BILL ANALYSIS
AB 32
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2005-2006 Regular Session
BILL NO: AB 32
AUTHOR: Nunez and Pavley
AMENDED: June 22, 2006
FISCAL: Yes HEARING DATE: June 26, 2006
URGENCY: No CONSULTANT: Bruce Jennings
SUBJECT : CALIFORNIA GLOBAL WARMING SOLUTIONS ACT
OF 2006: GREENHOUSE GASES
SUMMARY :
Existing law :
1) Provides for the California Climate Action Registry and the
voluntary reporting of greenhouse gas emissions (GHGs) to
establish baselines against which future GHG emission
reduction requirements may be applied. Chapter 1018,
Statutes of 2000 (SB 1771, Sher) and Chapter 769, Statutes
of 2001 (SB 527, Sher).
2) Requires the California Air Resources Board (ARB) to
regulate GHGs emitted by passenger vehicles and light-duty
trucks to achieve maximum feasible reductions (Chapter 200,
Statutes of 2002, AB 1493, Pavley).
3) Requires ARB to develop regulations to prevent diesel truck
engine idling at ports pursuant to Chapter 1129, Statutes
of 2002 (AB 2650, Lowenthal).
4) Requires the state's retail sellers of electricity to
achieve at least 20 percent of energy sales from renewable
sources, pursuant to Chapter 516, Statutes of 2002 (SB
1078, Sher).
5) Requires the California Energy Commission (CEC) to develop
and adopt by June 30, 2007, a state plan to increase the
use of alternative transportation fuels to achieve multiple
objectives, including the reduction of GHG emissions,
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pursuant to Chapter 371, Statutes of 2005 (AB 1007,
Pavley).
This bill :
1) Enacts the California Global Warming Solutions Act of 2006.
2) Requires the ARB to report and verify greenhouse gas
emissions.
3) Authorizes the ARB to monitor and implement regulations to
reduce emissions of gases that cause global warming.
4) Requires the ARB to adopt a statewide greenhouse gas
emissions limit that would gradually impose a limit between
2010 and 2020.
5) Requires the Governor to establish an interagency task
force to coordinate investments of state moneys and state
programs to reduce emissions of greenhouse gases, promote
economic growth, make information publicly available to
assist sources of greenhouse gases to meet the requirements
of this act, and related activities.
6) Requires, in place of existing requirements on CEC, the CEC
to update its inventory of emissions of greenhouse gases to
supplement information collected by the ARB to maintain a
reasonably comprehensive inventory of California's
emissions of greenhouse gases.
COMMENTS :
1) Background: The State of Climate Change . There is broad
scientific consensus that rising concentrations of GHGs in
the atmosphere are resulting in climate changes that will
continue to accelerate during this century. A statement in
June, 2006 from the Attorney General's Office, provides a
succinct statement about the threats from global warming.
The statement was provided in support of the Public Utility
Commission's promulgating a rule to integrate greenhouse
gas emission standards into procurement policies and
included the following findings:
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"?the best available science establishes that GHG-induced
climate change is occurring and is fast approaching a
critical "tipping point," and that California has a
substantial stake in taking every possible action at the
earliest juncture to mitigate the potentially devastating
impacts - economic as well as environmental - of climate
change?
Impacts from anthropogenic CO2 emissions that have
occurred, are occurring, and will occur, include:
temperature increases, heat waves, loss of Artic ice and
habitat, loss of Antartic ice, melting of glaciers and
related glacial lake outburst flows, loss of snowpack in
California and elsewhere, changes in precipitation
patterns, increased hurricane intensity, sea level rise
and coastal flooding, public health harms such as
increased heat-related illness and smog, harm to
habitats, and the potential for substantial social
upheaval resulting from significant environmental
changes. ?[a one meter sea level rise threatens $48
billion of commercial, industrial, and residential
structures in the San Francisco Bay]?
In litigation between the automakers and the State of
California, the automakers have challenged the authority
of the State to regulate greenhouse gases from mobile
sources. In response to the automakers claims, the State
has gathered declarations from some of the world's
leading climate scientists concerning impacts of
anthropogenic greenhouse gas emissions on climate broadly
and on California in particular. Many of these
declarations, which starkly establishes the threat to the
world and to California:
At the same time as climate change is likely to cause a
significant reduction in California's effective water
supply, it is also likely to cause an increase in
California's demand for water because of the sharp
increase in summertime temperatures.
