June 1, 2017// Boston, MA – The San Francisco Chronicle published an op-ed titled “Extend Cap-and-Trade Program to Address Climate Change,” written by Trillium’s Director of Shareholder Advocacy, Jonas Kron.
The op-ed discusses California’s cap-and-trade program, regulation designed to reduce greenhouse gas (GHG) emissions across the state and increase investments in clean energy.
Read the full op-ed below or by visiting the San Francisco Chronicle website.
Extend cap-and-trade program to address climate change
It would not be California if we were not debating what to do next on climate change. The good news? Unlike the rest of the country, our deliberation centers on the best way to meet the ambitious greenhouse gas emission cuts we set for ourselves last year.
We are at a critical crossroads. Our current cap-and-trade program, begun in 2012, could end in 2020; a two-thirds vote of the Legislature to extend the program through 2030 is important. It will provide regulatory certainty and quell legal challenges. Further, cap-and-trade is key to ensuring that we ultimately meet our state’s new greenhouse gas emissions targets. Legislators are now deciding what kind of carbon pricing will be a part of meeting them. Some favor broad changes, including making elements more restrictive. Others favor starting from scratch.
The smartest path forward is to keep the main thrust of our cap-and-trade auction program in place and maintain complementary climate programs such as the low carbon fuel standard. Sure, a few well-thought-out tweaks make sense. California also must do more to address the very serious air pollution issues that disproportionally impact disadvantaged communities.
It is tempting to focus on isolated weaknesses of the current approach and to explore big reforms. But let us remember the significant economic progress our climate policies are driving:
- California’s climate programs are driving innovation in clean energy technologies, such as batteries and electric cars.
- The state’s per capita energy use and carbon intensity have fallen — even as gross domestic product, per capita income and the employment rate have grown. These investments are keeping down costs for consumers, lowering energy bills and providing alternatives to driving or reliance on conventional fuels.
California is a global leader on climate change policy. It is hard to overstate how important California is as a proof of concept, especially when the White House is turning its back on the opportunities created by the transition to a clean economy. Greenhouse gases do not respect borders. For our own sake, we have to continue encouraging the adoption of other systems and linkages to our own. Oregon and Ontario, inspired directly by our state, are close to joining our program, and Quebec has been a valued partner. Now the state is taking steps to engage China and Mexico in the absence of any federal leadership. If California stumbles now, it could have ripple effects globally.
Recommitting to the cap-and-trade program will help California continue to limit the effects of climate change, promote economic growth and provide regulatory clarity for industry and investors.
The cap-and-trade program also makes market sense because it reduces greenhouse gases at the least cost. Critics point to the price of the permits or “allowances,” which have stayed at or just above the price floor set by regulators, as proof of failure. But this is due in part to the positive impact that other regulations, including the renewable portfolio standard, have had on cutting emissions from oil refineries, food processors, power plants and other facilities. The latest auction of allowances demonstrated strong demand and generated nearly half a billion dollars for the state to invest in clean energy projects on top of another half billion dollars in direct rebates for utility ratepayers. As we raise our emissions targets, it is particularly important to allow the market to do what is the most cost effective, while continuing to innovate.
Our current approach results in quantifiable reductions in greenhouse gas emissions while allowing flexible compliance for businesses. Alternative proposals championing a carbon tax or a cap-and-trade program with a hard ceiling on allowance prices would not necessarily get us to those targets. If the state does not reach its targets because of an inadequate ceiling price, it could trigger something no business wants — resorting to additional command-and-control programs to reduce emissions.
Market certainty and regulatory continuity are critical for business. Companies and investors make the most progress on issues when the rules of the road do not change drastically, when they know what to plan for and where to make long-term investments. Policy certainty affects where investors like Trillium Asset Management put capital, but it also affects how the companies we are invested in will perform.
The current cap-and-trade system offers a flexible foundation that can be strengthened to generate greater emissions reductions over time and drive sustainable economic growth. As it set out to do.
Contact: Caroline White, Communications Manager, email@example.com