BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 278
Author: Gatto (D), et al.
Amended: 8/5/14 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 6/25/13
AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,
Lara, Roth, Wyland
NO VOTE RECORDED: Liu, Pavley
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 9-0, 7/3/13
AYES: Hill, Gaines, Calderon, Corbett, Fuller, Hancock,
Jackson, Leno, Pavley
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 77-0, 5/28/13 - See last page for vote
SUBJECT : Low carbon fuel regulations and policies
SOURCE : Author
DIGEST : This bill directs the Air Resources Board (ARB) to
consider the impact on global food supply of its low-carbon fuel
regulations and to adopt policies that favor fuels with the
highest possible sustainability.
Senate Floor Amendments of 8/5/14 direct the ARB to consider the
impact on global food supply, rather than the domestic food
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supply, and to provide, rather than encourage, the incentives
for sustainable foods produced without displacement of food
crops.
ANALYSIS : State law assigns the ARB with primary
responsibility for implementing California's air quality and
greenhouse gas (GHG) emission policies. State law gives ARB
authority to control mobile source air pollution, including the
adoption of rules for the reduction of harmful vehicle emissions
and the specification of vehicular fuel composition.
In 2006, the Legislature passed and Governor Schwarzenegger
signed AB 32 (Núñez and Pavley, Chapter 488) to establish a
statewide GHG emissions limit such that by 2020 California shall
reduce its GHG emissions to the level they were in 1990. ARB
instituted a low-carbon fuel standard (LCFS) as one element of
achieving the AB 32 goal.
This bill:
1. Directs the ARB when promulgating regulations or other
policies on the carbon intensity of fuels to consider the
following sustainability factors:
The full life-cycle carbon emissions from producing
the fuel, the positive or negative effect a fuel source
has on global food supply including crop displacement,
food prices, food shipping, and market conditions, and the
direct and indirect land use changes associated with
producing the fuel.
The state of the fuel market and technologies.
2. Requires ARB by December 2015 to include mechanisms and
policies that favor low-carbon fuels with the highest
possible sustainability based on the factors listed above and
provide incentives for sustainable fuels produced without
displacement of food crops.
Comments
Purpose . Executive Order S-01-07 tasked ARB with looking solely
at the carbon intensity of California's transportation fuels.
The author's office asserts that this bill directs ARB also to
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take into consideration the impacts fuels have on food
production, as well as the overall sustainability of the fuel.
The author's office notes that ARB is currently updating its
indirect land use change calculation, an algorithm used to
estimate the indirect carbon emissions generated by producing
fossil fuels or alternative fuels. Several articles have
challenged ARB to take into consideration several additional
sources of indirect emissions, including changes in global food
shipping caused by the production of a fuel. This bill requires
ARB to include these additional factors in its update of the
indirect land use change calculation.
Citing the University of California Davis Institute of
Transportation Studies, the author's office notes that the LCFS
generated 78% of its credits from ethanol in 2012. The author's
office believes the state should be incentivizing more
sustainable alternative fuels that do not displace food crops,
like waste-based fuels, cellulosic ethanol, electrification, and
efficiency. The author introduced this bill to require ARB to
take proactive steps to incentivize non-food based compliance
mechanism and require ARB to give preference to non-food based
fuels.
Carbon intensity . Carbon intensity is a measure of the direct
and indirect GHG emissions associated with each of the steps in
the full life-cycle of a transportation fuel (also referred to
as the "well-to-wheels" for fossil fuels, or "seed or
field-to-wheels" for biofuels). The overall GHG contribution
from each particular step in the production and delivery process
is a function of the energy that step requires. Thus, if a fuel
that requires little energy to produce and that produces low
carbon emissions when consumed has to be trucked a long way to
market, it can still have a high life-cycle carbon intensity
because of the high energy requirements of getting it to market.