The effects of global warming are already observed in the
decrease in snow water equivalent and in the earlier
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snowmelt and streamflow timing of the past several
decades.
Climate change will increase global sea levels?Sea level
rise will have two effects (a) ?increase the intrusion of
salt water [into the Sacramento delta]; and (b) increase
water levels in the channels [of the Delta] and so
threaten the integrity of the levees in the Delta."
The findings strongly suggest that a climate change
consistent with any of the four [commonly employed]
climate projections?will lead to a significant increase
in heat-related deaths. This increase will number in the
thousands for the five California cities [Fresno, Los
Angeles, Riverside, Sacramento and San Francisco] over a
period of a decade.
If additional human-made global warming (above that in
2000) is so large, say 2-3 degrees C, that the expected
equilibrium (long-term) sea level rise is of the order of
25 meters, there would be a potential for a continually
unfolding planetary disaster of monstrous proportions.
2) Background: The Governor's Executive Order . In June, 2005,
the Governor issued an executive order that established the
following GHG emission reduction targets for the state:
By 2010 - reduce GHG emissions to year 2000 levels.
By 2020 - reduce GHG emissions to year 1990 levels..
By 2050 - reduce GHG emissions to 80 percent below year 1990
levels.
As noted in a report by the Legislative Analyst, between 1990
and 2000, annual California GHG emissions increased by
approximately 13 percent, from about 396 million metric
tons in 1990 to 449 million metric tons in 2000. The
Governor's Climate Action Team has estimated that achieving
the Governor's GHG reduction targets for 2010 and 2020 will
result in GHG emissions that are 11 percent and 29 percent,
respectively, below that which would otherwise occur
according to "business as usual" (BAU).
The initial draft of recommendations drafted by the Climate
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Action Team included four actions essential to meeting the
Governor's GHG reduction goals:
a) Require climate change emissions reporting from all
emitters of GHGs, starting with the largest emitters.
b) Levy fees on gasoline and diesel sales to reduce
demand for these fuels and to fund promotion of
alternative, cleaner fuels.
c) Coordinate state investment funds to reward industry
development of emission reduction technologies; and,
d) Encourage companies to take early action to reduce
their climate change emissions in anticipation of
subsequent state, federal, or international emissions
reduction programs.
3) Defining Greenhouse Gases . Although GHG's are regularly
defined in accordance with five to six gases, there are
other recognized contaminants that affect climate change
(e.g., carbon black, and other chemicals, substances, and
gases). Because of the long-life of certain contaminants
on the atmosphere, a broadened definition may be especially
important for making early changes that may affect the
atmosphere for decades to come.
Indeed, Jim Hansen, who is among the world's foremost
climatologists, has recently concluded that the "total
forcing by non-CO 2 GHGs equals that of CO 2," and that the
climate changes to date has been caused mainly by non-CO 2
pollutants, not CO 2.
It is recommended that the definition of greenhouse gases be
expanded with a fuller listing of an array of contaminants
having an impact on climate are inventoried and regulated,
including those non-Kyoto contaminants having a potential
to contribute to climate change.
4) Flexible Compliance Mechanisms . The terms "flexible
compliance mechanisms" play a central role in AB 32, and is
largely employed to refer to "banking, borrowing, and
market mechanisms that provide compliance flexibility that
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are required to ensure that their greenhouse gas emissions
do not exceed their emissions allowances."
The bill's use of "flexible compliance mechanisms" at first
glance appears to be contingent on the state board
evaluating and reporting on those mechanisms "most
beneficial in achieving reductions in GHGs." As a study.
Following this study, yet apparently irrespective of the
study's findings, by January 2009, the state board is
instructed to adopt regulations providing flexible
compliance mechanisms, including banking, borrowing, and
other market mechanisms as a means for entities to comply
with controlling GHG emissions as a basis for meeting
emissions allowances. Ergo, flexible compliance, appears
largely to mean "banking, borrowing, and other market
mechanisms."
Flexible compliance mechanisms are also related to another
central term in the bill, "emissions reduction strategies,"
which includes programs, measures, standards, and flexible
compliance mechanisms that can be used with respect to
sources or categories of sources. The result is that
"emissions reductions strategies" are also linked to
banking, borrowing, and other market mechanisms.
AB 32, as a consequence, nests an important part of the
control of GHGs within emission reduction strategies that
are linked with flexible compliance mechanisms; which in
turn, are largely defined as market mechanisms.
