A bill making its way through the California Senate is dividing business groups. Assembly Bill (AB) 398 would extend the state’s cap-and-trade program, a market-based program aimed at reducing greenhouse gas emissions by capping them and requiring affected private entities to hold emission allowances to cover those emissions. Companies are allowed to buy and sell the allowances.


The bill passed the Senate Environmental Quality Committee on July 13 and was re-referred to the Committee on Appropriations.


AB 398 would also require the California Air Resources Board (CARB) to prepare a scoping plan for “achieving the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions” and to revise it every five years.


The cap-and-trade program was created under the California Global Warming Solutions Act of 2006 but has since been under fire, particularly by the private sector, with accusations of poor oversight and negative impacts to business.


AB 398 includes a number of requirements to address these concerns. It would establish additional oversight via the creation of an Independent Emissions Market Advisory Committee, which would annually hold a public meeting and report to CARB and the Joint Legislative Committee on Climate Change Policies about the performance of the cap-and-trade program.


The bill would additionally create a Compliance Offsets Protocol Task Force to guide CARB in “new offset protocols for a market-based compliance mechanism for the purposes of increasing offset projects with direct environmental benefits in the state while prioritizing disadvantaged communities, Native American or tribal lands, and rural and agricultural regions.”


Another provision requires that, until January 1, 2031, air districts would be prohibited “from adopting or implementing an emission reduction rule for carbon dioxide from stationary sources that are also subject to a specified market-based compliance mechanism.”


The National Federation of Independent Businesses (NFIB) announced its opposition to the bill on July 12. NFIB California State Executive Director Tom Scott indicated in a statement that the bill was rushed by Gov. Jerry Brown and the “Supermajority Party” behind closed doors, and he objected to a lack of outreach to small businesses.


“In a statewide survey to our small business owners in 2014, 91% of NFIB members said they do not support increased fuel costs as a result of California cap-and-trade policies,” Scott stated. “Whether the increased fuel costs are 45 cents per gallon under AB 398 or some higher amount under the alternative ‘command and control’ scheme by CARB, struggling small business owners have been clear: we must reject bad public policy and not settle for cap and trade lite.”


Scott also expressed opposition to AB 617, a companion piece of legislation that creates air emissions guidelines and reporting mechanisms.


The California Chamber of Commerce and the California Manufacturers & Technology Association (CMTA) each came out in support of AB 398 during the same week. The CMTA also supports AB 617.


“The balanced, well-designed cap-and-trade program in AB 398 is essential to reducing the costs of California’s greenhouse gas reduction goals established last year in SB 32,” CalChamber President Allan Zaremberg stated, referencing a revision of the 2006 global warming bill. “AB 398 will provide the least costly path to achieving our climate goals by extending cap and trade to 2030. The measure will help California maintain a healthy economy that produces well-paid, middle-class jobs.”


CMTA President Dorothy Rothrock stated the following in a press release: “CMTA supports AB 398 and AB 617 to continue California’s responsible leadership role by extending the cap-and-trade program, promoting a stronger economy through protecting manufacturing jobs and providing for local environmental improvements. We urge legislators to support this balanced package that provides compliance flexibility and reduces climate change policy costs on our state’s entire economy.”