BILL ANALYSIS �
AB 527
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 527
AUTHOR: Gaines
AMENDED: May 7, 2013
FISCAL: Yes HEARING DATE: June 26, 2013
URGENCY: No CONSULTANT: Rebecca
Newhouse
SUBJECT : WESTERN CLIMATE INITIATIVE, INC.
SUMMARY :
Existing law :
1) Under the California Global Warming Solutions Act of 2006
(CGWSA), requires the California Air Resources Board (ARB)
to determine the 1990 statewide greenhouse gas (GHG)
emissions level and approve a statewide GHG emissions limit
that is equivalent to that level, to be achieved by 2020,
and to adopt GHG emission reduction measures by regulation,
and sets certain requirements in adopting the regulations.
ARB may include the use of market-based mechanisms to
comply with these regulations. (Health and Safety Code
�38500 et seq.).
2) Requires that the California membership of the board of
directors of the Western Climate Initiative, Incorporated
(WCI, Inc.) include one ex officio non-voting member
appointed by the Senate Rules Committee, one ex officio
non-voting member appointed by the Speaker of the Assembly,
the Chairperson of the ARB, or their designee, and the
Secretary for Environmental Protection, or their designee
(Government Code �12894).
3) Requires that the ARB provide notice to the Joint
Legislative Budget Committee of any funds over $150,000
provided to the WCI, Inc., or its derivatives or
subcontractors, no later than 30 days prior to the transfer
or expenditure of the funds (GC �12894).
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4) Requires the ARB Chairperson and the Secretary for
Environmental Protection to report every six months to the
Joint Legislative Budget Committee on any actions proposed
by the WCI, Inc. that affect the state government or
entities within the state (GC �12894).
5) Defines "link" or "linkage" to mean an action taken by the
ARB or other state agency that results in acceptance of
compliance instruments by the State of California, issued
by any other governmental agency, for purposes of
demonstrating compliance with a market-based compliance
mechanism (GC �12894).
6) Prohibits a state agency from linking with any other state,
province, or country unless the state agency notifies the
Governor and the Governor makes the following findings (GC
�12894):
a) The jurisdiction has adopted program requirements for
GHG reductions, including requirements for offsets,
which are equivalent to or stricter than those required
by the CGWSA.
b) The state of California is able to enforce the CGWSA,
and related statutes, against any entity subject to
regulation under that statute, and against any entity
located within the linking jurisdiction to the maximum
extent permitted under the federal and state
constitutions.
c) The proposed linkage provides for enforcement of
applicable laws by the state agency or linking
jurisdiction of program requirements that are equivalent
to or stricter than those required by the CGWSA.
d) The proposed linkage and related participation of
California in WCI, Inc. does not pose significant
liability on the state for any failure associated with
the linkage.
7) Requires the above findings consider advice from the
Attorney General, and that the Governor issue the above
findings within 45 days of receiving notice from the state
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agency (GC �12894).
8) Under the Bagley-Keene Open Meeting Act (Act), requires
state boards, commissions, committees, panels, and
councils, meeting certain criteria and that are required to
hold official meetings, to publicly notice their meetings,
prepare agendas, accept public testimony and conduct their
meetings in public, unless specifically authorized by the
Act to meet in closed session (GC �11120 et seq.).
9) Exempts WCI, Inc. and the appointees when performing their
statutory duties related to the WCI, Inc. from the
requirements of the Bagley-Keene Open Meeting Act (GC
�12894).
This bill :
1) Removes the Bagley-Keene Open Meeting Act exemption for the
WCI, Inc.
2) Requires that a contract between the state and the WCI,
Inc. be subject to audit by the California State Auditor.
COMMENTS :
1) Purpose of Bill . According to the author, "Currently,
actions taken by WCI, Inc. are not subject to the
Bagley-Keene Open Meetings Act. AB 527 would remove the
exemption and subject WCI, Inc. to the good government
transparency act that is required of bodies acting on
behalf of the people."
2) Brief background on cap-and-trade . Pursuant to authority
under AB 32 (Nu�ez) Statutes of 2006, Chapter 488, the ARB
adopted cap-and-trade regulations and those regulations
were approved on December 13, 2011. Beginning on January 1,
2013, the cap-and-trade regulation sets a firm, declining
cap on total GHG emissions from sources that make up
approximately 85% of all statewide GHG emissions. Sources
included under the cap are termed "covered" entities. The
cap is enforced by requiring each covered entity to
surrender one "compliance instrument" for every metric ton
of carbon dioxide equivalent (MTCO2e) that it emits at the
end of a compliance period. Over time, the cap declines,
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resulting in GHG emission reductions. Compliance
instruments include allowances and offsets, where
allowances are generated by the state in an amount equal to
the cap, and offsets result from emission reductions
achieved in an uncapped sector, generated pursuant to an
approved protocol adopted by ARB. Offsets may be used to
satisfy up to 8% of a covered entity's compliance
obligation.
