BILL ANALYSIS Ó
SB 726
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: SB 726
AUTHOR: Lara
AMENDED: April 8, 2013
FISCAL: Yes HEARING DATE: May 1, 2013
URGENCY: No CONSULTANT: Rebecca Newhouse
SUBJECT : CALIFORNIA GLOBAL WARMING SOLUTIONS ACT OF 2006:
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 nonvoting member appointed
by the Senate Rules Committee, one ex officio nonvoting
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).
4) Requires the ARB Chairperson and the Secretary for
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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 agency (GC
§12894).
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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) Repeals the provision exempting the WCI, Inc. from the
Bagley-Keene Open Meeting Act and specifies that WCI, Inc.
and the appointees when performing their statutory duties
related to the WCI, Inc. are subject to the requirements of
the Bagley-Keene Open Meeting Act and the California Public
Records Act.
2) Requires the WCI, Inc. to cease all work on behalf of the
state on and after January 1, 2014, until the non-ex officio
California members of the board of directors of WCI, Inc. are
confirmed by the Senate.
3) Requires the WCI, Inc. to annually submit a report to the
Governor and appropriate legislative committees that includes
the emissions reductions achieved pursuant to the Western
Climate Initiative, general plans to foster relationships
with other locations, states and nations in order to reduce
greenhouse gas emissions in California.
4) Requires that, beginning January 1, 2014, the ARB include
information on all proposed expenditures and allocations of
moneys to the WCI, Inc. in the Governor's budget.
COMMENTS :
1) Purpose of Bill . According to the author, "There have been
several concerns raised with the operations of WCI, Inc.
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Specifically, related to accessibility of information to the
public, lack of time to review agendas prior to meetings, and
the specific benefits that will be achieved by linking with
entities, such as Quebec." The author notes that as
California explores and actually links with other states and
nations, the state must ensure that proper oversight is in
place and the linkage effort is monitored appropriately. The
author states that the requirements contained in SB 726,
including subjecting California voting members of the WCI,
Inc. Board to Senate Rules confirmation, requiring the WCI,
Inc. be subject to the Bagley-Keene Open Meeting Act and the
California Public Records Act, and requiring the WCI, Inc. to
submit an annual report to the Legislature regarding linkage
updates and GHG emission reductions, will provide necessary
legislative and public oversight of California-funded linkage
efforts.
2) Brief background on cap-and-trade . Pursuant to authority
under AB 32 (Nuñez) 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, 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
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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
Québec cap-and-trade programs.
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 Québec cap-and-trade programs. On April 8,
2013, Governor Brown sent a letter to the ARB making the
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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
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,
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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) Related Legislation .
a) AB 245 (Grove) of 2013 subjects the Western Climate
Initiative, Incorporated, and its appointees to the
Bagley-Keene Open Meeting Act (Act) when performing their
duties. AB 245 is in the Assembly Governmental
Organization Committee.
b) AB 527 (Gaines) of 2013 subjects the Western Climate
Initiative, Incorporated, and its appointees to the Act
when performing their duties, as well as the California
Public Records Act, and specifies that the WCI, Inc. is
subject to an audit requested or required by the
California State Auditor. AB 527 is in the Assembly
Natural Resources Committee.
SOURCE : Senator Lara
SUPPORT : None on file
OPPOSITION : None on file