Putting aside for a moment the question of whether AB 32
should rely so exclusively on market mechanisms, two
questions are begged by constructing AB 32 in such a
fashion:
First, what is the legal basis for the state to enforce (or a
failure to achieve) GHG emission reductions according to
the bill's provisions? While the bill constructs a penalty
provision for violations of the ARB's regulations (Section
42878.5), unresolved is whether the state, in fact,
exercises any authority over flexible compliance strategies
or flexible compliance mechanisms to the extent that these
are rooted in private sector activities, such as the
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banking and borrowing of emissions credits for which there
appears to be little, if any, applicable regulatory law.
Second, how does the bill ensure that flexible compliance
mechanisms will yield reductions in GHG emissions? The
bill appears to presume that banking, borrowing and other
market mechanisms can be expected to yield emissions
reductions. Is there any evidence to support this
proposition? In light of serious criticisms of such
schemes, including the recent collapse of the European
market for emissions trading, this is a subject deserving
much more scrutiny and consideration before the state
initiates any regulations founded on this approach.
Moreover, the use of flexible compliance mechanisms has an
uncertain relationship to the ARB's current authority and
programs to achieve and maintain clean air (e.g., the
issuance of permits, the use of best achievable control
technologies). The use of flexible compliance mechanisms
may set in motion a set of practices for which the state
may have only limited legal authority and considerable
uncertainty as to who is responsible for achieving what
reductions.
The sponsors have expressed an interest in providing some
manner of flexibility for achieving reductions in GHGs.
Rather than employing an approach that is poorly defined,
legally uncertain, and operates in a market context largely
uncontrolled by state law, an alternative would be to use
certain aspects of the approach adopted in another enacted
statute, AB 1493 (Pavley); which contains a provision
allowing for an alternative method for complying with the
regulations governing emissions from specific sources that
achieve the equivalent, or greater, reduction in emission
of greenhouse gases, as those requirements contained in
regulation (see, for example, Section 43018.5 (c ) (3). By
comparison, this "flexibility" contained in AB 1493's
provisions is much more carefully integrated with the
existing authority of the state board, including its
enforcement authority.
It is recommended that the terms "flexible compliance
mechanisms" be removed from the bill and that the
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appropriate section(s) be redrafted to clarify that the use
of any alternative to compliance be integrally linked to
existing air quality laws and regulations.
5) Who Is Accountable for Achieving GHG Emission Reductions?
As amended, it is unclear who is subject to the reductions
to be achieved by 2020 and by what authority. Consider,
for example, the bill's reference to "electricity
provider." Does a "source" include an individual power
plant, a company owning multiple power plants, power plants
in general, or a category of sources? It is similarly
unclear whether the reductions are to be achieved by
individual emitters, companies, or sectors. For this
particular case, unless the reference to electricity
provider is essential for the operation of the bill, it is
recommended that this provision be eliminated from the
bill.
The lack of clarity, however, does not simply extend to the
realm of electricity providers. The bill, as amended,
strongly appears to lay the foundations for market
mechanisms, including potentially trading. The adoption of
regulations to limit GHGs, for example, is explicitly based
on banking, borrowing, and market mechanisms. The same
regulations also include the "distribution of emissions
allowances," or authorizations to emit a GHGs.
Furthermore, the regulation's reduction strategies are
evaluated with respect to their "cost-effectiveness," a
term that appears to discriminate against controls that may
be more expensive in the short run, but protective of the
environment by a longer term analysis.
Should AB 32 be establishing a regulatory approach that is so
strongly oriented toward market mechanisms? The
questionable role of market mechanisms is not just whether
these have given rise to climate change, but the equally
important question of how such language comports with
California's air quality, environmental, and other laws
provide clear rules for reducing GHG emissions while
protecting public health and the environment.
The variety of poorly defined terms, and especially the
proliferation of terms referring to market mechanisms,
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casts considerable doubt over the question of who is
responsible for reducing GHG emissions and what is the
state's authority in this regard. The authors' offices
have elsewhere explained that various analytics must be
performed prior to the adoption of regulations or other
rules advancing trading or similar market mechanisms as a
primary approach for controlling GHG emissions.
