The effectiveness of the state’s program directly hinges on careful implementation and oversight by a single entity: the California Air Resources Board, which constructed a sizable administrative infrastructure specifically for this program. Shifting market-based investment decisions to any government has always been historically tricky. Meanwhile, the complexity of any cap-and-trade program is a challenge to scaling up the program without reducing its effectiveness. So a critical element for California to maintain its environmental leadership position is that our cap-and-trade program must be efficient and not impose unnecessary energy costs on businesses in the state.
And one thing so far is clear: There is a big cost to business.
Money is being pulled out of the state’s private sector – a projected $2.2 billion – through this program. By sheer economics, that impact has to be reflected elsewhere in the bottom line of a business through cost-cutting in other areas such as jobs, reduced purchases or capital investments, reduced investment in new technologies, or reduced work hours or contracting.
And as businesses are paying, concerns are growing about where their money is going.
At the BizFed Institute forum, Callahan noted that Senate Bill 535 (by Sen. Kevin de Leon) requires at least 25 percent of the cap-and-trade funds be allocated to benefit disadvantaged communities.
But Callahan also noted that while Los Angeles County has more disadvantaged communities than anywhere else in the state, the process for distributing money gives no guarantee of funding by region. As a result, of the 54 affordable housing projects statewide asked to submit full proposals for cap-and-trade funds, only 13 are located in the five-county Southern California region that contains half of the state’s population.
How does that math work?
We applaud California’s leadership in reducing greenhouse gas emissions and being a global contributor of clean energy. But there must be a better way to balance California’s groundbreaking work without jeopardizing the private sector and ensure equitable distribution of funds being raised under our cap-and-trade program.
We all must keep asking Speaker Toni Atkins and the newly formed Strategic Growth Council for serious answers and, better yet, seek change in the outcomes. Cap-and-trade funds must go back to work where the needs are greatest. Sadly, that’s right here in our Los Angeles region.
Tracy Rafter is founding chief executive of the Los Angeles County Business Federation, an alliance of 142 business groups representing more than 273,000 companies that employ nearly 3 million people in the county.
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