COP 23 has been a banner event for subnational actors, and especially for California. Between events and breaking news, our EDF California team has enjoyed visiting informally with representatives from around the world.

In what could be the iconic decision of COP 23, negotiators in Bonn agreed to new future negotiation processes to “jointly address” a number of new agriculture topics, overcoming longstanding hurdles that had blocked progress on the topic in recent years.

As one of the earliest representatives of an international environmental organization working in China, I have witnessed the progress of environmental protection collaboration between the US and China in the past 20 years and witnessed many specific incidents that have given me a good understanding of the different roles played by each country and how they have changed over time.

Brazil’s climate change negotiators are trying to throw the best hope for at-scale finance for stopping deforestation under the bus to ensure a big payday for bogus carbon credits from Amazon dams and other Clean Development Mechanism (CDM) projects  -- benefitting the scandal-plagued national power company Eletrobrás at the expense of the Amazon.

Brazil’s climate policy theater: Brazil climate negotiators fight for carbon credit payout for scandal-plagued national power company Eletrobrás and Amazon mega-hydroelectrics, block carbon finance for ending Amazon deforestation.      Behind the headline-grabbing news about Brazilian political corruption, Brazilian climate change negotiators are busy pushing proposals that could seriously damage important new climate change agreements – […]

This week, signatories to the United Nations’ Framework Convention on Climate Change (COP 23) meet in Bonn, Germany to discuss implementation of the Paris Agreement.

By Alex Hanafi, Senior Manager, Multilateral Climate Strategy and Senior Attorney, and Soren Dudley, Program Assistant, Global Climate The first UN climate talks since the United States announced its plans to withdraw from the Paris Agreement start this week in Bonn, Germany. Chaired by the island nation of Fiji, the meetings are the second-to-last Conference of the Parties […]

This year’s global climate conference (COP23) is upon us. This blog post lays out what will be happening during the COP related to REDD+ in the negotiations and what we can hear about in the hallways and many side events.

en español  |  This morning California, Québec, and Ontario signed a linking agreement that officially welcomes Ontario into the Western Climate Initiative (WCI) cap-and-trade market. The announcement came after an inspiring Climate Week in New York where states, businesses, and individuals showed that despite Washington D.C going backwards, the U.S. will continue to make progress on […]

Clean-burning cookstoves powered by biogas help surrounding forests grow and regenerate, according to a new study by Columbia University scientists.

Strong results from the California-Quebec August auction released today reflect that the future of cap and trade is secure in California.

New policies the Brazilian president recently approved put at risk indigenous peoples’ rights to their lands, and could open the flood gates for Amazon deforestation, which has been rising dramatically in the past few years.

According to a report published today, Collaboration Toward Zero Deforestation: Aligning Corporate and National Commitments in Brazil and Indonesia, companies and governments are beginning to work together toward their shared goals of reducing deforestation.

California is stepping up to extend its landmark cap and trade program, address local air pollution, and push California businesses forward toward a cleaner economy.

California politicians are deep into negotiations over how to extend the backbone of the state’s climate policies, the cap-and-trade program. The Governor’s office and legislative leadership are nearing a compromise that can lock in the 2/3 vote that would provide the strongest legal foundation for a future cap-and-trade program and accelerate the state’s progress to […]

Major consumer goods companies that have pledged to eliminate deforestation from their supply chains need support from their local governments to accelerate and scale up the implementation of their commitments, according to analysis from Environmental Defense Fund

Every conversation I have with my Brazilian friends and colleagues these days starts off with a discussion of whose political crisis is worse. It’s a hard question. But Brazil’s President Temer has the chance to show a little real leadership June 19th if he decides to veto a blatant giveaway of a large swath of protected […]

By Quentin Foster

The California Legislature is in the midst of a critically important discussion right now: how can the state do more to clean the air for all residents and address climate change?

As a native of South Los Angeles with deep roots in the environmental justice community, I’ve seen first-hand that there’s still more that needs to be done to improve our air quality. At the same time, California is a longtime leader on climate issues, in large part due to its cap-and-trade program that’s successfully limited climate pollution.

Assemblymember Cristina Garcia’s bill, AB 378, though still a work in progress, would provide incentives for major greenhouse gas emitters to reduce localized air pollution, on top of extending a key tool to keep their carbon emissions below a certain limit.

Right now, AB 378 is the only bill in the California Legislature that is seeking to both improve air quality in the most impacted local communities and fight climate change globally. Here’s why we think the Legislature must pass it as soon as possible.

