Mary Nichols on California’s Climate Legacy Amid a ‘1959 Rewind’
Former Chair of the California Air Resources Board and longtime national climate leader Mary Nichols reflects on the stakes for California as federal threats loom and the state’s Cap-and-Trade Program faces reauthorization. She addresses how today’s federal policy rollbacks could be characterized as a “1959 rewind” of social, environmental, and regulatory norms, warning that hard-won climate enactments could be undermined. Nichols also reflects on the durability of California’s cap-and-trade program, its linkage with Québec, and the lessons that should inform preparation for the next decade of public actions to facilitate both remediation and adaptation.
In doing so, Nichols emphasizes the importance of subnational leadership, state-to-state collaboration, and rebuilding public trust as California navigates rising seas, freight emissions, and mounting pressures on agencies like the Coastal Commission. Looking ahead, she points to the 2028 Los Angeles Olympics as both a challenge and an opportunity for California and the United States to showcase effective climate policy on the world stage.
“Every State that is looking for a leadership role on climate issues is at least talking about how, if, and when they might be able to move forward absent federal legislation.” —Mary Nichols
Mary, to begin our interview provocatively, is the nation — and California — presently experiencing a “1959 rewind” in terms of climate policy, standards, and enforcement?
Well first, I want to be clear– a friend shared that specific comment and attributed it to the constellation of changes represented by the Trump philosophy — if you can call it a philosophy — or at least his approach to the world that he’s trying to recreate on many different fronts.
It's noteworthy that climate change in 1959 was not a public issue. It wasn’t even on Al Gore’s radar screen, as far as I know. Air pollution was just beginning to be seriously addressed; and all of the other social and political issues being challenged are wrapped up in Trumpism…whether it’s a world in which the only people who counted were white people, or where the idea of gay people marrying, or even just acknowledged publicly, was not accepted. Where the concept of a trans person wasn’t on the public radar.
There’s this broad array of personal issues that aligns with the idea that you’re on your own when it comes to the environment, and the norm is that there’s no effective regulation at all. It’s all wrapped up in one package. It’s not just a climate issue.
Let’s unpack the climate policy challenges presented by the President’s administration. There are reports that the US EPA is weighing sanctions and a Federal Implementation Plan that could penalize California for non-attainment while limiting our emissions-reduction tools. How real is that risk?
I saw one statement, I can’t cite it for you, but that disclaimed any intention to do any such thing. I think this was a threat that lawyers, and those who lived through lawsuits against the state and the federal government for failing to have a plan that demonstrates attainment, speculated about. That there could be a double-bind situation where California would not be permitted to use the one tool which has been, and remains, the most important way of reducing pollution– addressing motor vehicle air pollution emissions, and at the same time would be sanctioned because it hadn’t achieved the standards.
That’s what we hypothesized could happen. Legally, that remains a possibility. The EPA said it would not pursue such action, but that doesn’t mean that our old friend Mark Abramowitz couldn’t bring a lawsuit in federal court, and under the clear reading of the Clean Air Act, would be entitled to an injunction.
What might such an injunction mean in practice?
Well, the injunction would tell EPA to withhold any federal permits, and begin withholding federal highway funds from California, until the state could come into compliance by coming up with a plan that would achieve the federal clean air standards. But of course, the state would not be able to do that — because they would lack the tools to do it.
Turning to Cap-and-Trade, now up for reauthorization in the Legislature: California’s statewide greenhouse gas emissions cap-and-trade program has been hailed as a success and a cornerstone of the state’s climate leadership. What made the program both durable and broadly supported, including by business leaders and across party lines, since its launch under Governor Schwarzenegger? What lessons from its structure and evolution should lawmakers bear in mind as they consider reauthorization today? (LAO’s February 2024 issue brief: Cap-and-Trade Program: Issues for Legislative Consideration)
First, it’s important to understand that cap-and-trade was only one piece of the overall scoping plan that CARB adopted to implement AB 32, the Global Warming Solutions Act, signed by Governor Schwarzenegger. Schwarzenegger insisted on including a market-based program as part of his climate plan. He did that because he believed in the power of markets, and believed it would allow business leaders to support the overall climate effort.
The support for cap-and-trade was strongest not from liberals or Democrats, but from corporations that for years articulated the view that if you wanted to do something about climate change — specifically about emissions of greenhouse gases from burning oil, gas, and coal — the way to do that was either through a tax or a cap-and-trade system. That was their policy position, and so he took them at their word.
Anyway, we did it. The program we designed covered all, or most, of the major sources of emissions with a not very severe cap. It could be lowered over time, but in the beginning, it asked for modest reductions. It also launched with a system where sectors of the economy received allowances that they could sell or use to cover their own emissions. The way the program worked is that for the first three years, every entity covered by the program received all or most of the allowances they needed to comply with the cap.
