No cap-and-trade for Colorado, and why exactly not?

by Allen Best

From Big Pivots 41, July 9,2021

Given his background as a business entrepreneur, you’d think that Gov. Jared Polis would be chummy with the idea of cap-and-trade or some other form of carbon pricing. Such mechanisms tell the market that this is the problem, now you figure out the most inventive way to solve it.

He is not, as he made abundantly clear—again—last Friday in an executive order that forbids state agencies and employees from working on any state-based, economy-wide cap-and-trade programs. “Such programs have been neither developed nor authorized under Colorado law and are contrary to the position of my administration,” he wrote in the order.

This echoed his remarks in February after SB 21-200 was introduced and proposed to erect hard caps on emissions. He issued a letter and also gave an interview to the Colorado Springs Gazette.

The Air Quality Control Commission last year heard from environmental groups and at least two legislators, Sen. Faith Winter then House Speaker KC Becker, about the need for hard limits on greenhouse gas pollution. Hard caps, they said, are the only way for Colorado to ensure it meets its greenhouse gas reduction targets identified in a 2019 law, including a 50% economy wide reduction by 2030 and a 90% reduction by 2050.

The AQCC took their arguments under advisement.

In his executive order, Polis acknowledged that economy-wide cap-and-trade programs may have merit, depending on the details, at the federal or international level. But, he went on to say, “it is not an appropriate policy for Colorado.”

He went on to note that the many bills adopted in the 2021 session were part of the legislative priorities outlined in the Colorado GHG Reduction Roadmap that was adopted in January.

Polis also pointed out that his administration—via the Colorado Energy Office—has secured commitments from the electrical sector to reduce emissions 80% by 2030 and the state has adopted zero-emission vehicle standards. Too, there have been historic oil-and-gas reform bills (with more rulemaking scheduled at the AQCC this year).

Polis on Friday signed the compromise bill, HB21-1266, that emerged after SB-200 died. It’s a lengthy bill, 45 pages, triple most laws. It’s devoted to environmental justice but also to pollutants. Ironically, it does include a provision for collection of fees to administer programs based on levels of emissions.

During the legislative session, there was much pushback against Polis. He was being accused of all talk and no walk on climate change.

After the bill signing, those who work with Polis and his administration were far more restrained. Sen. Faith Winter, a prime sponsor of SB-200, told the Denver Post she believes Colorado can still meet its goals without cap-and-trade and believes that Colorado’s legislation will serve as a national model. She also said more should be done, especially in the transportation sector.

Western Resource Advocates’ Erin Overturf, a key figure in creating policy designs adopted by legislators, had been a strong proponent of hard cap on emissions. But when I spoke to her hours after the governor’s executive order was issued, she didn’t directly criticize the governor. She was more oblique.

“Goals are not enough, and we need to be taking concrete steps to achieve those goals,” she said. She credits state legislators with pushing forward a strong agenda.

I’m guessing that Polis was mindful that he has to represent the entire state—and if Colorado has trended Democratic in recent elections, only three years ago Republicans had veto power in the Legislature.

Patrick Cummins, senior policy advisor at the Center for the New Energy Economy, acknowledged the muddled politics of Colorado during a webinar conducted several days prior by the Colorado Local Science Engagement Network.

Developing and implementing such programs is “very challenging,” he said. “I would observe that that the issue is not really the benefits or the efficiency or inefficiency of the program. The issue is really that these are the types of things that jurisdictions implement when they are really serious about driving down emissions. That’s a high political cliff, and one that we struggle with this at the national level.”

Colorado is not unique, he went on to say. “It’s a national and international problem.” He said he agreed that additional policies of carbon pricing will be needed to create the proper price signals. “But the thing is in Colorado you have to go to the ballot.”

And that takes us back to Polis, who launched his 2018 campaign for governor in Pueblo. Pueblo, the city, was one of the first jurisdictions to embrace a goal of 100% renewables, a pledge followed by the Pueblo County commissioners.

Comanche units 1 and 2 and, on the right, 3. Photo/Allen Best

But that was then. The Pueblo County commissioners bristled at SB 200 when it was introduced in late March. Their complaint: they want Comanche 3 to be able to operate until 2040, as its operator and primary owner, Xcel Energy, proposes. They worried about closing of the gas-fired power plant east of the city operated by Black Hills Energy, the local utility.

SB 200 went too far in too many ways, the commissioners said in an op-ed published :April 15 in the Pueblo Chieftain. And, they added, the bill sponsors had not sought input from Pueblo or from Xcel. Later, the Pueblo City Council similarly announced opposition.

Once a labor stronghold, a given for the Democratic Party, Pueblo has become deep purple, a city and a county that can go in either direction, as was evident in the 2016 presidential election. That makes Pueblo the equivalent of Joe Manchin. And Polis understands that.

Yesterday, I interviewed Will Toor, the executive director of the Colorado Energy Office. We talked for an hour about this and other issues, which I’ll share in future issues of Big Pivots. He made several key points. One is that the Polis administration studied carefully the successes and failures of other states, most notably California. California’s successes in reducing emissions have been almost entirely the result of sector-specific actions, not due to its cap-and-trade regime.

That, in turn, has been the approach of the Polis administration. And, he added, the significant progress made in renewable energy in recent years was due in large measure to Obama administration policies that created the scales that made the economics of renewable energy incontestable. That also looks to be the approach of the Biden administration.

President Donald Trump arrived in the White House with vows to save coal, but of course, the coal sector tanked during his four years in Washington because the market fundamentals of renewables were unassailable.

Toor also spoke of the need for public policy, if it is to be durable, to achieve winners. Winners are created when there is clear and immediate evidence of gain, such as investment in rural areas, creation of jobs, and so forth.

Carbon pricing achieve those goals in the long run, but it is seen on the face of it as a negative. As such, it’s less durable in a state like Colorado, trending toward blue but still purplish.

“The more we can do to make good climate policy and economic wins for all parts of Colorado, the less partisan it will become over time.”

Expect more on this particular topic and other elements of Colorado’s 2021 legislative session in future issues of Big Pivots.

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