Here's what you should know about this year's debate over California's cap-and-trade program

By Chris Megerian, Los Angeles Times. 

Battles over climate change policies have become an annual fixture at the state Capitol, and this year appears to be no different. Lawmakers are preparing to decide the future of the cap-and-trade program, the centerpiece of California’s battle against global warming.

Cap and trade is extremely complex, and so are the politics involved. Here’s a guide to the program and the brewing debate. 

What is cap and trade, and how does it work?

The program is intended to provide a financial incentive for companies to clean up their operations. The “cap” refers to an overall limit on greenhouse gas emissions, which becomes tighter over time. Before releasing emissions into the atmosphere, companies such as oil refiners and food processors must obtain permits. Some permits are given out for free by regulators and others are sold in state-run auctions. Revenue from the auctions is spent by California lawmakers on additional initiatives to further reduce emissions, such as on public transit. 

Permits are also bought and sold on a market — that’s where the “trade” comes in. In addition, companies can comply with the rules by investing in offsets, which are projects designed to reduce emissions by preserving forests or other strategies. 

The state law that provides the foundation for the program was enacted in 2006, cap and trade was approved by California regulators in 2011 and the first permits were auctioned off in 2012. 

Why are lawmakers debating this now?

State regulators at the Air Resources Board designed cap and trade to help California reduce greenhouse gas emissions to 1990 levels. Because the original law set a 2020 deadline to hit the target, there are legal questions about whether the program can continue past that date. Gov. Jerry Brown wants to clear that up by having the Legislature reauthorize cap and trade. 

The program is also facing a lawsuit over whether the permits that must be bought to pollute amount to an unconstitutional tax. Reaffirming the program with a two-thirds vote in both houses of the Legislature, the legal threshold for approving taxes, could help eliminate that threat. 

Two measures have been introduced so far, one more narrowly focused on extending cap and trade, the other seeking to refocus the state’s efforts on social justice.