Initially, 90% of all allowances will be allocated freely
to covered entities. A small percentage of the remaining
allowances are set aside for an allowance price-containment
reserve, and the rest are sold at quarterly auctions.
After the first compliance period for the program, the
number of allowances freely distributed to entities
declines, and entities must either reduce emissions or
purchase a greater number of allowances at auction. The
program authorizes entities to buy or sell their
allowances, creating a market that is intended by ARB to
minimize the cost of compliance and encourage entities to
invest in GHG emissions reductions.
For the first two years, the program will cover electricity
generation, and large industrial sources and processes with
annual GHG emissions at or above 25,000 MTCO2e. The
program will expand in 2015 to include fuel distributors to
address emissions from combustion of transportation fuels
and combustion of natural gas and propane at sources not
covered in the first phase of the program.
3) Linkage . For the purposes of the cap-and-trade regulation,
linkage refers to the use of compliance instruments from a
GHG emission trading system outside California to meet
compliance obligations under California's cap-and-trade
regulation, and the reciprocal approval of compliance
instruments issued by California to meet compliance
obligations in the external trading program. The
cap-and-trade regulations approved on December 13, 2011,
include general requirements for linking to other trading
programs. On May 9, 2012, ARB staff noticed regulatory
amendments to allow for linkage between the California and
Qu�bec cap-and-trade programs.
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Subsequent to the notice, SB 1018, a 2012 Budget trailer
bill, was enacted, with provisions intended to establish
new oversight and transparency over proposed linkages and
the WCI, Inc. Specifically, the bill requires state
agencies to notify the Governor that the agency intends to
link with another GHG emissions trading program, and also
requires the Governor to make specified findings, reviewed
by the Attorney General, prior to the agency taking action
to approve the linkage.
On February 22, 2013, ARB's Executive Officer sent a notice
of the intent to link with Quebec, and requested the
Governor consider and make four findings required by
statute so that the ARB may adopt regulatory amendments to
link the California and Quebec cap-and-trade programs. On
April 8, 2013, Governor Brown sent a letter to the ARB
making the required findings. In mid-April, the ARB
approved the regulatory amendments to link with Quebec
beginning on January 1, 2014.
4) WCI and the WCI, Inc . The WCI is a collaboration of
independent jurisdictions working together to identify,
evaluate, and implement emissions trading policies to
address climate change at a regional level. The WCI began
in February 2007 when the Governors of California, Arizona,
New Mexico, Oregon, and Washington signed an agreement
directing their respective states to develop a regional
target for reducing greenhouse gas emissions, participate
in a multi-state registry to track and manage greenhouse
gas emissions in the region, and develop a market-based
program to reach the target. The WCI partner jurisdictions
released recommendations for designing and implementing an
emissions trading program. Those recommendations are
consistent with the design of the ARB cap-and-trade
program. Current WCI membership differs substantially from
the inception, since all US states besides California
dropped out, and the Provinces of British Columbia,
California, Ontario, Quebec and Manitoba, have since
joined.
In November 2011, the WCI Partner jurisdictions created
Western Climate Initiative, Incorporated (WCI, Inc.), a
non-profit corporation formed to provide administrative and
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technical support to state and provincial greenhouse gas
emissions trading programs. The administrative services
that WCI, Inc. plans to provide to participating
jurisdictions include development of a compliance tracking
system for allowance and offset certificates,
administration of allowance auctions, and market monitoring
of allowance auctions and allowance and offset certificate
trading. The WCI, Inc. governing board is made up of eight
members: four representing California, two representing
British Columbia and two representing Quebec.
ARB's agreement with WCI, Inc. provides ARB access to the
administrative systems that WCI, Inc. is developing.
According to the ARB, the benefits of participating in WCI,
Inc. will include reduced administrative costs through cost
sharing with other jurisdictions and enhanced security and
effectiveness of program infrastructure across programs,
including the tracking system, auction operation, and
market monitoring.
ARB's share of the WCI, Inc. budget is approximately $3.7
million over two years. Quebec's share of the budget over
the same time period is approximately $1.6 million. Thus,
the preliminary WCI, Inc. budget for its first two years of
operation is $5.3 million. The distribution of funding
across jurisdictions is based on the number of
participating jurisdictions and the total emissions covered
by each jurisdiction's emissions trading program.
5) Conflicting measure . The provisions of this measure
conflict with SB 726 (currently double referred to Assembly
Natural Resources and Assembly Judiciary Committees).
Double-jointing language with SB 726 (Lara) is necessary to
avoid chaptering out of one of the measures. Because SB
726 is double referred in the Assembly, double-jointing
amendments to this measure should be taken on the Senate
floor in case SB 726 is amended out of either policy
committee in the Assembly.
SOURCE : Author
SUPPORT : California League of Food Processors
California Manufacturers & Technology
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Association
Western States Petroleum Association
OPPOSITION : None on file