BILL NUMBER: AB 1404	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 1, 2009
	AMENDED IN ASSEMBLY  APRIL 13, 2009

INTRODUCED BY   Assembly Members De Leon, Carter, and V. Manuel Perez

                        FEBRUARY 27, 2009

   An act to amend Section 38505 of, and to add Section 38573 to, the
Health and Safety Code, relating to air pollution.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1404, as amended, De Leon. California Global Warming Solutions
Act of 2006: offsets.
   The California Global Warming Solutions Act of 2006 designates the
State Air Resources Board as the state agency charged with
monitoring and regulating sources of emissions of greenhouse gases.
The state board is required to adopt a statewide greenhouse gas
emissions limit equivalent to the statewide greenhouse gas emissions
level in 1990 to be achieved by 2020, and to adopt rules and
regulations in an open public process to achieve the maximum
technologically feasible and cost-effective greenhouse gas emission
reductions. The act authorizes the state board to adopt by
regulation, after a public workshop, a schedule of fees to be paid by
the sources of greenhouse gas emissions regulated pursuant to the
act. The fee revenues are deposited into the Air Pollution Control
Fund and are available  ,  upon appropriation  ,
 by the Legislature, for purposes of carrying out the act.
The state board is authorized to adopt market-based compliance
mechanisms, as defined, meeting specified requirements to be used for
compliance with those regulations. The state board is required,
before including any market-based compliance mechanism, to maximize
additional environmental and economic benefits for California, as
appropriate.
   This bill would require the state board, if the state board allows
the use of market-based compliance mechanisms, to limit the use of
compliance offsets, as defined, that meet specific criteria, to no
more than 10% of the greenhouse gas emission reductions expected from
market mechanisms during the compliance period. The bill would
require the state board to apply the limit as a percentage of each
regulated  facility's   party's  reported
emissions in a compliance period. The bill would require the state
board to impose  an offset verification   a
 fee  on entities buying and selling compliance offsets,
  pursuant to the fee authority described above 
for deposit into the fund  to pay for expenses related to state
board administration of the compliance offset program, upon
appropriation by the Legislature  .  Under the bill, fee
revenues would be available, upon appropriation, to pay for expenses
related to state board administration of the compliance offset
program. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 38505 of the Health and Safety Code is amended
to read:
   38505.  For the purposes of this division, the following terms
have the following meanings:
   (a) "Allowance" means an authorization to emit, during a specified
year, up to one ton of carbon dioxide equivalent.
   (b) "Alternative compliance mechanism" means an action undertaken
by a greenhouse gas emission source that achieves the equivalent
reduction of greenhouse gas emissions over the same time period as a
direct emission reduction, and that is approved by the state board.
"Alternative compliance mechanism" includes, but is not limited to, a
flexible compliance schedule, alternative control technology, a
process change, or a product substitution.
   (c) "Carbon dioxide equivalent" means the amount of carbon dioxide
by weight that would produce the same global warming impact as a
given weight of another greenhouse gas, based on the best available
science, including from the Intergovernmental Panel on Climate
Change.
   (d) "Cost-effective" or "cost-effectiveness" means the cost per
unit of reduced emissions of greenhouse gases adjusted for its global
warming potential.
   (e) "Compliance offset" means the quantified reduction of
greenhouse gas emissions used as a substitute for direct compliance
with a greenhouse gas reduction regulation or market mechanism. A
compliance offset is based on emission reductions occurring outside
of the sector or sectors covered by the greenhouse gas regulation.
   (f) "Direct emission reduction" means a greenhouse gas emission
reduction action made by a greenhouse gas emission source at that
source.
   (g) "Emissions reduction measure" means programs, measures,
standards, and alternative compliance mechanisms authorized pursuant
to this division, applicable to sources or categories of sources,
that are designed to reduce emissions of greenhouse gases.
   (h) "Greenhouse gas" or "greenhouse gases" includes all of the
following gases: carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
   (i) "Greenhouse gas emissions limit" means an authorization,
during a specified year, to emit up to a level of greenhouse gases
specified by the state board, expressed in tons of carbon dioxide
equivalents.
   (j) "Greenhouse gas emission source" or "source" means any source,
or category of sources, of greenhouse gas emissions whose emissions
are at a level of significance, as determined by the state board,