 How we should extend cap and trade

The question we must ask ourselves is not whether we should extend cap and trade – we should, as I explain next – but rather how we can extend it. Three things need to happen for California’s cap-and-trade program to be successfully extended beyond 2020:

1. The cap-and-trade program itself, which is succeeding in its goal of reducing carbon emissions, should be strengthened. This includes ensuring jobs are created across California neighborhoods – an issue the Legislature is working to address in other proposals – as well as better meeting the needs of rural communities.
2. Air quality concerns in California’s environmental justice communities must be addressed. There are many suggestions of how this can be done, but this public health issue cannot be ignored.
3. Cap-and-trade should be passed with a supermajority of votes (2/3 of both the state Assembly and the Senate) this session. That will provide it the greatest legal certainty in a post-2020 program, and inoculate cap and trade from further “illegal tax”-type challenges.

Why we should extend cap and trade now

The best way to continue California’s climate leadership and successful climate policies, is for the Legislature to extend cap and trade beyond 2020 this year with a 2/3 vote.

EDF is advocating for this extension because California’s cap-and-trade program:

• Provides the certainty needed for a strong and stable climate program. Eliminating post-2020 uncertainty by voting on a cap-and-trade extension this year limits market volatility and creates greater price and revenue predictability. This in turn helps local businesses plan investments, hire new employees, and adopt the next groundbreaking technology.
• Demonstrates that protecting the environment need not come at the expense of economic growth. California has added over a million jobs since cap and trade launched in 2013, far surpassing the national average. This includes blue-collar jobs in parts of the state plagued by high unemployment. California has also grown to be the sixth largest economy in the world.
• Reduces greenhouse gas emissions. California is on track to meet its 2020 target of reducing these emissions to 1990 levels. Our 2030 goal is even more ambitious – 40% below 1990 levels – and to be successful we need to start aiming for that target now.

Remember why clean air and a healthy climate matter

There will be important policy to discuss in the coming weeks, but for now let us remember why we are pressing forward on climate and clean air legislation in the first place.

California has many communities that suffer disproportionately from poor air quality caused by major emitters. As someone who grew up in South Los Angeles, I understand the impact dangerous air pollution has on daily life. Like much of San Joaquin Valley, many of California’s most vulnerable communities struggle with some of the worst air quality in the country. More must urgently be done to deal with this public health crisis.

At the same time, all of California, and indeed the world, are facing the unprecedented threat of global climate change. This demands immediate and prolonged action, especially now.

That’s why we must continue California’s renowned climate leadership and pass – as soon as possible – legislation like AB 378 that can provide solutions for both local air pollution and global climate change.

By Erica Morehouse

Tower Bridge in Sacramento. Photo: public domain via pixabay.

Auction results from the May California-Quebec carbon auction showed increased demand after a California Court of Appeal upheld the legality of California’s auction design last month.

These auction results should send a clear message to legislators that California has a strong carbon market design that can weather legal challenges and the inevitable bumps of the political process.

They also indicate it’s high time to extend, adapt, and strengthen the cap-and-trade program as the backbone of California’s effort to meet its ambitious 2030 target – something the California legislature has an opportunity to do by June 15 in concert with the governor’s budget.

Results from the May 16 auction

• The auction offered more than 75 million current vintage allowances (available for 2017 or later compliance) and all of them sold at a price of $13.80, 23 cents above the minimum floor price. This is the first time the auction has cleared above the floor since November of 2015.
• Allowances held by the utilities, Quebec, and ARB sold with over $500 million expected for California’s Greenhouse Gas Reduction Fund (GGRF).
• Almost 10 million future allowances were offered that will not be available for use until 2020 or later; a little over 2 million of those allowances sold. This is significantly higher than the 600,000 that sold in February but future allowances tend to have the most variability in demand.

Demand increased significantly from February, but why?

1. The market has clearly reacted positively by increasing demand in the wake of the Court of Appeals ruling. The appeal to the California Supreme Court and uncertainty about cap-and-trade’s future after 2020 may still be impacting market behavior, however.

2. Regulated businesses need a certain number of allowances to cover their emissions. Demand for allowances is in part driven by this simple reality, and since businesses have been laying low the last few auctions, it makes sense they would need to buy allowances this quarter. Economist Chris Busch describes why these “market fundamentals” led him to predict that at least 50-65 million allowances would be sold in this auction.

3. The stabilizing forces built into California’s program prevent big price swings when the market reacts to new developments. We can see this through California’s private secondary market, which shows daily allowance prices, and acts as a kind of barometer for how and whether the market is reacting to particular events. For example, after the California Court of Appeal on April 6 upheld the legality of California’s auction design, prices on the secondary market went up by 54 cents. When the California state senate on May 1 introduced SB 775, which would have overhauled the current cap-and-trade program and eliminated the auction allowances after 2020, the market dipped by roughly 20 cents – but recovered May 10 after the bill did not come up for a vote as anticipated. This means price shifts have been very small – mostly less than one dollar.

What will happen in the auctions if the legislature extends the cap-and-trade program?

An extension of the cap-and-trade program would lead to more robust demand for allowances — leading to a rising allowance price that better reflects the cost of a ton of carbon pollution reductions, taking into account the 2030 target that was put into law last year. With the price likely rising above the floor, we would expect to see future auctions being fully subscribed — translating into significantly more revenue for the GGRF to invest in projects that reduce carbon pollution.