As the cap began lowering, they would have to either reduce their emissions or buy allowances from other companies. It was set up as an exchange, with a very gradual path toward achieving actual reductions. In the first years, it was intended to get participating entities comfortable with the operation of the system.
Elaborate on the lessons learned by policy-makers since its passage in 2006?
In terms of achieving climate goals, the program worked. It was implemented from the beginning without any scandals, any market manipulations, or anybody facing enforcement actions because they didn’t have enough allowances to cover their operations.
In other words, all of the implementation details for making a complicated program had been worked out before we pulled the switch to start the program. It worked extremely well, as we achieved the emissions reductions that we looked for.
The now more politically relevant lesson we learned is that the revenue to the state generated from the very small percentage of allowances created under this program turned out to be huge from the legislature’s perspective. The state kept these allowances to use either if there was an emergency, such as needing to put more allowances into the market or risk companies having to shut their doors, or a situation where there was a run-up in prices suddenly that you needed to try to bring down. The state kept its allowances and used them to keep the overall market relatively stable.
The idea that this was a revenue-producing program, which had never been part of the cap-and-trade program's original goal, began to dominate the public perception of what the program actually accomplished.
During the Schwarzenegger and Brown administrations, California emerged as a global climate leader, ultimately partnering with Canadian provinces, most notably Québec, through cap-and-trade. What motivated that alliance, and what’s the future possibility of subnational alliances going forward?
Before the cap-and-trade regulation was enacted or even a scoping plan for AB 32—there was an early effort called the Western Climate Initiative. It brought together, at different points for about a year, representatives from all 50 U.S. states, all the Canadian provinces, and several Mexican states. The goal was to explore designing a market for trading carbon allowances as a tool to achieve climate benefits.
In the end, when it came time to launch, California was the only U.S. state ready and willing to move forward with cap-and-trade. In Canada, the Province of Quebec was in a similar position. California and Quebec emerged as the two “survivors” of that broader process, and in the course of it, developed strong relationships and a solid understanding of each other’s economic and political contexts.
When California moved forward to adopt its cap-and-trade regulation, we did so from the outset with the hope of partnering with Quebec. The logic was straightforward: the larger the pool of allowances, the more flexibility regulated entities would have in trading, and the costs of compliance could be spread across a broader market. That, in turn, would make the program more efficient.
California and Quebec worked closely to align their programs and ultimately succeeded in linking them. That meant tackling all the technical and legal complexities—ensuring allowances worked in both countries’ systems and currencies, making all founding documents bilingual under Quebec law, and resolving many operational details. Despite the complexity, the people designing it carried out the process with a lot of goodwill and enthusiasm. In practice, it worked very well: for entities that needed or wanted to trade allowances, the system functioned seamlessly.
Given the current position of the federal government, does such a subnational strategy take on even greater importance today?
Certainly. From the very beginning, Governor Schwarzenegger embodied that approach. He attended the UN Climate Conferences…not as an official delegate, since California is not a member of the United Nations, but because of his celebrity and the size and economic importance of California, he was allowed to make presentations. Leaders from other countries sought him out.
What many people don’t realize is that in most countries, the delegation to the UN climate conferences includes not only representatives from the federal government but also leaders from their states and provinces.
For example, Canada’s delegation includes the premiers of all its provinces as part of the negotiating team. In the U.S., however, because of the peculiarities of our federal system, state leaders are not formally part of the federal delegation. That makes California’s independent presence—and its willingness to engage directly—all the more significant.
This September, New York City will host Climate Week, where VerdeXchange will join discussions about re-initiating and scaling state-to-state collaboration. From your perspective, how promising is such an agenda?
As you know, Washington State recently adopted a cap and invest program, and Oregon is working on its version as well. Our three states are already exploring all the details of how our three programs are going to link together. Other states not ready to pass legislation also expressed interest in exploring the possibilities.
Every state looking for a leadership role on climate issues is talking about how, if, and when they might be able to move forward, absent federal legislation.
Looking forward, what should be the top priority for any Cap-and-Trade program? Is it tightening the cap, linkage, auction design, or the equitable distribution of captured revenue?
I think it's all of the above. You have to make the program durable, and now we see the places in which it needs to be strengthened. There must be a more ambitious use of the cap to reduce emissions and a way to deal with affordability in different sectors. The approach with electric utilities represents an effective example. They've made major progress in shifting their emissions from burning of fossil fuels to renewables, and that resulted in keeping the cost relating to this program invisible to the ratepayers. That's not true in other areas where there's not as simple a way for state agencies to implement the program in a unified way.
The public must continue to see the benefit of the revenue created as a result of this program. The expenditures have to increasingly be tied to benefits that people can see in their communities, which also have actual, demonstrable benefits for reducing greenhouse gas emissions.
