BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 278 (Gatto) - California Global Warming Solutions Act of
2006: Low Carbon Fuel Standard.
Amended: July 11, 2013 Policy Vote: T&H 9-0, EQ 9-0
Urgency: No Mandate: No
Hearing Date: August 30, 2013 Consultant:
Marie Liu
SUSPENSE FILE.
Bill Summary: AB 278 would require the California Air Resources
Board (ARB) to consider specific factors relating to
sustainability when considering the carbon intensity of fuels
and would require the ARB to have policies that favor the
low-carbon fuels with the highest possible sustainability.
Fiscal Impact:
On-going costs of $1.6 million from the Cost of
Implementation Account within the Air Pollution Control Fund
(special) for nine positions starting in FY 2013-14.
Initial costs of at least $400,000 for outside contracts
for FY 2013-14 and FY 2014-15 and ongoing annual costs of
$135,000 beginning FY 2015-16 from the Cost of
Implementation Account to assist ARB with modeling a global
food supply analysis.
Background: The California Global Warming Solutions Act of 2006
(AB 32) requires California to reduce the amount of greenhouse
gas (GHG) emitted to 1990 levels by 2002.
In January 2007, Governor Schwarzenegger issued Executive Order
S-01-07 in which he ordered the establishment of a statewide
goal of reducing the carbon intensity of California's
transportation fuels by at least 10 percent by 2020 and ordered
the ARB to establish a low-carbon fuel standard (LCFS) for the
state. ARB adopted the LCFS regulation in April 2009, which
became effective in 2010. ARB has instituted the LCFS as an
element in achieving the AB 32 goals.
Carbon intensity (CI) is a measure of the direct and indirect
GHG emissions associated with each of the steps in the full
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life-cycle of a transportation fuel. The lower the CI value of a
fuel, the more useful that fuel is in meeting the state's LCFS
standards.
For each fuel pathway, the LCFS requires the analysis of both
direct and indirect effects when determining the CI value.
Examples of direct effects include farming practices, crop
yields, harvesting practices, transportation of the feedstock,
the efficiency and fuel use, and the transport and distribution
of the fuel. An example of an indirect effect is land use
change. When farmland that is devoted to food and feed
production is diverted to the production of a biofuel crop, it
causes the conversion of new lands into agricultural in order to
grow replacement food and feed. As a result, biofuels produced
from food have a significantly higher CI value than biofuels
produced from waste products or other fuels that are not crop or
fossil fuel based.
ARB is currently in the process of revising the CI calculation
methodology to better account for the potential impacts of price
effects and related reductions in food consumption from the
diversion of food crops to produce biofuels. ARB anticipates
adopting the updates to its LCFS regulations this fall to
incorporate the revised methodology.
Proposed Law: This bill would require the ARB to consider the
sustainability of the fuel when promulgating regulations or
other policies regarding the carbon intensity of fuels.
Specifically, when considering the sustainability of the fuel,
the ARB must consider the full life-cycle of carbon emissions in
producing the fuel, the effect of the fuel on the global food
supply, and the direct and indirect land use changes resulting
from the fuel production.
This bill would also require the ARB to provide incentives for
sustainable fuels produced without food stock or displacement of
food crops by December 2014.
Staff Comments: This bill would require ARB to significantly
revise its methodology to calculate CI values to change the way
ARB accounts for certain impacts like crop displacement and food
prices. Under this bill, ARB would be required to consider the
effect of a fuel source on the global food supply which includes
crop displacement, food prices, food shipping, and market
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conditions.
Changing the methodology by which ARB calculates the impact of a
fuel on food supply as specified in the bill would require
significant additional staff for activities such modeling global
food prices, establishing baseline global food markets, and
researching the impacts of food shipping. Some of these
responsibilities will have to be contracted out as it involves
issues that are out of the ARB's staff expertise. There will
also be ongoing costs to run models once they are developed. ARB
estimates that nine positions will be needed on-going at a cost
of $1.6 million and initial contracting costs of at least
$400,000 for the first two years and then $135,000 ongoing.
This bill requires ARB to provide incentives for fuels produced
without food stock or displacement of food crops; however it is
unclear on what is the likely form of these incentives. Staff
notes that the term "incentives" is often used in other programs
to refer to financial benefits such as tax credits and loan
incentives.