Polis Signs A Major Climate Bill, But Promises It Won’t Bring A Cap-And-Trade Program To Colorado

Hart Van Denburg/CPR News
An oil pumpjack in Weld County on Friday, March 5, 2021.

After months of tense negotiations among Colorado Democrats, Gov. Jared Polis signed legislation Friday to advance environmental justice and reduce climate pollution.

At the same time, the governor shut the door on a potential policy strategy favored by some environmental groups. To accompany the bill signing, Polis issued an executive order that prohibits the state from installing an economy-wide cap-and-trade system.

“While this approach, depending on the details, may have merit at the federal or international level, it is not an appropriate policy for Colorado,” Polis wrote.

The move marks Polis’ most aggressive action yet against the prospect of cap-and-trade in Colorado. Since winning the governor’s office, Polis has long argued the policy would harm the state’s economy and burden poorer communities. His administration has instead sought to reduce emissions through voluntary agreements and targeted policies for specific industries. 

Pam Kiely, the associate vice president of U.S. climate at the Environmental Defense Fund, said the previous opposition made his executive order “mystifying.” 

“It’s very clear the governor does not like cap-and-invest programs, so I’m not sure why he needs an executive order to underline that,” Kiely said.

Cap-and-trade is best understood as a market-based approach to pollution reduction. A government sets a limit on total emissions and lets companies buy or sell allowances to release a certain amount. A company can also trade its permits if it manages to reduce its emissions. 

For years, California has been the only U.S. state with a statewide cap-and-trade program. Washington appears set to become the second after its Democratically controlled legislature passed major climate legislation in April. Washington Gov. Jay Inslee signed the bill in May.

Environmental groups have pushed for a similar program to help Colorado meet its greenhouse gas reduction goals. The targets commit the state to reduce emissions by 26 percent by 2025; 50 percent by 2030 and 90 percent by 2050. Each goal is measured against the state’s total emissions in 2005.

Those efforts have led to repeated clashes between environmental groups and the Polis Administration. 

In February, the Environmental Defense Fund asked Colorado air regulators to consider a cap-and-trade system to enforce Colorado’s emission targets. The Governor’s Office formally opposed the petition. In the end, the Air Quality Control Commission, which Polis appoints, voted to reject the plan 7-to-1.

After the defeat, a similar coalition of environmental groups aligned behind a bill in the last legislative session. While it attempted to build off of plans in Gov. Polis’ climate roadmap, it also called on state air regulators to evaluate a “multi-sector program with an overall limit on greenhouse gas emissions.”

Polis quickly threatened a veto. In an interview with the Colorado Springs Gazette editorial board, he said it was a “top-down requirement and a hard cap bill.”

Months of negotiations led lawmakers to drop the legislation. Under a compromise, parts of the original bill were moved to the environmental justice bill Polis signed Friday.

The final legislation removed the requirement for an economy-wide program to reduce emissions. Under the compromise, only power plants, oil and gas operations and factories would face new rules to meet specific emissions targets. Other legislation addresses the transportation and building sectors. 

Will Toor, the director of the Colorado Energy Office and the lead architect of Polis’ climate plans said only heavy industry, like steel and cement makers, would be subject to a cap-and-trade system under the new bill. Toor added any program would also be voluntary. 

While the final rush to pass the bill frustrated Republican and trade groups, many share Polis’ resistance to a cap-and-trade system. Dan Haley, the president of the Colorado Oil and Gas Association, agreed the state’s economy is too small for an effective program. 

“That discussion belongs in Congress. If federal legislators and the Biden administration pursue a cap-and-trade system, it will be important to include the input of all the economic sectors it would impact,” Healy said.