that its participation in the program established under this division
will enable the state board to effectively reduce greenhouse gas
emissions and monitor compliance with the statewide greenhouse gas
emissions limit.
   (k) "Leakage" means a reduction in emissions of greenhouse gases
within the state that is offset by an increase in emissions of
greenhouse gases outside the state.
   (l) "Market-based compliance mechanism" means either of the
following:
   (1) A system of market-based declining annual aggregate emissions
limitations for sources or categories of sources that emit greenhouse
gases.
   (2) Greenhouse gas emissions exchanges, banking, credits, and
other transactions, governed by rules and protocols established by
the state board, that result in the same greenhouse gas emission
reduction, over the same time period, as direct compliance with a
greenhouse gas emission limit or emission reduction measure adopted
by the state board pursuant to this division.
   (m) "State board" means the State Air Resources Board.
   (n) "Statewide greenhouse gas emissions" means the total annual
emissions of greenhouse gases in the state, including all emissions
of greenhouse gases from the generation of electricity delivered to
and consumed in California, accounting for transmission and
distribution line losses, whether the electricity is generated in
state or imported. Statewide emissions shall be expressed in tons of
carbon dioxide equivalents.
   (o) "Statewide greenhouse gas emissions limit" or "statewide
emissions limit" means the maximum allowable level of statewide
greenhouse gas emissions in 2020, as determined by the state board
pursuant to Part 3 (commencing with Section 38550).
  SEC. 2.  Section 38573 is added to the Health and Safety Code, to
read:
   38573.  If the state board allows the use of market-based
compliance mechanisms pursuant to Section 38570, all of the following
shall apply:
   (a) The state board shall limit the use of compliance offsets
within a compliance period to no more than 10 percent of the
greenhouse gas emission reductions expected from market mechanisms
during that compliance period. The state board shall apply the limit
as a percentage of each regulated  facility's  
party's  reported emissions in a compliance period.
   (b) The state board shall approve compliance offsets only if those
compliance offsets meet all of the following criteria:
   (1) The compliance offset has been verified by an independent,
third-party verifier who has been certified and assigned by the state
board.
   (2) The independent verifier has certified that the emission
reductions represented by the compliance offset meets the
requirements of a protocol adopted by the state board. Protocols
shall be developed to meet the requirements of paragraph (1) of
subdivision (d) of Section 38562.
   (3) The compliance offset is entered into a tracking system
developed or designated by the state board and assigned a unique
serial number.
   (4) The compliance offset is permanently retired and the emission
reductions represented by the compliance offset have not been claimed
by any other entity.
   (5) The compliance offset shall not cause or contribute to
significant adverse effects on human health or the environment as
determined by the state board.
   (6) The compliance offset is not a certified emission reduction
credit developed as part of the Kyoto Protocol's Clean Development
Mechanism.
   (c) Compliance offsets shall meet the requirements for emission
reductions in Section 38562.
   (d) Subject to subdivision (a), the state board shall establish
incentives or guidelines that prioritize the use of compliance
offsets in the following order:
   (1) Compliance offsets that result in air quality benefits to
California communities disproportionately impacted by air pollution,
as determined by the state board. A preference shall be made for
compliance offsets that benefit air quality in the same air pollution
control district or air quality management district where the
 facility   regulated party  claiming the
offset credit is located.
   (2) Compliance offsets that comply with Section 38565.
   (3) Compliance offsets that result in cobenefits to public health
and the environment anywhere in the state. 
   (e) The state board shall impose an offset verification fee on
entities buying and selling compliance offsets. The fee shall be
imposed and collected, and the revenues shall be deposited into the
Air Pollution Control Fund, in accordance with Section 38597.
Revenues deposited into the Air Pollution Control Fund pursuant to
this section shall be available, upon appropriation by the
Legislature, to pay for expenses related to state board
administration of the compliance offset program.  
   (e) The state board shall impose a fee pursuant to Section 38597,
the revenues of which shall be placed into the Air Pollution Control
Fund and shall be available, upon appropriation by the Legislature,
to pay for expenses related to state board administration of the
compliance offset program. General Fund moneys shall not be expended
for the administration of the compliance offset program.