Some observers have painted a dire picture of allowance prices spiking overnight. But that’s not how we’ve seen carbon markets behave in the past — and there’s no reason to think it will happen now. Instead, we’d expect a gradual strengthening of the allowance price over time, as compliance entities weighed the current price of allowances against the anticipated cost of reducing emissions in the future as the cap becomes more ambitious.

What’s more, the system already has a number of design features in place to protect against such a surge in prices, including offsets, the ability to draw on allowances “banked” from previous years, and a reserve pool of allowances (the “allowance price containment reserve”) that would be released into the market if prices rise high enough.

The governor is pushing hard for a deal on cap and trade by the budget deadline of June 15, so I’m hopeful the next auction will give us much to celebrate.

By Erica Morehouse

(Source: cropped photo from Flickr/ Zoe-Rochelle)

Today Senator Bob Wieckowski, supported by Senate President Pro Tem Kevin de Leon, proposed what amounts to a complete overhaul of California’s cap-and-trade program after 2020 in amendments to SB 775.

Pro Tem de Leon in particular has been a tireless champion of effective climate policies that are benefiting California’s communities and making the state a global leader on climate action. California would not be where it is today without his leadership especially on investments in disadvantaged communities and strong renewable and energy efficiency targets. This particular proposal, however, contains provisions that risk undermining the enormous progress the state has made.

Rather than scrapping the current system and starting over with an unproven approach, the state should build on success, keeping what is working well while strengthening the program by doing more to address local air pollution and environmental justice.

With President Trump seeking to take the country in reverse, California’s leadership is needed now more than ever. We can – and must – forge a post-2020 program that benefits communities in the state while leveraging progress here at home to spur greater ambition globally.

What’s at risk in this bill?

We still need to do a full assessment on the language of the bill, which was amended today on the senate floor, but we know certain key policies are at risk:

• Setting a hard ceiling on allowance prices, without any provision to ensure that California would meet its climate targets if that price ceiling were exceeded, opens a loophole that could undermine the program’s environmental integrity and California’s climate leadership. While the specific price ceiling envisioned in the bill is high enough that it may not be triggered, it represents an approach that is counter to the signature feature of the cap-and-trade program: the guarantee that California will meet its emission target.
• This price ceiling also supplants a carefully designed cost-containment system that has operated effectively and works in harmony with California’s environmental goals. For example, this bill would prohibit firms from banking allowances, denying them a key source of flexibility that allows them to reduce emissions at the lowest possible cost over time. The bill would also ban the use of offsets, which help California achieve high integrity, hard-to-reach reductions outside the cap while keeping costs under the cap in-check and extending California’s climate diplomacy.
• This bill could put California’s existing and future partnerships and linkages at risk by overhauling California’s approach to cap-and-trade and then asking partners to quickly fall in line. International linkages strengthen California’s leadership position and allow the state to leverage its program to spur greater ambition globally. Turning inward now would cede global leadership just when the world needs it most.

Today’s proposal is just one step in the complex legislative process, not a final bill proposal. Decision makers must balance many policy priorities as they navigate how to extend California’s cap-and-trade program. We believe there is plenty of room to adapt and strengthen California’s policy package while hewing to the framework that has served California well in reducing carbon pollution so far.

How California can chart a path to a strong cap-and-trade extension

California’s cap-and-trade program is working to bring carbon pollution down while the economy thrives. Even with this success, we recognize California needs to be doing more to address the very serious air pollution issues in local, environmental justice communities. EDF is committing to working on this with legislative leadership and our partners to ensure that the air is safe for all Californians to breathe wherever they live, while recognizing that climate policy – which affects issues as serious as our access to water – is critical to our continued future.

California needs policies that – in addition to improving local air quality – will continue to build on the successful reductions of GHG emissions; secure national and international partnerships vital to the state’s progress as a climate leader; and continue to support strong economic growth.

Rather than a wholesale change of a program that is meeting its goals, we should preserve what’s working and strengthen the parts that aren’t doing enough by designing and implementing policies that will directly improve air quality, especially in environmental justice communities.

This Senate bill comes as Governor Brown is urging the Legislature to pass an extension through the budget process with a two-thirds vote, and after two proposals introduced into the Assembly on how to extend the cap-and-trade program.

It is important that the Senate has now entered this debate and is recognizing the importance of passing a cap-and-trade extension with a supermajority vote. EDF looks forward to working with Senator Wieckowski, President Pro Tem de Leon, Assembly leaders, the Governor, and other stakeholders as California charts a path to a strong post-2020 climate policy.

With the Trump Administration abandoning its leadership role on climate at home and on the international stage, it is more important than ever that California continues to model successful climate policy that ensures that the state will meet its ambitious carbon pollution reduction targets, while promoting better local air quality and supporting a thriving economy.