Reed Smith Client Alerts

To achieve its goals of reducing greenhouse gas (“GHG”) emissions linked to global warming, California relies upon a number of programs and policies, including a system of capping total GHG emissions from regulated source, but allowing the trading of GHG permits or allowances between regulated parties. As this “cap-and-trade” system is only authorized through 2020, the state faced several options regarding how best to extend the regulatory program beyond 2020, but in a way that achieves other public policies, including protecting the health of individuals in communities close to sources of GHG emissions.

Legislative leaders have just voted to extend the cap-and-trade program via two bills, AB 398, which will extend the life of the program until 2030 and modify how the cap-and-trade market operates; and AB 617, which aims to address concerns about air quality in communities proximate to large stationary sources by increasing monitoring and imposing stricter penalties on large sources. This is a major victory for Governor Jerry Brown that included rare bipartisan support for mitigating global warming (while compromising on other important public policy issues). This article briefly summarizes the bills and some potential impacts.


California has set a goal of reducing the state’s greenhouse gas emissions back to 1990 emissions levels by 2020, and to 40 percent below 1990 levels by 2030 – despite increases in population and sources of pollution. To achieve these goals, the state partly depends upon its current “cap-and-trade” program, which: (a) allows entities to purchase GHG emission “allowances” from the state in quarterly auctions (or by trading allowances in a secondary market); and (b) utilizing credits generated from “carbon offset projects” (e.g., forestry projects constituting carbon dioxide “sinks,” methane capture from manure management programs at livestock facilities, etc.).