The battle over California’s cap-and-trade slush fund

California is nothing if not innovative. The state government found a way to pull $28 billion out of greenhouse gases and deposit all of it into a slush fund.

More specifically, the money was pulled out of utilities, oil companies, manufacturers and other entities that are required to buy permission to emit greenhouse gases. The California Air Resources Board, known as CARB, created the cap-and-trade program as a way of meeting the state’s self-imposed mandate to reduce greenhouse gas emissions to ever-lower targets by ever-closer deadlines.

The state makes money by auctioning a limited supply of permits (that’s the cap). “Market participants” buy and sell the permits, profiting from the demand (that’s the trade).

It was a temporary program that was set to end in 2020, but Sacramento enjoyed spending the money, so when “market participants” began to back away in anticipation that the permits would become worthless when the program expired, the legislature reauthorized cap-and-trade through 2030.

Now Gov. Gavin Newsom and legislative leaders are determined to renew it again. They say they’d like to get it done this year. Analysts agree that the “market” needs “certainty.”

But it’s not a real market. It’s government force. Companies must pay for permits or credits in order to operate in California, and that cost is passed on to wholesale and retail customers. The cap-and-trade program is a hidden tax on gasoline, diesel fuel, electricity and anything that’s made or moved in California.

Where does the money go? Into the Greenhouse Gas Reduction Fund in the state treasury, from which the $28 billion has been spent by lawmakers on things that supposedly reduce greenhouse gases.

For example: $405 million for “equitable building decarbonization”; $319 million for an “alternative manure management program” and “dairy digester research”; $3.64 billion for “low carbon transportation programs” including “voucher incentive” and “rebate” projects.

Tens of millions were spent for “equitable at-home charging,” “green schoolyards,” and “sea level rise.”

More than $4.8 billion was spent for “affordable housing and sustainable communities” by sending money to an assortment of agencies, authorities, operators, commissions, districts, developers and tribal governments.

The “transit and intercity rail capital program” soaked up $2.5 billion. Another $220 million went to the “zero emission transit capital program,” plus $124 million for the “climate ready program” and $280 million for the “self-generation incentive program.”

But the crown jewel of cap-and-trade spending was $6.46 billion to the California High-Speed Rail project, still described on the state’s “climate investments” website as a train that, when complete, “will run from San Francisco to the Los Angeles basin in under three hours at speeds capable of over 200 miles per hour, providing a clean alternative to driving or flying.”

That’s not happening, but the rail Authority “planted more than 7,100 urban trees since 2018” to compensate for its own carbon emissions.

Now, the racket may finally come to an end.

Before the November election, it appeared that the only potential hurdle to renewing cap-and-trade was the requirement for a two-thirds vote of the legislature to pass it. Why a two-thirds vote? Because in 1978, voters passed Proposition 13, which amended the state constitution to require a two-thirds vote to raise state taxes. The law that launched cap-and-trade didn’t get a two-thirds vote, but state courts held that it wasn’t a tax. Still, it looks so much like a tax that the legislature hasn’t wanted to take any chances since. Any legal challenge would reduce “certainty” in the “market” for permits, drying up the money.

That could happen anyway.

On April 8, President Donald J. Trump signed an executive order titled, “Protecting American Energy from State Overreach.” In it, he flatly accused California of “trying to dictate national energy policy.” He slammed the state government for “adopting impossible caps on the amount of carbon businesses may use, all but forcing businesses to pay large sums to ‘trade’ carbon credits to meet California’s radical requirements.”

Yes, that’s exactly what it’s doing. Either you want to fund an alternative manure management program or you don’t.

The executive order directed Attorney General Pam Bondi to “identify” state and local laws and regulations that burden the development of domestic energy resources and “that are or may be unconstitutional, preempted by Federal law, or otherwise unenforceable,” and then “expeditiously take all appropriate action to stop the enforcement” of them.

The president also directed Bondi to prioritize the identification of laws “purporting to address ‘climate change’” or involving “carbon or ‘greenhouse gas’ emissions, and funds to collect carbon penalties or carbon taxes.”

It won’t take long to identify the cap-and-trade program. A blindfolded monkey could pick it out of a line-up from that description.

California will go to court over this and fight with everything you have, starting with $25 million of your taxes already approved for legal fees. But it’s possible that the state will lose.

Do you know how much money that will save you?

Everything in California is more expensive because of laws, regulations, policies and programs “purporting to address ‘climate change.’” The higher cost of electricity and transportation fuels reverberates throughout the economy. Even trash collection fees are rising because of a ‘climate change’ law. SB 1383 (2016) requires separation and composting of food waste to prevent landfills from emitting a “short-lived climate pollutant.”

If Trump wins this fight, many if not all of CARB’s greenhouse gas regulations could be unenforceable. That could finally allow single-family housing construction to take place in areas where land is more affordable. Currently, suburban housing projects are made infeasible by CARB regulations that restrict “vehicle miles traveled,” otherwise known as driving to work, in the name of reducing greenhouse gas emissions.

Most California residents probably don’t even realize how much they’ve lost to this regime of central planning. That is, until they visit another state where gasoline, electricity, housing and food are calmly affordable, and jobs are not leaving.

Only in California does the government pretend a slush fund can stop climate change.

Write Susan@SusanShelley.com and follow her on X @Susan_Shelley