BILL ANALYSIS �
AB 1285
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Date of Hearing: May 2, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1285 (Fuentes) - As Amended: March 31, 2011
SUBJECT : Regional greenhouse gas emission reduction program
SUMMARY : Requires the Air Resources Board (ARB) to establish a
program to maximize regional greenhouse gas (GHG) emission
reduction and sequestration projects, as specified. Permits GHG
offsets produced by these projects to be used for compliance
with AB 32.
EXISTING LAW :
1)Requires ARB to adopt a statewide GHG emissions limit
equivalent to 1990 levels by 2020 and adopt regulations to
achieve maximum technologically feasible and cost-effective
GHG emission reductions.
2)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, to be
adopted by 2011 and operative by 2012, under limited
circumstances once specified conditions are met.
3)Requires any direct regulation or market-based compliance
mechanism to achieve GHG reductions that are real, permanent,
quantifiable, verifiable and enforceable by ARB.
4)Requires ARB, in adopting regulations, including market-based
compliance mechanisms, to design the regulations in a manner
that is equitable, seeks to minimize costs and maximize the
total benefits to California, and encourages early action to
reduce GHG emissions.
THIS BILL :
1)Requires ARB to establish a program to maximize regional GHG
emission reduction and sequestration projects.
2)Requires federal, state, regional, local, and nonprofit
entities and Native American tribes to develop and implement
GHG emission reduction and sequestration projects.
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3)Provides that eligible projects include energy efficiency,
localized clean energy generation, urban greening, natural
resource protection and conservation, recycling and
composting, and other interventions that reduce GHG emissions
and co-pollutant emissions.
4)Requires the program to:
a) Promote the aggregation of projects.
b) Provide incentives to entities subject to an emissions
cap to invest in projects.
c) Contain design elements that maximize the ability of
federal, state, regional, local, and nonprofit entities and
Native American tribes to participate in the program.
d) Promote emission reduction projects that provide
multiple benefits, including, decrease in air or water
pollution, reduction in the consumption of natural
resources or energy, increase in the reliability of local
water supplies, reduction in vehicle miles traveled, and
increased adaptability to climate change.
e) Provide for state review and oversight of the program.
f) Create incentives that take into account future state or
federal climate change programs.
g) Maximize interagency cooperation and integration,
investments in existing agency and nonprofit programs, and
the use of existing public lands and public resources.
h) Include standardized auditing of projects.
5)Requires ARB to create a system by which emission reductions
achieved by projects result in the creation of qualified units
of exchange (i.e. offsets) that may be transferred to entities
subject to an emissions cap for compliance.
6)Requires ARB to establish a Regional Emission Reduction
Exchange to provide oversight and facilitate the transfer of
offsets. Requires the Exchange to meet all of the following
requirements:
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a) Ensure that only real, verifiable, and additional
projects result in the creation of offsets.
b) Ensure the proper accounting of emission reductions
represented by offsets.
c) Promote the financing of projects, especially those
projects located in a disadvantaged community.
7)Establishes the Regional Emission Reduction System Account
within the Air Pollution Control Fund and authorizes deposit
of moneys from federal, state, regional, and private sources,
and authorizes use of funds for the purposes of this bill,
upon appropriation by the Legislature.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The AB 32 Scoping Plan is a description of the
specific measures ARB and others must take to meet the
objective of AB 32: Reduce statewide GHG emissions to 1990
levels by 2020. The reduction measures identified in the
Scoping Plan must be proposed, reviewed, and adopted as
individual regulations by January 1, 2011, to become operative
by January 1, 2012.
According to ARB, a total reduction of 174 million metric tons
(MMT), or 30 percent compared to business as usual, is
necessary to achieve the 2020 limit. The major sources of GHG
emissions that must be cut are the transportation and
electricity sectors, as well as high global warming potential
(GWP) products. Reductions of approximately 140 MMT (~80
percent) will be achieved through identified "regulatory"
measures. Of the regulatory measures, more than 54 percent of
the tons come from four measures in the transportation and
electricity sectors. ARB proposes to achieve an additional
34.4 MMT (~20 percent) reductions necessary to meet the 2020
limit through a cap-and-trade program.
ARB's proposed cap-and-trade program would apply to an
estimated 600 regulated entities engaged in stationary
combustion, cement manufacturing, cogeneration, petroleum
refining, hydrogen production, aluminum production, facility
operators calcining carbonates, CO2 supplier or transfer
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recipient, electricity generation, glass production, iron and
steel production, lime production, natural gas transmission
and distribution, nitric acid production, oil and gas
extraction field operation, production of industrial gases,
pulp and paper production, soda ash production, electricity
deliverers, transportation fuel deliverers, and natural gas
deliverers.
In a cap-and-trade program, a limit, or cap is put on the
amount of pollutants (GHGs) that can be emitted. Each
allowance equals one metric ton of carbon dioxide equivalent.
The total number of allowances created is equal to the cap set
for cumulative emissions from all the covered sectors. These
allowances may be auctioned and/or freely given to companies
or other groups. In addition to allowances, a emissions
reductions from sources that are outside the cap coverage,
called offsets, could be authorized. This would allow
emissions in the capped sectors to exceed the allowances
issued. After initial distribution of allowances-or in the
use of offsets-compliance instruments may be traded among
entities. At the end of each compliance period, covered
entities are required to turn in, or surrender, enough
compliance instruments to match their emissions during this
time period.
Compliance offsets allow regulated entities to purchase
emission reduction credits from unregulated entities in
sectors that are not subject to emission limits, instead of
directly reducing their own emissions or causing emissions to
be reduced amongst other regulated entities.
2)Are offsets an appropriate tool for AB 32 compliance? AB 32
makes no mention of offsets, instead focusing on direct GHG
emission reductions and only permitting market-based
mechanisms to the extent they produce equivalent results. The
potential use of offsets for compliance with AB 32, as
envisioned in the Scoping Plan and proposed cap-and-trade
program, has been invented by ARB without any statutory
guidance. While ARB has indicated a heavy reliance on
offsets, citing an opportunity for low-cost reductions, it has
not spelled out how these offsets might meet AB 32's
requirements or otherwise produce benefits in California.
It's no mistake that AB 32 does not require offsets - they
were quite intentionally omitted during the negotiation of
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that bill. This committee has previously passed legislation
(e.g. AB 1404 (De Leon) in 2009) to apply stringent limits to
ARB's use of offsets for AB 32 compliance. To remain
consistent with the policy of AB 32, this bill should not
require offsets. Instead the author and the committee may
wish to consider adding language to say "if compliance offsets
are authorized by ARB as a market-based compliance mechanism
pursuant to Section 38570," then ARB may establish the program
proposed by the bill.
3)If offsets are to be used for AB 32 compliance, standards are
needed to assure integrity. This bill includes eligible
projects that would not be legitimate sources of offsets
because they would originate from within a capped sector, such
as energy efficiency and energy generation. Reductions
originating from these sources would be counted by electric
utilities toward their caps, so saying they are a source of
offsets is inappropriate and an invitation to double count the
same reduction. The author and the committee may wish to
consider amending the bill to exclude any project from within
a capped sector.
In addition, to assure that offsets from appropriate sources
represent legitimate emission reductions, the author and the
committee may wish to consider amending the bill to require
that offsets must be developed pursuant to an approved
protocol and must meet existing requirements for emission
reductions in AB 32 (e.g. AB 32 requires GHG reductions used
for compliance purposes to be "real, permanent, quantifiable,
verifiable, and enforceable by ARB.").
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
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