BILL ANALYSIS Ó
SB 605
Page 1
Date of Hearing: August 12, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 605 (Lara) - As Amended: July 3, 2013
SENATE VOTE : 27-11
SUBJECT : California Global Warming Solutions Act of 2006:
Greenhouse Gas Reduction Fund and scoping plan
SUMMARY : Appropriates up to $125 million of cap-and-trade
auction revenue to the Air Resources Board (ARB) to be spent on
greenhouse gas (GHG) reduction programs and projects in
disadvantaged communities. Imposes new requirements on the
implementation of AB 32 via the scoping plan update, including
requiring ARB to (1) prioritize GHG emission reductions in
regions of the state most impacted by air pollution, (2) focus
on measures to reduce short-lived climate pollutants, and (3)
limit the use of offsets to those located in California.
EXISTING LAW :
1)Requires ARB, pursuant to California Global Warming Solutions
Act of 2006 (AB 32), to adopt a statewide GHG emissions limit
equivalent to 1990 levels by 2020 and adopt regulations to
achieve maximum technologically feasible and cost-effective
GHG emission reductions.
2)Requires ARB to adopt a scoping plan for implementation of AB
32 by January 1, 2009, and to update the scoping plan at least
once every five years.
3)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, once
specified conditions are met. Prior to adopting a
market-based compliance mechanism, to the extent feasible and
in furtherance of achieving the statewide GHG emissions limit,
ARB must:
a) Consider the potential for direct, indirect, and
cumulative emission impacts from these mechanisms,
including localized impacts in communities that are
already adversely impacted by air pollution.
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b) Design any market-based compliance mechanism to
prevent any increase in the emissions of toxic air
contaminants or criteria air pollutants.
c) Maximize additional environmental and economic
benefits for California, as appropriate.
4)Requires any direct regulation or market-based compliance
mechanism to achieve GHG reductions that are real, permanent,
quantifiable, verifiable, and enforceable by ARB.
5)Requires ARB, to the extent feasible and in furtherance of
achieving the statewide GHG emissions limit, to:
a) Design market-based and certain other regulations,
including distribution of emissions allowances where
appropriate, 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.
b) Ensure that activities undertaken to comply with the
regulations do not disproportionately impact low-income
communities, and complement efforts to achieve and
maintain federal and state ambient air quality standards
and to reduce toxic air contaminant emissions.
6)Requires ARB to ensure that the GHG emission reduction rules,
regulations, programs, mechanisms, and incentives under its
jurisdiction direct public and private investment toward the
most disadvantaged communities in California and provide an
opportunity for small businesses, schools, affordable housing
associations, and other community institutions to participate
in and benefit from statewide efforts to reduce GHG emissions.
7)Establishes the GHG Reduction Fund (GHGRF) and requires all
moneys, except for fines and penalties, collected by ARB from
the auction or sale of allowances pursuant to a market-based
compliance mechanism (i.e., the cap-and-trade program adopted
by ARB under AB 32) to be deposited in the GHGRF and available
for appropriation by the Legislature.
8)Establishes the GHGRF Investment Plan and Communities
Revitalization Act [AB 1532 (John A. Pérez), Chapter 807,
Statutes of 2012] to set procedures for the investment of GHG
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allowance auction revenues. AB 1532 authorizes a range of GHG
reduction investments and establishes several additional
policy objectives.
9)Requires the investment plan to allocate (1) a minimum of 25
percent of the available moneys in the fund to projects that
provide benefits to identified disadvantaged communities and
(2) a minimum of 10 percent of the available moneys in the
fund to projects located within identified disadvantaged
communities [SB 535 (De Leon), Chapter 830, Statutes of 2012].
THIS BILL :
1)Appropriates $125 million of the unencumbered funds determined
by the Controller to be in the GHGRF in the 2013-14 fiscal
year (i.e., funds in excess of the $500 million loaned to the
General Fund in the Budget Act) to ARB and requires ARB to
spend these funds on programs and projects located within and
benefitting disadvantaged communities, as defined. The funds
must be spent by June 30, 2014 and in accordance with the
three-year investment plan adopted pursuant to AB 1532.