It is recommended that the relevant provisions be redrafted to
clarify that before adopting regulations to implement
flexible compliance mechanisms, a thorough review and
justification be established for the use of specific
alternative compliance mechanisms and that these be
integrated with existing law; and, that the surrounding
provisions be revised accordingly, without introducing a
new set of terms that only confuse who is subject to the
reductions and what are their responsibilities under state
law. (see the next section)
6) Streamlining the Collection of Information: Avoiding
Duplication of Effort . Local air districts and ARB have
existing authority and responsibilities under state and
federal law (the Clean Air Act) to collect emission
information for any air contaminant. Together, ARB and the
air districts have spent decades developing air emission
assessment and reporting protocols, coordinating with the
US EPA and other stakeholders to ensure consistent, high
quality data. These inventories are used for a variety of
purposes, including the development of air quality
management plans, to develop potential control measures, to
analyze new source impacts, to determine control program
effectiveness, to predict future air quality through
modeling analyses, and to determine compliance by emission
sources. To this extent, the local air districts, in
conjunction with the ARB, possess a capability for
collecting, auditing, inspecting, and enforcing
requirements in accordance with a facility specific
inventory of information. Air district permits also
provide a basis for assisting ARB with ensuring that
emission reductions are verifiable, permanent and
quantifiable, and that data collection and reporting is
enforceable. Tens of thousands of facilities are currently
reporting annual emissions data to local districts,
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including the largest pollution sources in the state and
those likely to be included in any mandatory GHG inventory
process. Additionally, given the threats posed by
additional air contaminants affecting global climate (see
Comment on defining GHGs), the ability of California to act
decisively on these gases and particles may hinge on
utilizing the existing authority provided by the State's
air quality laws.
It is recommended that the relevant provisions be amended to
allow air districts, under the direction of ARB, to collect
information on GHGs to assist with the compilation of a
comprehensive statewide data base and to ensure that
reductions are verifiable, permanent, and quantifiable.
7) Transportation Sector Reductions: the Problematic
Implementation of Existing Law . Over the decades, whenever
California has pursued path-breaking legislation, there
have often been corresponding efforts to disrupt the
implementation of such measures. Such is currently the
case with AB 1493, the measure authored by Assembly Member
Pavley requiring automobiles sold in California after 2009
to meet specified emission standards.
Challenges to AB 1493 are especially significant since the
state's ability to curtail GHG emissions from the
transportation sector largely depend on successful
implementation of AB 1493. If AB 1493 is not fully and
expeditiously implemented, the state's ability to attain
the necessary reduction of GHG's will likely be seriously
compromised.
It is recommended that AB 32 be amended to allow for the
implementation of a specific, alternative provision that
would become operative should AB 1493 fail to be
implemented according to its statutory deadlines and/or
California fails to achieve the necessary reductions in GHG
emissions in the transportation sector. Such a provision
would provide broad authority to ARB to institute necessary
measures to compensate for the loss of anticipated
reductions from the failure of AB 1493's full
implementation, including the authority to impose a
surcharge on petroleum fuels produced or imported into the
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state. Additionally, a severability clause should be added
to the bill.
8) Additional Issues for Consideration: Reviewing 2020
Objectives Based on New Information . As climate scientists
are noting with increasing regularity, the observations of
global climate changes are being rapidly revised; and
unfortunately determining that conditions are generally
worsening from even very recent scientific findings. In
this regard, the Governor's objectives could prove to be
considered too modest with the appearance of new
information.
It is recommended that the bill be amended to require a review
of the adequacy of the 2020 objectives based on indications
of worsening climate conditions, including measurements of
atmospheric levels of GHG's, Sierra snow pack, and other
observations of global climate change as noted by the IPPC.
9) Additional Issues for Consideration: Establishing a
Binding Policy for Agencies: Amending the Government Code .
It is recommended that the current bill language regarding
agency obligations to conduct GHG emission reductions be
amended to add a new Government Code provision and clarify
that GHG policy is binding on all state agencies.
10)Additional Issues for Consideration: Support for Local
Initiatives . There are currently more than 50 cities in
California that have pledged to find ways to reduce GHGs at
a rate exceeding the Governor's plan.
It is recommended that AB 32 be amended, authorizing ARB (or
another, more agency) to provide assistance to cities and
counties in their efforts to achieve GHG reductions and to
provide a common protocol for collecting information on
inventories.
11)Additional Issues for Consideration: State & Federal
Authorities . AB 32 currently delegates to the ARB the
determination of whether to implement the program, if there
is a federally enacted statute. Alternatively, it might be
superior to allow ARB to file a petition with the
Legislature, establishing the reasons supporting the
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suspension of one or more provisions of law and to clarify
that such a suspension rests with the Legislature.
