I am late in posting this, but CALmatters has a great in-depth story on the side deals emerging in the implementation of California's cap-and-trade program. Last month the California Air Resources Board quietly approved regulations that sent some $300M worth of extra free allowances to the oil refining industry, as I wrote about previously. Over at CALmatters, Julie Cart and Laurel Rosenthall dug into the story and learned some remarkable things about the process that led to this outcome—go read the whole thing.
For context, free allowance allocation determines who pays and who doesn't in a cap-and-trade program. With many billions at stake, the public has an interest in knowing how decisions about free allocation are made. Last month's decision to increase the free allocation going to the oil industry also speaks to a broader issue at the heart of California's climate policy: whether the program will be stringent enough to deliver on California's ambitious 2030 climate targets. Free allocation itself doesn't determine program stringency, but the regulator's behavior in this episode sends troubling signals about the pressure that industry will bring to bear as the regulator begins to reform its post-2020 cap-and-trade program. As I told CALmatters:
How cap-and-trade gets implemented will help determine whether the state has a shot at reaching its 2030 climate targets[—]“an ambitious accomplishment that most people believe (the cap-and-trade extension) has just delivered,” said Cullenward, the economist. He noted that a $300 million “transfer of wealth from the general public to a special interest is a notable development, but I’m not claiming this particular episode will make or break the whole cap-and-trade program.”
If regulators take the same industry-friendly approach to the rest of its cap-and-trade operations, he added, “it will.”