BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1572|
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THIRD READING
Bill No: SB 1572
Author: Pavley (D)
Amended: 5/1/12
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 5-2, 4/23/12
AYES: Simitian, Hancock, Kehoe, Lowenthal, Pavley
NOES: Strickland, Blakeslee
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Global warming: Greenhouse Gas Reduction
Account
SOURCE : Author
DIGEST : This bill establishes the Greenhouse Gas
Reduction Fund within the Air Pollution Control Fund and
requires that all moneys collected pursuant to the
market-based compliance mechanism be deposited in the Fund
and available upon appropriation by the Legislature for the
purposes of carrying out the California Global Warming
Solutions Act (CGWSA).
ANALYSIS : The CGWSA designates the Air Resources Board
(ARB) as the state agency charged with monitoring and
regulating sources of emissions of greenhouse gases. The
ARB is required to adopt a statewide greenhouse gas
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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 ARB to include use of market-based
compliance mechanisms. The Act authorizes the ARB to adopt
a schedule of fees to be paid by the sources of greenhouse
gas emissions regulated pursuant to the Act, and requires
the revenues collected pursuant to that fee schedule be
deposited into the Air Pollution Control Fund and be
available, upon appropriation by the Legislature, for the
purposes of carrying out the act.
This bill:
1. Establishes the Greenhouse Gas Reduction Fund (Fund)
within the Air Pollution Control Fund and requires that
all moneys collected pursuant to the market-based
compliance mechanism be deposited in the Fund and
available upon appropriation by the Legislature for the
purposes of carrying out the CGWSA.
2. Makes findings that (a) ARB, in accordance with its
discretionary authority, has adopted a final regulation
establishing a cap-and-trade program for greenhouse
gases (GHGs) and that funds generated by the program are
regulatory fees whose use is required to conform with
Sinclair Paint Co. v. State Board of Equalization (1997)
15 Cal.4th 866, (b) under current cap-and-trade
regulations ARB will begin auctioning GHG emission
allowances and proceeds will be deposited into the Air
Pollution Control Fund and only available upon
appropriation by the Legislature, and (c) if the
cap-and-trade regulation does not remain in place ARB
may adopt alternate regulation to ensure the reduction
of GHG emissions pursuant to the CGWSA.
Background
Cap-and-trade . The adopted cap-and-trade regulation
imposes a cap on the aggregate GHG emissions allowed from
"capped sectors." The entities covered within these
sectors constitute approximately 85% of all statewide GHG
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emissions. Each year the cap declines, resulting in a
reduction in GHG emissions over time. To comply with the
cap, covered entities must surrender to the state a number
of "compliance instruments" equal to the amount of their
GHG emissions, as expressed in the equivalent metric tons
of CO2. The regulations describe two types of compliance
instruments: (1) an "allowance" to emit GHGs, all of which
are generated by the state in an amount equal to the cap,
and (2) an "offset" resulting from an emissions reduction
achieved in an uncapped sector and generated by third party
pursuant to a protocol adopted by ARB.
Under the cap-and-trade regulation many of the allowances
are freely allocated to the covered entities, some are held
in a price containment reserve, and the remainder
auctioned. Allowances received or purchased can be traded,
thus creating an emissions market which according to ARB
minimizes compliance costs and encourages businesses to
invest in GHG emissions reductions. ARB plans to hold
auctions quarterly starting in November 2012, and monies
collected for allowances sold at auction are deposited into
the Air Pollution Control fund, with the exception of
allowances sold on behalf of investor owned utilities
(IOUs). IOUs are given enough allowances to cover all of
their emissions, but are required to auction them all. The
revenues from these auctions are then returned to the IOUs
to be used for ratepayer benefit in accordance with an
ongoing rulemaking at the Public Utilities Commission.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, unknown,
but likely in the hundreds of thousands of dollars, from
the Air Pollution Control Fund (special) beginning in
2012-13 for additional accounting needs.
SUPPORT : (Verified 5/29/12)
American Lung Association
Audubon California
Bloom Energy
Blue Green Alliance
California Climate and Agriculture Network
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California Energy Efficiency Industry Council
California Housing Partnership Corporation
California Releaf
California Urban Forests Council
California Watershed Network
Californians Against Waste
CALSTART
Energy Independence Now
Environment California
Environmental Defense Fund
Environmental Entrepreneurs
Global Green USA
Greenlining Institute
Natural Resources Defense Council
Nature Conservancy
Pacific Forest Trust
Small Business Majority
SunRun
Transform
Trust for Public Land
Union of Concerned Scientists
Wilderness Society
OPPOSITION : (Verified 5/29/12)
American Council of Engineering Companies of California
California Chamber of Commerce
California Grocers Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Retailers Association
California Taxpayers Association
Can Manufacturers Institute
Chemical Industry Council of California
Western States Petroleum Association
ARGUMENTS IN SUPPORT : According to supporters, this bill
"provides a framework to advance the goals of California's
landmark law, the ÝCGWSA], to reduce ÝGHG] emissions in a
manner that optimizes benefits for all Californians."
Supporters also note that "fees generated by the
market-based compliance mechanism should adhere to the
legal precedent of ÝSinclair Paint] governing regulatory
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fees, advancing GHG reductions and the goals of AB 32."
ARGUMENTS IN OPPOSITION : According to opponents, "The
purpose of cap-and-trade is to reduce greenhouse gas
emissions, not raise billions in new revenue for state
coffers?Ýthis bill] wrongly assumes ÝARB] has the legal
authority to withhold allowances and conduct the auctions,
and the bill would spend revenues without a good
understanding of the serious
impacts of collection and expenditure on program
cost-effectiveness and emissions leakage."
DLW:mw 5/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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