BILL ANALYSIS Ó
AB 153
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Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 153 (Bonilla) - As Amended: April 8, 2013
SUBJECT : California Global Warming Solutions Act of 2006:
offsets
SUMMARY : Requires the Air Resources Board (ARB) to adopt a
process for the review and consideration of new offset protocols
and contains related findings.
EXISTING LAW :
1)Requires ARB to adopt a statewide greenhouse gas (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)Contains extensive findings regarding the role of offsets in
ARB's cap-and-trade program.
2)Requires ARB, on or before January 1, 2015, to adopt a process
for review and consideration of new offset protocols.
Authorizes ARB to rely on an existing exemption from the
rulemaking requirements of the Administrative Procedure Act
(APA) for the adoption of "methodologies" under AB 32.
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Requires the process to include:
a) A published schedule for review and consideration of new
offset protocols submitted to ARB.
b) An online system to track the progress of new offset
protocols under review by ARB.
c) An explanation of how the process will accommodate
public input and comments.
d) An explanation of the criteria used for consideration of
new offset protocols, including a description of the
standards for protocol approval, rejection, and delay, as
well as, to the extent feasible, a description of the
social, environmental, and financial impacts analysis used
in making offset protocol decisions and estimate of
potential supply and expected development costs.
3)Requires ARB to use this process to annually review and
consider new offset protocols.
4)Requires ARB to establish incentives and guidelines for the
approval of offsets according to the following priorities:
a) The creation of "green" jobs and reduction of GHG
emissions in the state.
b) Air quality benefits in California communities
disproportionately affected by air pollution.
c) Public health and environmental "co-benefits" anywhere
in the state.
5)Requires ARB to submit an annual report to the Legislature
regarding offset supply.
FISCAL EFFECT : Unknown [according to the Assembly
Appropriations Committee analysis of a similar bill (AB 2563,
2012), (1) one-time costs of several hundred thousand dollars -
equivalent to three fulltime positions - to ARB to develop the
protocol review and consideration process and (2) ongoing costs
in the range of $125,000 to $250,000 - equivalent to one to two
full time positions, or some fraction thereof - to update the
protocol review schedule, maintain online resources, and serve
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as a public contact.]
COMMENTS :
1)Background on cap-and-trade. According to ARB, a total
reduction of 80 million metric tons (MMT), or 16 percent
compared to business as usual, is necessary to achieve the
2020 limit. Approximately 78 percent of the reductions will
be achieved through identified direct regulations. ARB
proposes to achieve the balance of reductions necessary to
meet the 2020 limit (approximately 18 MMT) through a
cap-and-trade program that covers an estimated 600 entities.
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 regulated
entities or other parties. In addition to allowances,
emissions reductions from sources that are outside the cap
coverage, called offsets, can be used to meet compliance
obligations. 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 surrender enough compliance
instruments to match their emissions during this time period.
2)The role of offsets in cap-and-trade. 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 use of offsets for compliance
with AB 32, as envisioned in the cap-and-trade program, has
been invented by ARB without any statutory guidance. While
ARB has justified the reliance on compliance offsets as an
opportunity for low-cost reductions from outside the cap,
others have questioned how offsets, particularly from sources
outside the state, might meet AB 32's requirements or
otherwise produce benefits in California. 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. AB 1404 also prioritized the use of compliance
offsets to favor local sources that resulted in local air
quality benefits. AB 1404 was vetoed by Governor
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Schwarzenegger.
ARB's cap and trade regulation allows, but does not require,
the use of offsets to meet a limited portion of regulated
entities' compliance obligation. Each regulated entity may
meet up to 8 percent of their total compliance obligations
with offsets, which is equivalent to approximately 50 percent
of their GHG reduction obligation. ARB recognizes only
compliance offsets generated by sources that adhere to a
compliance offset protocol adopted by ARB. To date, ARB has
adopted protocols for the following four project types:
livestock manure management, ozone depleting substances, urban
forestry, and U.S. forestry.
ARB does not have a formal process for review of proposed
offset protocols, as proposed by this bill, but the board, in
Resolution 11-32 adopted October 20, 2011, directed the
Executive Officer "to develop implementation documents laying
out the process for review and consideration of new offset
protocols, including a description of how staff will evaluate
additionality."
3)Process questions. This bill incorporates by reference an
existing exemption from the rulemaking requirements of the APA
for the adoption of "methodologies" under AB 32 (Health and
Safety Code Section 38571). The author and the committee may
wish to clarify that the APA exemption does not apply to ARB
adoption of offset protocols. Alternatively, the provisions
for review and consideration of offsets could be posed as
"guidelines" and the APA reference removed.
In addition, while the bill requires ARB to establish
incentives and guidelines for the approval of offsets
according to specified priority in-state benefits, it's not
clear at what stage of offset review ARB should apply the
priorities - consideration of proposed offset protocols,
approval of protocols, or application of offsets for
compliance.
4)Prior legislation. This bill is very similar to AB 2563
(Smyth), approved by this committee in June 2012 and later
held in the Assembly Appropriations Committee, except that AB
2563 did not include this bill's provisions to prioritize
offsets that provide benefits in California.
AB 153
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REGISTERED SUPPORT / OPPOSITION :
Support
California Biomass Energy Alliance
California Energy Efficiency Industry Council
California League of Food Processors
California Manufacturers and Technology Association
California Municipal Utilities Association
CleanWorld
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Los Angeles Integrated Waste Management Task Force
Los Angeles County Integrated Management Committee
Natural Resources Defense Council
Recology
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092