2)Requires ARB, when updating its AB 32 scoping plan, to:
a) Prioritize and emphasize measures and actions
resulting in GHG emissions reductions that create jobs
within the state and reduce co-pollutants in regions of
the state most impacted by toxic and criteria air
pollutants.
b) Prioritize and emphasize current regulations and
actions, and recommend additional measures and actions
that can be implemented beginning no later than December
31, 2015, to achieve the maximum, technologically
feasible, and cost-effective reductions in short-lived
climate pollutants with high global warming potentials.
c) Limit the use of offsets to those offsets
originating and achieved within the state.
d) Include a plan that achieves the GHG emissions goals
established pursuant to AB 32 to be implemented in the
event any of ARB's regulatory measures are not projected
to result in the emissions reductions necessary to meet
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the established goals.
e) Consider the use of special funds authorized to be
expended for the purposes of GHG emissions reductions.
3)Requires ARB to submit these scoping plan criteria to the
Joint Legislative Budget Committee (JLBC). If, after 30 days
of receipt, JLBC has not made a finding on the submitted
elements, the updated scoping plan shall be deemed concurred.
4)Provides if ARB updates the scoping plan prior to January 1,
2014, ARB must revise the scoping plan to incorporate the
requirements established by this bill.
5)Defines "offset" to mean a quantified unit of GHG emission
that is reduced, avoided, or permanently sequestered in a
sector not regulated by a market-based compliance mechanism
adopted by ARB.
FISCAL EFFECT : According to the Senate Appropriations Committee
(based on a version of the bill prior to the addition of the
$125 million appropriation), annual limited-term costs of $1.7
million and 11.2 PYs from the Cost of Implementation Account
(COI) within the Air Pollution Control Fund (special fund) for
FY 2013-14, FY 2014-15, and FY 2015-16 for additional
information to be incorporated into the 2013 scoping plan.
Annual ongoing costs of $1.7 million and 11.2 PYs from the COI
starting in FY 2013-14 for to incorporate additional information
into future scoping plans.
COMMENTS :
1)Background. The AB 32 Scoping Plan is a description of the
specific measures ARB and others must take to meet the
objective of AB 32: Reduce statewide GHG emissions to 1990
levels by 2020. The reduction measures identified in the
Scoping Plan must be proposed, reviewed, and adopted as
individual regulations by January 1, 2011, to become operative
beginning on January 1, 2012.
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
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reductions necessary to meet the 2020 limit (approximately 18
MMT) through a cap-and-trade program that covers an estimated
600 entities.
AB 1532 established a long-term spending strategy for
cap-and-trade auction revenues. While Department of Finance
and ARB developed a three-year investment plan for the auction
proceeds pursuant to AB 1532, the 2013-14 Budget Act loaned
the first $500 million in auction revenue to the General Fund
and did not appropriate any funds pursuant to the investment
plan.
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 has been invented by ARB without any statutory
guidance. 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 eight 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, but offset projects
may be located anywhere in the United States and its
territories, Canada, or Mexico. To date, ARB has adopted
protocols for the following four project types: livestock
manure management, ozone depleting substances, urban forestry,
and U.S. forestry. 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
Schwarzenegger. In April 2013, this committee passed AB 153
(Bonilla), which, among other provisions, requires ARB to
establish incentives and guidelines for the approval of
offsets prioritizing in-state benefits, including the creation
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of "green" jobs, air quality benefits in communities
disproportionately affected by air pollution, and public
health and environmental "co-benefits" anywhere in the state.
AB 153 is pending in the Assembly Appropriations Committee
(held on suspense).
3)Think globally, act locally? By appropriating auction
revenues and establishing specific priorities for the scoping
plan, this bill would alter the course of the AB 32 program,
placing a greater emphasis on directly reducing GHG emissions
in regions of the state most impacted by air pollution. As
briefly outlined below, these measures to emphasize
alleviating burdens on disadvantaged communities may sacrifice
other legitimate objectives and overall program effectiveness:
a) Appropriate auction revenue first to disadvantaged
communities. Significant work has been done, through the
enactment and implementation of AB 1532 and SB 535, to
determine how to distribute cap-and-trade auction revenue
through an investment plan, including assuring minimum
levels of funding to disadvantaged communities. This
investment plan process was bypassed by the decision to
loan $500 million to the General Fund in the 2013-14
Budget. This bill further bypasses the investment plan
process by proposing to spend the first $125 million above
the loan amount entirely in disadvantaged communities.
