Gavin Newsom

Governor

Jared Blumenfeld
Secretary for Environmental Protection

June 18, 2020

Senator Bob Wieckowski

Senate District 10
Capitol Office State Capitol, Room 4085
Sacramento, CA 95814

Dear Chair Wieckowski and Members:

I am writing in reference to the Legislature’s cap-and-trade budget item. The Item consists both of a budget bill
appropriation and trailer bill language to direct the California Air Resources Board (CARB) to initiate a new,
expedited rulemaking to address perceived concerns with the performance of the cap and trade program.

It is clear that the economic and environmental circumstances that existed in 2017 when CARB last examined
the cap and trade programmatic underpinnings have changed dramatically. The advent of the COVID 19
Crisis, the collapse of the world oil market, and the results of CARB’s May 2020 Auction are all factors that
deserve careful consideration. However, now is not the time to rush into a comprehensive and complicated set
of technical program reforms.

At this time, California is navigating a set of critical economic and social challenges as a result of the global
pandemic. We do not know what the long-term impact will be on the state’s economy nor on its greenhouse
gas emissions trajectory, and within the next year we are unlikely to have resolution on those questions in time
to inform a comprehensive program review.

Furthermore, the opportunity to revisit program design questions is already available through the regular
update of CARB’s Scoping Plan process and associated rulemakings. That process is about to commence
and by state law must be completed by the end of 2022.

To be clear, achieving clarity around the operating assumptions and the relative weight given to our cap-and-
trade program is essential. The Board’s 2017 Scoping Plan designates cap-and-trade as responsible for
almost half of the reductions required to achieve California’s 2030 climate target, making it the single largest
driver of planned climate policy outcomes. In previous scoping plans, the program played a much smaller role
as a complement to a set of other measures that address electricity and transportation sector emissions.
Those regulations, in turn, have delivered significant reductions in climate and local air pollution that form the
backbone of state climate policy today.

While it would be unwise to initiate a comprehensive cap-and-trade program rulemaking in the immediate
future, I believe it prudent for CalEPA to work collaboratively with CARB to examine the program’s role in
California’s 2030 climate strategy as part of its broader 2022 Scoping Plan process.

Air Resources Board • Department of Pesticide Regulation • Department of Resources Recycling and Recovery • Department of Toxic Substances
Control • Office of Environmental Health Hazard Assessment • State Water Resources Control Board • Regional Water Quality Control Boards

1001 I Street, Sacramento, CA 95814 • P.O. Box 2815, Sacramento, CA 95812 • (916) 323-2514 • www.calepa.ca.gov
Chair Wieckowski
Page 2
June 18, 2020

In the context of this regulatory process, I will work with CARB’s leadership to ensure a comprehensive review
and consideration of the following:

• The extent to which the state’s climate strategy should rely on the cap-and-trade program reductions
relative to other approaches.

• An evaluation of potential changes to the cap-and-trade program that may be necessary to address the
long-term economic and emissions projections. As part of this process, the Independent Emissions Market
Advisory Committee, and the Legislative Analyst’s Office should be consulted to provide a mutually
agreeable set of technical metrics, while drawing upon the experiences of other cap-and-trade programs
around the world.

• An identification of areas where new legislation could further the successful implementation of California’s
climate strategy.

I look forward to working together with you and the Legislative Branch to ensure that California’s climate
leadership thrives during challenging times—and beyond.

Sincerely,

Jared Blumenfeld
Secretary
California Environmental Protection

Air Resources Board • Department of Pesticide Regulation • Department of Resources Recycling and Recovery • Department of Toxic Substances
Control Office of Environmental Health Hazard Assessment • State Water Resources Control Board • Regional Water Quality Control Boards

1001 I Street, Sacramento, CA 95814 • P.O. Box 2815, Sacramento, CA 95812 • (916) 323-2514 • www.calepa.ca.gov