The linchpin of California's climate change agenda, a program known as cap and trade, has become mired in legal, financial and political troubles that threaten to derail the state's plans to curb greenhouse gas emissions.
The program has been a symbol of the state's leadership in the fight against global warming and a key source of funding, most notably for the high-speed rail project connecting San Francisco and Los Angeles.
which has no feasible business plan and is violating every promise made to get voter approval
But the legality of cap and trade is being challenged in court by a business group, and questions are growing about whether state law allows it to operate past 2020. With the end of the legislative session in August, Gov. Jerry Brown, lawmakers and interest groups of all stripes are laying the groundwork for what could become a battle royal over the future of California's climate change programs.
Unless the state acts, "the whole system could fail," said Senate leader Kevin de LeĂłn (D-Los Angeles). "If that happens, we could lose an entire stream of revenue to make our communities more sustainable."
California received an unwelcome reminder of cap and trade's precarious situation last month.
The program functions by capping how much greenhouse gas can be emitted into the atmosphere and requiring companies to obtain permits, each allowing 1 metric ton of emissions. Those permits can be purchased at auctions or traded in a market, a system intended to provide a financial incentive for businesses such as power plants, oil refineries and manufacturers to reduce emissions.
By selling the permits, the state generates revenue that can be spent on other initiatives that reduce greenhouse-gas emissions, such as weatherizing homes and helping low-income residents buy cleaner cars. The bullet train is the biggest recipient, getting 25% of the cap-and-trade funds.
During the most recent auction in May, only 11% of the permits offered for sale were purchased.