12)Technical/Clarifying Amendments . The authors have offered
a number of technical and clarifying amendments which will
be integrated with a series of such amendments that are
also being prepared by the committee staff.
13)Related Legislation . In the current session, there are
more than three dozen measures that relate broadly to
issues involving climate change. Among these are:
SB 107 (Simitian). Accelerates RPS to require sellers
of electricity to procure at least 20% of their retail
sales from renewable power by 2010 instead of 2017.
SB 1250 (Perata). Revises the public interest energy
research, demonstration, and development program; the
renewable energy resources program, including the
purposes for which the money in the Renewable Resource
Trust Fund may be used. Makes other changes as well,
including to the Reliable Electric Service Investments.
SB 1368 (Perata). Requires the CEC to set emission
(e.g., pollution) standards for those entities providing
electricity to the state. Requires the California Public
Utilities Commission to prohibit electricity providers
and corporations from entering into long-term contracts
which do not meet the CEC's standards.
1) Referral to Senate Rules Committee . Should this measure be
approved by this committee, the do pass motion must include
the action to re-refer the bill to the Senate Rules
Committee.
SOURCE : Natural Resources Defense Counsel and
Environmental Defense
SUPPORT : American Federation of State, County, and
Municipal
Employees (AFSCME), AFL-CIO
American Lung Association of CA
Agoura Technologies
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Baykeeper
Bluewater Network
California Church Impact
California Catholic Conference of Bishops
California League of Conservation Voters
California Nurses Association
California Ski Industry Association
California Wind Energy Association
Californians Against Waste
CalWind Resources, Inc.
Center for Environmental Health
Christopherson Homes, Inc.
Clean Power Campaign
Climate Protection Campaign (600 signatures)
Coalition for Clean Air
Codding Investments Inc.
Community Action to fight Asthma
Community Fuels
Congress of the United States
Congressman George Miller
East Bay Municipal Utility District
Endangered Habitats League
Energy Solutions
Environment California
Environmental Entrepreneurs (E2) (160
individuals - 700 members)
Environmental Justice Coalition for Water
Global Green
Ion America
KEMCO
Kirsh Foundation
KyotoUSA
Literacy for Environmental Justice
Marin Municipal Water District
Mendocino Wine Company
Natural Resources Defense Council
Oak Creek Energy Systems, Inc.
Pacific Forest Trust
Planning and Conservation League
Sacramento Metropolitan Air Quality Management
District
San Gorgonio Farms, Inc.
Santa Clara Valley Water District
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Santa Cruz City Council
Senator Diane Feinstein
Sierra Club California
Sierra Club-Loma Prieta Chapter
Sonoma Wineco
Straus Family Creamery
Turtle Island Restoration Network
VentureSpark (SF)
Union of Concerned Scientists
Waste Management
Westminster Presbyterian Church
Whitewater Maintenance Corp.
Witt Rylander Advertising
Working Assets
Individuals (89) (213 emails)
Cities/Counties/Towns of :
Chino, Chula Vista, Cloverdale, Cotati,
Fairfax, Hayward, Healdsburg, Huntington Park,
Monterey Park, Morgan Hill, Oakland, Petaluma,
Pleasanton, Rialto, Rohnert Park, Sacramento,
San Francisco, San Luis Obispo, San Mateo,
Santa Cruz, Santa Monica, Santa Rosa,
Sebastopol, Sonoma, South San Francisco,
Stockton, Sunnyvale, West Hollywood, Contra
Costa County, Marin County Supervisors, Town of
Windsor, County of Sonoma
OPPOSITION : BP America
California Cement Manufacturers Environmental
Coalition
California Chamber of Commerce
California Council for Environmental & Economic
Balance
California Nevada Cement Promotion Council
Milpitas Chamber of Commerce
Pacific Gas and Electric Company
Silicon Valley Leadership Group
Western States Petroleum Association
SEECalifornia Coalition:
Agricultural Council of California
Association General Contractors of
California Inc.
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California Business Roundtable
California Business Properties Association
California Chamber of Commerce
California Farm Bureau Federation
California Forestry Association
California Grocers Association
California Hotel & Lodging Association
California Independent Petroleum
Association
California Manufacturers & Technology
Association
California Nevada Cement Promotion Council
California Retailers Association
Center for Energy and Economic Development
Engine Manufacturers Association
Rubber Manufacturers Association
Western Growers