This is now an important source of funds for the state, but it's also tied to the need to remove carbon from the air, so there must be a clear relationship between the goals of the program and how it's implemented.
Mary, you’ve been at the forefront of efforts to reduce automobile emissions for decades—at the state, national, and even global levels. How significant is the federal government’s pullback of support for vehicle electrification, and what does it mean for California? Which elements of the state’s Advanced Clean Fleets regulations are most likely to withstand both political challenges and legal scrutiny today?
As far as where things are headed with cars and light trucks, the market will continue moving in that direction, although more slowly if the tax credits go away. While the auto companies did not succeed in convincing the administration to take a hands-off attitude towards the Biden incentives for electrification, I was heartened to see that the National Charging Program stayed. The program provides money through states to create a national system of charging similar to how the National Defense Highway Act operated under Eisenhower. Having that infrastructure as a national asset became an article of accepted policy by both Republicans and Democrats. Due to this, it seems as though the National Highway Charging Program has been exempted from destruction. It avoided death, and may possibly be given running room to operate more effectively than it would under the previous administration's guidance. That's quite good news.
As far as the fleets are concerned, that remains an issue for states to figure out how to make it work. The states need to adapt and develop tools to get the vehicles using ports, rail yards, distribution centers, and trucking centers to be clean. They are looking at what tools are likely to be the most effective, but we haven't seen any real programs emerge yet.
Continuing on that note, what immediate steps ought cities take to better protect air quality near seaports and freight corridors?
First, they can avoid moving us in the opposite direction. We have a history of establishing strong environmental goals and then undermining them by taking action at the local level under the guise of easing congestion or serving a new development priority that undercuts the goal. Having a stronger planning approach where achieving climate goals is a common thread in all the decision making about spending money has to be a top priority.
As for the areas most adversely impacted by poor air quality from the existing fleet, it comes down to those entities using their authority to regulate who operates at their facilities and under what conditions. The ports previously did this with their green gates programs, and they could do more. They can use fees on containers to finance incentives for cleaner vehicles, while also recognizing that this piece of the economy touches hundreds of medium-sized and smaller businesses. It's not just a small handful of very large interstate companies that are affected.
In the end, the federal government will have to address major nationally regulated transportation sources—such as railroads, airports, interstates, and buses—by incorporating climate goals into their policies and ensuring that the public benefits from these systems as well.
Before concluding, let’s pivot to California’s Coastal Act. At a recent Coastal Commission meeting, a property owner proposed building a house on a documented protected estuary. Commissioners seemed caught in a dilemma: On one hand, several worried that ruling against the proposal on the facts might trigger a Supreme Court challenge, with a negative decision construed as a regulatory “taking.” On the other hand, most conceded that the proposal clearly violated the plain language of the Coastal Act.
How would you advise the Coastal Commission to navigate these competing responsibilities?
The Coastal Commission has a clear mandate in its founding authority, to protect public access, protect this one natural resource for the benefit of all Californians, and to allow uses inherent with private property ownership in areas up to or above the mean high tide line. The public owns the area that's at the shore, no matter what. If you own a home near the shore and face the risk of inundation from rising sea levels, you need to either take steps to protect your property or relocate. This is a delicate balance.
I think one of the most important things to look at is the intermediate level between the state commission, with its tripartite governing board representing the two houses of legislature and the governor, and local elected officials appointed as members of this statewide body. The politics of different communities along the shore are complicated because this is incredibly valuable real estate. At the same time, if it's destroyed for everyone, California and the world will have lost something precious.
I think common ground can be created here, but it will require a lot of work and advanced discussion and planning. The Coastal Commission has never been strong in that area because they lack resources to do it, either from a staff perspective or from a legal mandate.
The Coastal Conservancy has been more active and successful in resolving some of these disputes at the local level than the commission has. Ultimately, it's the Coastal Act, not CEQA, that's the critical issue here.
Lastly, looking to the future, what is a likely climate policy “bright” spot?
There’s a lot of work to be done at the local and state level, which should have help and support from the federal level. It’s not getting as much attention as we would like to see, but I am personally optimistic. It may be foolish optimism on my part, but the Olympics are coming. The President of the United States will show up in person, waving the flag, and want to see the United States prevail on the world stage and the Olympics be a success.
To make that happen, he not only has to claim that he's kept terrorism away, but also that he's carried these Olympics to be a credit to the country as a whole. That includes having transportation systems that work and not having smog that prevents people from competing or setting records at the games.
At the moment, that's not the primary focus for anyone…except for the people responsible for planning the Games. They will have these Games, and I think it will quickly emerge as an important area for people to pay attention to and identify ways to polish LA's image as the world city that it is.