California Senate Democrats battle Newsom over climate funding

from Alejandro Lazo and Yue Stella YuCalMatters

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California Senate Democrats want to stop a new program from Gov. Gavin Newsom’s administration that targets free pollution permits to oil refineries and other big polluters — and they’re using the state budget to force the issue.

C cost proposal they released last month, senators decided to block the program until the state funds a tripartite climate agreement the governor made with the Legislature last year, an agreement they say Newsom is now violating. They’re calling their counterplan “A Deal’s a Deal,” signaling a standoff that could continue into the summer.

“We really have to stick to the deal,” Sen said. Eloise Gomez ReyesDemocrat from San Bernardino and chairman of the Senate Climate Budget Subcommittee.

At stake are billions of dollars earmarked for public transportation, safe drinking water and affordable housing raised through climate market auctions. The Senate also threatens to hold up many of Newsom’s own priorities, including funding for high-speed rail and wildfires, tax credits for electric cars and a subsidy for clean jet fuel.

It is a new incentive program created last month by the California Air Resources Board, which overhauled the state’s carbon market under pressure from Newsom and heavy lobbying from the oil industry. It offers free pollution permits worth up to $4 billion to companies that pledge to invest in clean energy and efficiency initiatives, half of which is earmarked for the fossil fuel industry.

That program threatens to drain funds for a series of air quality, housing and transit programs that lawmakers and Newsom agreed to fund last year when extended the state’s carbon market to 2045, rebranding to “restrict and invest”. The overhaul also puts up to $1 billion guaranteed to the Legislature for discretionary projects in jeopardy.

Climate deal under threat

California’s Carbon Trading Program, launched in 2013, is California’s way of putting a price on emissions of the greenhouse gases responsible for climate change.

Last year’s trade at the end of the session set new pecking order for the billions of dollars the program raises by auctioning pollution permits.

Under the deal, high-speed rail gets $1 billion a year before many other climate programs are funded; another $1 billion a year is earmarked for lawmakers’ priorities.

Last in line are the programs that turn carbon market money paid by polluters into tangible benefits for some of California’s most burdened communities: affordable housing projects near transit, cleaner buses and trains, safe drinking waterforest fire protection and neighborhood air monitoring.

Last month, after intense lobbying by the oil industry and ballooning gas pricesair board adopted rules to drastically reduce the number of auctioned pollution permits by 2030 with Newsom’s blessing. It also created a new incentive for oil and gas refineries and other industries to invest in decarbonisation.

“It’s unfortunate that the state of California is enabling the oil industry to scare everyone and pass bad policies,” Sen said. Scott WienerDemocrat from San Francisco.

Office of the Legislative Analyst projects the changes could reduce annual auction revenue for state climate programs from roughly $4 billion to $2 billion, which would eliminate community-focused programs.

Newsom spokesman Anthony Martinez said the changes keep the carbon market “resilient” while helping consumers and industry.

“This is not a retreat from climate leadership — this is how California continues to lead while the federal government backs down,” Martinez said.

The Senate is holding Newsom’s priorities hostage

Senate Democrats countered with a plan of their own. It would protect lawmakers’ control of $1 billion, then direct up to $2 billion to housing, transit, clean air and drinking water programs. Newsom’s priorities will move to the back of the line, meaning that if the climate fund brings in just $2 billion, Cal Fire, high-speed rail and other programs will get little or nothing.

“Why at this point … would we take away critical funding to build affordable homes in California?” Sen said. Jesse ArreguinDemocrat from Oakland and chairman of the housing committee.

Wiener said public transport should not have to fight for survival. “Every year, transit funding becomes a political football.”

Meanwhile, Assembly Democrats have been silent on changing the rules in their budget plan and have not offered any alternatives.

members of the assembly Jackie Irwin and Coty Petrie-NorrisDemocrats who chair key climate and energy committees supported the air council’s plan, saying the changes reflect the Legislature’s focus on affordability, including potentially more money on Californians’ electricity bills.

The governor and Legislature have until June 30 to agree on a budget deal before the start of the new fiscal year. But much of the climate funding tied to the negotiations is not bound by the deadline and could be distributed before the end of the legislative session in September.

Senate opposition threatens to hold up many of Newsom’s priorities.

One is his January proposal to spend $200 million on incentives for electric vehicles, $115 million of which would come from the climate fund. Senate Democrats have delayed negotiations on it, and negotiations could continues through the summer.

The Senate also rejected Newsom’s proposal tax credit for sustainable aviation fuelwhich Newsom claims will encourage the production of cleaner fuel and increase refinery jobs. The initiative, which would allow eligible manufacturers to pay less for state road repair funding, followed intense lobbying by oil refiner Phillips 66, the only company to publicly say it would take advantage of the credit.

Cleanup Tool or Subsidy for the Polluter?

The debate over climate finance centers on the idea that California could use its carbon market to loosen rules for some of the state’s biggest polluters.

Air regulators say the permits created through the new programme, the Manufacturing Decarbonisation Incentive, will only be given to companies that reduce their own emissions. They say the program has safeguards, including requirements to return permits if companies fail to comply. They argue the program will help preserve California’s refineries and other major industries while supporting investments in clean energy as President Donald Trump withdraws federal support.

“The cap-and-invest program has been updated to do what it was always intended to do: reduce pollution in a cost-effective manner, protect ratepayers and keep California businesses operating,” said Lindsay Buckley, board spokeswoman. “The program was never designed to maximize auction revenue.”

Critics of the new program see only a subsidy for polluters that does not guarantee a reduction in emissions. They argue that the new program could threaten California’s ability to meet its legally mandated 2030 emissions targets.

Several board members shared concerns. The overhaul passed 10-3, but only after the board requested additional review before launching the new incentive program.

The Senate plan would block climate finance spending unless the Treasury Department certifies that last year’s deal can be funded. It also would prevent the air board from handing out the new industrial permits unless state officials show they are in line with California’s climate goals, lower gas prices and leave enough money for threatened climate programs.

The budget battle could have political ramifications for Newsom as he defends his climate record beyond California, said Katie Valenzuela, a political advocate who focuses on environmental justice issues.

“If this (rule) goes forward and isn’t fixed, it’s a huge stain on his climate legacy,” Valenzuela said. “He is showing loud and clear that the most vulnerable residents who are most affected by climate change are not his priority.”

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.