downgrading changes by the Legislature.

Worse, the only money directly appropriated in this bill is for High Speed Rail, siphoning 60% of total revenue. The next nearly $350 million is earmarked to cover the sales tax exemption, fire tax, the Workforce Development Board, and CARB for administrative costs.

Only after all that money is spent, the authority to spend rest of the money (assuming there is anything left over) is given to the Legislature to spend it based on a simple majority vote.

BOTTOM LINE:

The Cap and Trade extension legislation is vague on exactly how (and if) the agricultural industry will actually benefit.  Odds are this will end up like previous promises made to agriculture made by the Governor and the Legislature.  For example, the original $5 billion earmarked for storage in the water bond was cut nearly in half and didn’t go to the ballot until four years later.  The Cross Valley Canal funding was also cut nearly in half and stalled for over three years.

Governor Brown and the Democrat leaders of the Legislature have a history of making a lot of promises when they push through vague legislation that requires a 2/3 vote. Only after the dust settles, it is clear that the legislation is riddled with loopholes that allow them to come back later and undermine the agreements with legislation that only requires a majority vote.

You don’t have to be a psychic to know that Lucy is going to pull the football away right before Charlie Brown tries to kick it . . . every time.