Late Monday night, California lawmakers approved a group of bills that extend the state’s landmark program capping greenhouse gas emissions. The news comes after months of rejected bills and aggressive negotiations by Governor Jerry Brown.

Before the vote last week, Governor Brown told lawmakers that the bill was “the most important vote of your life.”

“This isn’t about some cockamamie legacy. This isn’t for me. I’m going to be dead. It’s for you, and it’s damn real," he said.

Following the late-night approval on Monday, Brown tweeted: “Tonight, California stood tall and once again, boldly confronted the existential threat of our time. Republicans and Democrats set aside their differences, came together and took courageous action. That’s what good government looks like.”

It’s a huge win for climate advocates -- and also for cleantech companies in the state. The extension of the cap-and-trade program is a crucial economic market signal.

This says to the market, “We know where we’re going, and we can start to build on that objective,” said Steve Chadima, senior vice president of external affairs for the industry group Advanced Energy Economy. Chadima added, “We’re thrilled. This was our top priority for the year.”

SunPower CEO Tom Werner thanked Governor Brown and the California legislature for their hard work.

Billionaire Tom Steyer called passage of the bills “the next step in building the strongest possible program to protect our air, water, climate and economy.” Steyer also described Governor Brown’s leadership as deserving “huge credit,” as well as “brilliant and effective.”

“Give the master his due, please,” tweeted Steyer.

The details

California’s cap-and-trade program, enacted in 2013, has been celebrated as one of the most ambitious and aggressive in the world. It has been studied by China as that country experiments with its own carbon-trading framework.

But California’s program was set to expire in 2020 and needed to be extended. It also faced a variety of issues, like a lawsuit from the Chamber of Commerce (which was rejected by the Supreme Court) and auctions that had highly fluctuating degrees of participation. In addition, California’s cap-and-trade program needed to align with a recent bill that mandates a 40 percent cut in greenhouse gases below 1990 levels by 2030.

The bills, approved by the California legislature on Monday night, seek to address various pollution issues. The first, AB 298, extends the cap-and-trade program. That bill includes some changes meant to make the program work better, while also offering some concessions to industry stakeholders.

The second bill, AB 617, addresses local air pollution. Although the state has been decreasing its greenhouse gas emissions, local communities near refineries and other industrial sites have not benefited from better air quality.

The third part of the package is Assembly Constitutional Amendment 1, which banks the money raised through cap-and-trade auctions. It requires a two-thirds majority vote in both houses to spend the money. Currently, the allocations from auctions are determined by budget appropriations. The change could give Republicans more say on how the funds are spent.

Auction revenue

Beyond providing a clear market signal, the new cap-and-trade bill will provide a substantial amount of money for cleantech-related programs. Close to $3.4 billion has been appropriated by the legislature through state agencies to implement greenhouse reductions programs, according to the latest annual California Air Resources Board report

A quarter of the money in recent years has gone to high-speed rail projects, and another 35 percent has benefited disadvantaged communities, said AEE’s Chadima.

That leaves 40 percent of the funds “up for grabs,” he said.

According to the CARB report, auction money has funded 30,000 efficiency projects for homes and over 100,000 rebates for zero-emission and plug-in cars. The program has also funded electric buses projects and the “cash for clunkers" auto trade-in program.

Because the California state legislature took so long to pass a cap-and-trade extension, the current state budget did not address funding. Governor Brown originally wanted the decision made before the budget was determined, but he couldn’t get the deal done in time. As a result, the legislature and stakeholders will spend the next few months figuring out what programs will get money. 

There's already a waiting list for California’s electric-car rebate program, which is funded by cap-and-trade.

Previously, with cap-and-trade in jeopardy, quarterly auction results were mixed, because participants weren't sure if the program was going to continue. The extension will bring more long-term funding certainty for cleantech.