In an exclusive guest feature for CaliforniaCarbon.info, policy expert and founder of Tradesman Advisors, Jon Costantino, provides a status check on California’s road trip to carbon pricing.

With Memorial Day coming up and the memories of road trips past coming flying back, one question that is always asked during long tortuous road trips is stuck in my head: “Are we there yet?” This question can be repeated several times on any expedition and seems to come up both the when the trip is going well, and when there are setbacks along the road. It is truly one of the classics. Even though this question can be sincerely generated by a 4-year old, it can also be applicable to California’s decade-old effort to put a price on carbon. California’s journey to an irreversible, economy-wide, behavior changing carbon price has been filled with as many twists and turns as that winding back mountain road. So I am asking, are we there yet?

California’s GHG reduction push really started without thinking about a price on carbon. At this time, Governor Gray Davis was driving the bus and the “Pavley” bill he signed was a traditional legislative mandate requiring good old command and control environmental regulations. The fight over implementing this regulation lasted for years. Though it was eventually won by the State, the idea that California could achieve large-scale climate goals by regulating your way there, sector by sector, basically died in the courtrooms fighting over AB 1493. So not there yet, in fact, California still needed to change drivers, and add another big bill.

By the time Assembly Member Pavley’s next big GHG proposal, AB 32, was in final form (2006) it had authorized the use of “market mechanisms” and now Governor Schwarzenegger was in the driver’s seat. The California Air Resources Board (ARB at the time, but officially known as CARB today) took that opportunity and ran with it under the encouragement of the Governor’s Office. The idea of a price on carbon was officially made public on June 26, 2008, with the release of the Draft AB 32 Scoping Plan. (I wasn’t kidding about “decade-old” effort. The 10-year anniversary is coming up in about a month.) Though that document was filled with ideas that would eventually lead to myriad regulations intended to change the world’s 5^th largest economy, it was a seminal document because it made the initial statement that California wanted a carbon market and that a real price would be put on GHG emissions within the state. We were getting closer, but still were not there.

It would take another five years, and another change in Administrations, before that “price on carbon” thought bubble became a reality. On January 1, 2013, under the oversight of Governor Brown, GHG emissions from several hundred California industrial facilities had a measurable cost associated with them. Two years later transportation fuels joined the price party. This newfangled price on carbon secured additional revenue for the state to spend, and also another round of litigation that didn’t end until last year. So surely when the California Supreme Court didn’t take the case, California’s price on carbon was certainly secure?

Well, not exactly. Depending on your read of AB 32, it may have expired in 2020 (or at least the piece putting a price on carbon, the market). So along came SB 32, “Pavley’s last stand”, and then AB 398, which explicitly authorized the market at least through 2030. So we must definitely be at the point where we can say California has solid and robust price on carbon, right? Now any governor thinking of flipping a U-Turn is not only making a policy decision, but also multi-billion-dollar budget decision. California certainly has a stable price on carbon, right? Well, a funny thing happened on the way to Grandma’s house, California ended up with several markets with different prices on the same pollutant. The “market” is actually bigger than just Cap and Trade.

California now has several markets that put a price on carbon directly or indirectly, including: The Low Carbon Fuel Standard, Cap and Trade, Renewable Portfolio Standard, and the Zero Emission Vehicle mandate. These regulations place an economic value lower carbon impacts and therefore a price on carbon is baked in. In addition to these credit-centric program, there is a permeation of programs to work with the concept that GHG emissions have a cost and therefore there is value in reducing them—Electrification of the Ports, Transit, and buildings are just one additional set of policies based on this implicit price of carbon. There are scores more.

CARB is currently securing amendments to the two most transparent carbon markets—Cap and Trade and the LCFS. Now in 2018, after 10 years of tumult, anybody who doesn’t understand that turning back on California’s carbon price journey would be an extremely difficult, if not impossible route to cover. This includes the next Governor who gets behind the wheel and starts the next phase of this trip in less than eight months.

Jon Costantino oversaw the development and publication of the original AB 32 Scoping Plan when he served as Climate Change Planning Manager at the ARB. He is currently the owner and principal at Tradesman Advisors in Sacramento. Tradesman Advisors provide West Coast regulatory consulting and advocacy for clients in the areas of climate change, clean energy and other environmental issues. Mr. Costantino can be reached at (916) 716-3455, or jon@tradesmanadvisors.com.