Why are environmental justice advocates against carbon markets? California has it all.

Two new reports warn that California’s carbon market could hurt the state’s chances of meeting its ambitious climate goals.

Advocates for environmental justice call the reports the latest evidence of poor climate policy that market-driven solutions are making.

In A report that was released earlier in the monthA state-appointed panel known as the Independent Emissions Market Advisory Committee warned that California could miss its legally binding target to reduce greenhouse gas emissions by 40% below 1990 levels by 2030. This is largely due to the state’s complex cap-and trade market.

A Second reportUniversity of Southern California researchers published a Feb. 15 study that found communities with higher concentrations of people of color and households below the federal poverty level were less likely to see pollution reductions and to live near polluting facilities that participated in cap-and-trade.

These reports are the latest in a growing body that supports the idea that cap-and-trade programs can reduce global emissions but can also inadvertently perpetuate, or even worsen, environmental disparities by allowing polluting businesses, which are often located within Black and Brown neighborhoods, essentially to buy their way out. 

California’s cap-and trade program, which was established in 2013, offers incentives to private companies to reduce their greenhouse gas emissions. It makes it more expensive to release those emissions over time. 

The state sets an emissions limitor caprequiring companies to either keep their emissions within the limit or alternatively buy pollution “allowances.” As the cap becomes stricter, those allowances become scarcer and more expensive over time. The state will receive allowances that show that even though a company might not have reduced its emissions, they were still reduced elsewhere. It could be that some companies reduced their emissions below the threshold and then sold off or traded their additional reductions to other companies as credits. It could also be that a company invested in a carbon offset program that, at the very least, reduced emissions by planting trees in Amazon rainforest.

California requires that at minimum 35 percent of investments made from cap and trade revenue go to disadvantaged areas.

However, the trading component of the program has allowed some sectors to not only reduce their emissions, but in some cases, increase them, according to Amee Raval (research and policy director at the Asian Pacific Environmental Network).

According to state data, California’s total greenhouse gas emissions have fallen by at least 30,000,000 metric tons of CO2 equivalent in the past year since the state’s cap-and-trade program. The USC study shows that emissions from the oil-and-gas industry have increased, but they have fallen at the same. This finding is consistent with A 2018 studyPublished in PLOS Medicine. The study found that greenhouse gases emissions rose for 52 per cent of cap-and trade regulated facilities, from 2013 to 2015.

The USC study also tracked with ProPublica conducts a 2019 investigationAccording to a study, carbon emissions from California’s oil-and-gas industry have increased by 3.5 percent in the past five years since the cap and trade program was implemented. Oil and gas facilities also produce harmful pollutants like soot and nitrogen oxide, which are linked to an increased risk for asthma, cardiovascular disease, and premature death.

Raval said that this is especially important for environmental justice groups, which are often located close to these facilities. Raval cited the Chevron oil refinery at Richmond, California, as an example. The state’s single largest contributor to greenhouse gases is located in Richmond, California. According to census data, nearly 15% of households live below the federal poverty line.

“The reality is cap and trade is really letting Californias business polluters off the hook, concentrating pollution in working class communities of color and undermining the credibility of our climate policy,” Raval said.

California Air Resources Board, which manages state cap-and-trade program, stated in an email that it appreciated the work of USC researchers. However, it added that a separate analysis by the state reached a different conclusion.

This report, published Feb. 3 by the states Office of Environmental Health Hazard Assessment, found that communities of color and disadvantaged communitiesdetermined by the states screening toolwere the greatest beneficiaries of reduced emissions from facilities subject to the cap-and-trade program, resulting in a shrinking of Californias environmental disparities. However, the report noted that there are still large disparities and that more needs to be done.

The air resources board stated that California’s program was designed to anticipate low and high demand times for allowances, and had mechanisms in place to ensure that allowances don’t jeopardize state climate goals. Although this could mean taking some allowances off of the market, it has been strongly opposed by industry.

However, the Independent Emissions Market Advisory Committee stated in its report that allowance trading could prevent California from achieving its 2030 climate goal. 

One allowance equals one metric ton of carbon dioxide equivalent emission emissions. This is roughly equivalent to the amount of carbon dioxide equivalent emissions released by driving a car for 2,500 miles. According to the committee’s report, 321 million allowances were put into the markets in the period after 2020. That is equal to more than the emission reductions expected from this program over the next decade. The majority of those allowances come from forestry offset programs.

California’s largest companies accumulated allowances by purchasing projects that planted or protected trees. The idea was that these trees would help to sequester carbon from our atmosphere. However, climate activists have criticized this approach, saying it’s impossible to guarantee that offset projects will accomplish what they promise. California’s carbon-offset program includes 153,000 acres of forests.Last summer, wildfires caused extensive destructionHowever, companies can still claim these forests as allowances.

These reports have prompted activists to renew their calls for California officials to examine how cap-and-trade impacts California’s climate goals. The state’s top regulator stated Wednesday that California would not be making any changes to the program in the near future.

Environmental justice activists have long warned governments against relying too heavily on carbon markets to combat climate change. They fear they could undermine long-term emissions reduction goals, and increase the burdens on vulnerable populations. Instead, activists argue that governments should adopt stronger regulation that requires direct emissions reductions by industries before relying upon market incentives.

New York and New Jersey activists contributed to the demise of the Transportation Climate Initiative, a regional carbon market that would have placed a limit on tailpipe emissions and forced fuel companies to reduce pollution or buy allowances.

This program was designed to be similar to the Regional Greenhouse Gas Initiative. Its creators hoped to recruit New England states and Mid-Atlantic countries to participate. Washington, D.C., Maryland, Rhode Island, Connecticut, and Rhode Island all tentatively agreed that they would implement the project. The program was heavily opposed by a coalition o environmental justice organizations in New Jersey and New York. They claimed that the fuel companies would charge low-income drivers more for pollution reduction and less access to electricity.

People who have access to cleaner cars won’t be paying much for gas taxes. The gas taxes then go to fund cleaner cars and electric vehicle infrastructure. Melissa Miles is the executive director of New Jersey Environmental Justice Alliance. This is a problem if structural issues such as high front-end cost continue to be a barrier for low income people, who are still required to pay the entrance fee and are not able to access the benefits.

Connecticut, Maryland, Rhode Island and Rhode Island all pulled out last year of the proposal due to public pressure from environmental justice organizations and governors expressing concern about the program raising gasoline prices. The initiative was effectively dead in December.

Some environmentalists still believe carbon markets can work fairly, especially if they’re paired up with regulation that directs the revenue generated to vulnerable populations. For example A 2018 reportColumbia University’s Center for Global Energy Policy, and the Tax Policy Center both found that a carbon-tax alone can be regressive. However a rebate could offer low income households an average annual tax reduction of around 4.4 percent.

Washington passed its first carbon market legislation in the last year, following a decade of fighting among environmental justice activists. The Climate Commitment Act in Washington created what its proponents refer to as a cap-and invest program. It also includes a provision similar California’s that requires at least 35% of the revenue from the program to go to vulnerable communities and an additional 10% for tribal lands.

California activists are pushing state officials to spend those revenues on things such as installing solar panels in affordable housing, increasing energy efficiency programs, and increasing public transit and ridesharing access.

But those benefits don’t make up for the fact that pollution is rising in poor communities and California is on track to blow its climate goals, Raval said. She said that cap-and-trade will not achieve the emission reductions we need and that it is too risky to double down on a failing policy.

An earlier version of this article incorrectly described the penalties associated with California’s cap and trade. It’s the program’s allowances that increase in price over time.