This raises a number of questions, including where it would
leave other categories identified in the investment plan
that may not coincide with projects in disadvantaged
communities and whether this appropriation would count
toward, or bypass, the funding levels required by SB 535.
b) Prioritize GHG reductions that reduce co-pollutants in
regions most impacted by air pollution. Avoiding air
pollution impacts is already among AB 32's objectives,
though these objectives are subject to the conditions "to
the extent feasible and in furtherance of achieving the
statewide GHG emissions limit." This bill seems to place a
firmer and higher priority on GHG reduction measures that
reduce co-pollutants. It is not clear how this would be
reconciled with other program objectives, including
achieving other co-benefits and cost-effectiveness.
c) Limit offsets to California. The reliance on offsets to
achieve a significant portion of GHG emission reductions
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has been a focal point of criticisms of the cap-and-trade
program, including the basic question of how offsets from
outside California can be counted toward AB 32's goal of
achieving a "statewide" GHG emissions limit. However, to
the extent offsets are part of the cap-and-trade program,
with cost-containment as an explicit objective, concerns
have been raised that limiting offsets to California
sources will severely constrain supply and defeat the
cost-containment objective. An alternative to prohibiting
offsets from out-of-state sources may be to prioritize
approval of protocols and/or compliance credit for offsets
from projects that achieve in-state co-benefits. ARB could
also be directed to show how the current offset program
achieves the objectives already in AB 32, including
achieving the statewide limit, meeting the test of
enforceability by ARB, and avoiding disproportionate
impacts on low-income communities.
REGISTERED SUPPORT / OPPOSITION :
Support
A3PCON Environmental Justice Task Force
Allen Temple Baptist Church
Asian Americans Advancing Justice - Los Angeles
Asian and Pacific Islander Obesity Prevention Alliance
Asian Immigrant Women Advocates
Asian Neighborhood Design
Asian Pacific Environmental Network
Asian Pacific Policy & Planning Council
Asthma Coalition of Los Angeles County
California Black Health Network
California Environmental Justice Alliance
California Healthy Nail Salon Collaborative
California Labor Federation
California Nurses Association
Catholic Charities, Diocese of Stockton
Center on Race, Poverty & the Environment
Chinese for Affirmative Action
Chinese Progressive Association
Clean Coalition
Clean Power Campaign
Coalition for Clean Air
Communities for a Better Environment
Earth Justice Associates, First Unitarian Church of Oakland
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East Bay Alliance for a Sustainable Economy
End Oil/Communities for Clean Ports
Environmental Defense Fund (if amended)
Environmental Health Coalition
Friends of the Earth-US
Fundación Centro Estudios Ecologisos de la Republica Argentina
Global Alliance for Incinerator Alternatives
Global Exchange
Green Education
Green Technical Education & Employment
Greenlining Institute
Greenpeace
Gujarat Forum On CDM
InNative
Just Transition Alliance
Justice in Nigeria Now
Little Tokyo Service Center CDC
Local Clean Energy Alliance
Long Beach Alliance for Children with Asthma
Movement Generation
Nail Salon Women Greening their Jobs & the Environment
Nature Code/Carbon Market Watch
Nature Conservancy (if amended)
Oakland Rising
Pacific Asian Consortium in Employment
People's Community Organization for Reform & Empowerment
Physicians for Social Responsibility, Los Angeles
Planning and Conservation League
Policy Link
Public Advocates
Sacramento Housing Alliance
San Joaquin Valley Latino Environmental Advancement & Policy
Project
Sierra Club California
The City Project
TransForm
Ubuntu Green
Urban Releaf
Opposition
California Building Industry Association (unless amended)
California Chamber of Commerce (unless amended)
California Manufacturers & Technology Association (unless
amended)
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California League of Food Processors (unless amended)
California Municipal Utilities Association (unless amended)
CE2 Carbon Capital (unless amended)
Climate Markets & Investments Association
EOS Climate (unless amended)
International Emissions Trading Association
Independent Energy Producers Association (unless amended)
Silicon Valley Leadership Group (unless amended)
Southern California Public Power Authority
Western States Petroleum Association (unless amended)
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092