LCFS . 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% by 2020 and ordered ARB to
establish a LCFS for the state. ARB adopted the LCFS regulation
in April 2009, and it took full effect a year later. In May
2009, ARB adopted its AB 32 Scoping Plan to map out how to
achieve the reduction in GHG emissions by 2020, as required by
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AB 32. The scoping plan included the LCFS as an early action.
ARB staff designed the LCFS to reduce GHG emissions by reducing
the carbon intensity of transportation fuels used in California
by an average of 10% by the year 2020. The LCFS achieves a 10%
reduction in average carbon intensity by establishing an initial
intensity level for specified providers of transportation fuels
("regulated parties") and incrementally lowering the allowable
carbon intensity in each subsequent year. For example, modest
targeted reductions of 0.5% and 1% are required for 2012 and
2013, respectively. The reductions become more substantial with
each year, such that by 2020, the 10% average reduction is
achieved. This reduction makes room for low-carbon intensity
fuels to enter the market.
A regulated party needs to meet each year's specified target,
taking into account all of its transportation fuels. If the
reduction in intensity exceeds the target, the provider earns a
credit, which can be sold or carried forward. The LCFS allows
fuels like electricity, hydrogen, and natural gas - which
already meet the carbon intensity standards through 2020 - to
generate LCFS credits that may be sold. Regulated fuel
providers, therefore, can meet their annual carbon intensity
levels through several compliance strategies:
Making low-GHG fuels, such as biofuels made from waste
products;
Carrying forward credits from previous years from their own
production process;
Buying credits from other fuel producers; or
Reducing the amount of fuel they sell.
A fuel provider meets the requirements of the LCFS if the amount
of credits at the end of the year is equal to, or greater than,
the deficits. A provider determines its credits and deficits
based on the amount of fuel sold, the carbon intensity of the
fuel, and the efficiency by which a vehicle converts the fuel
into useable energy. Under the LCFS, a regulated party's
compliance with the annual carbon intensity requirements is
based on end-of-year credit/deficit balancing.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
On-going costs of $1.6 million from the Cost of
Implementation Account (CI Account) within the Air Pollution
Control Fund (special) for nine positions starting in fiscal
year (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 CI Account to assist
ARB with modeling a global food supply analysis.
SUPPORT : (Verified 8/6/14)
Clean Power Campaign
Environmental Defense Fund
Milk Producers Council
Union of Concerned Scientist
OPPOSITION : (Verified 8/6/14)
Advanced Ethanol Council
American Lung Association
Natural Resources Defense Council
ARGUMENTS IN SUPPORT : The Milk Producers Council (MPC) states
that California's dairy families produce about 20% of the
nation's milk and in order to do that, they need a reliable
supply of hay and grains in order to feed their cows. The MPC
notes that in recent years, that reliable supply has been
severely threatened, as our energy policies, particularly those
enacted by the United States Congress, have resulted in more
than 40% of the nation's corn supply being used to produce
ethanol rather than be available for food or animal feed
purposes.
ARGUMENTS IN OPPOSITION : The American Lung Association (ALA)
and the Natural Resources Defense Council (NRDC) are concerned
that this bill calls for analyses that are already underway at
ARB, does not reflect the benefits of the LCFS and the need for
California to move strongly in the direction of reducing carbon
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content of fuels, and focuses on the issue of "food supply
sustainability" rather than sustainability more generally. Both
of these organizations note the importance and benefit of the
LCFS as a key tool to fight both air pollution and climate
change problems, expressing concern that the bill may weaken the
LCFS, which they believe is already structured to favor fuels
that do not compete with food production. The ALA and NRDC
instead are seeking amendments to this bill that would clarify
the benefits and importance of the LCFS, support continued ARB
review of direct and indirect land use issues (including food
supply), and direct ARB to incorporate policies in the LCFS that
favor the least carbon-intensive and most sustainable fuels.
ASSEMBLY FLOOR : 77-0, 5/28/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Conway, Cooley,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Chesbro, Holden, Vacancy
JA:k 8/6/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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