BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 726
Author: Lara (D)
Amended: 9/11/13
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 9-0, 5/1/13
AYES: Hill, Gaines, Calderon, Corbett, Fuller, Hancock,
Jackson, Leno, Pavley
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SENATE FLOOR : 39-0, 5/29/13
AYES: Anderson, Beall, Berryhill, Block, Calderon, Cannella,
Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Fuller,
Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,
Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,
Padilla, Pavley, Price, Roth, Steinberg, Torres, Walters,
Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Vacancy
ASSEMBLY FLOOR : Not available
SUBJECT : California Global Warming Solutions Act of 2006:
Western
Climate Initiative, Incorporated
SOURCE : Author
DIGEST : This bill imposes specified conditions on the
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participation of the California board members of the Western
Climate Initiative, Incorporated (WCI, Inc.).
Assembly Amendments (1) impose specified conditions on the
participation of the California board members of the WCI, Inc.;
(2) require the Air Resources Board (ARB) to provide notice to
the Joint Legislative Budget Committee (JLBC) for all
procurements over $150,000 proposed by WCI, Inc. that are
expected to result in a contract no later than 30 days prior to
execution of those contracts; and (3) require the ARB to include
information in the Governor's budget on all proposed
expenditures and allocations of money to WCI, Inc.
ANALYSIS :
Existing law:
1.Imposes, pursuant to SB 1018 (Senate Budget and Fiscal Review
Committee), Chapter 39, Statutes of 2012 (Resources Budget
Trailer Bill), conditions on the non-governmental entity WCI,
Inc., created to assist ARB in the implementation of AB 32
(Núñez), Chapter 488, Statutes of 2006.
A. Finds and declares that the establishment of WCI, Inc.
should be done transparently and should be independently
reviewed by the Attorney General for consistency with all
applicable laws.
B. Establishes the California membership of the board of
directors of WCI, Inc. as follows:
(1) One appointee or his/her designee who shall serve
as an ex officio nonvoting member shall be appointed by
the Senate Rules Committee.
(2) One appointee or his/her designee who shall serve
as an ex officio nonvoting member shall be appointed by
the Speaker of the Assembly.
(3) The Chairperson of the ARB or his/her designee.
(4) The Secretary for Environmental Protection or
his/her designee.
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C. Requires ARB to provide notice to the JLBC of any funds
over $150,000 provided to WCI, Inc. or its derivatives or
subcontractors no later than 30 days prior to transfer or
expenditure of these funds.
D. Exempts WCI, Inc. and its ARB and CalEPA appointees from
Bagley-Keene when performing their duties.
2.Bagley-Keene generally requires that all meetings of a state
body be open and public. Defines a "state body" to include a
board, commission, committee, or similar multimember body on
which a member of a body that is a state body serves in
his/her official capacity as a representative of that state
body and that is supported, in whole or in part, by funds
provided by the state body, whether the multimember body is
organized and operated by the state body or by a private
corporation.
3.CPRA requires that all records maintained by local and state
governmental agencies are open to public inspection unless
specifically exempt. Defines "public records" to include any
writing containing information relating to the conduct of the
public's business prepared, owned, used, or retained by any
state or local agency regardless of physical form or
characteristics.
This bill:
1.Requires WCI, Inc.'s California board members to participate
on the board so long as WCI, Inc. maintains:
A. An open meetings policy consistent with the Bagley-Keene
Open Meeting Act.
B. A public records policy consistent with the California
Public Records Act (CPRA).
C. Bylaws that limit its activities to the technical and
operational support of the greenhouse gas emissions
reduction programs of California and other jurisdictions,
and do not allow WCI, Inc. to have policymaking authority.
1.Requires the ARB to provide notice to the JLBC for all
procurements over $150,000 proposed by WCI, Inc. that are
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expected to result in a contract no later than 30 days prior
to execution of those contracts.
2.Requires ARB, beginning January 2, 2014, to include
information in the Governor's Budget on all proposed
expenditures and allocations of money to WCI, Inc.
Background
Brief background on cap-and-trade . Pursuant to authority under
AB 32 (Nuñez, Chapter 488, Statutes of 2006), 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 set 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 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
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emissions from combustion of transportation fuels and combustion
of natural gas and propane at sources not covered in the first
phase of the program.
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, (Senate Budget and Fiscal
Review Committee, Chapter 39, Statutes of 2012), 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 Québec, 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 required findings. In
mid-April, the ARB approved the regulatory amendments to link
with Québec beginning on January 1, 2014.
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 Inc., 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 GHG emissions,
participate in a multi-state registry to track and manage GHG
emissions in the region, and develop a market-based program to
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reach the target. The WCI Inc. 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 Inc.
membership differs substantially from the inception, since all
US states besides California dropped out, and the Provinces of
British Columbia, California, Ontario, Québec and Manitoba, have
since joined.
In November 2011, the WCI Partner jurisdictions created WCI,
Inc. a non-profit corporation formed to provide administrative
and technical support to state and provincial GHG 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 Québec.
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. Québec'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.
Comments
According to the author, "There have been several concerns
raised with the operations of WCI, Inc. Specifically, related
to accessibility of information to the public, lack of time to
review agendas prior to meetings, and the specific benefits that
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will be achieved by linking with entities, such as Québec." 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 Act and the CPRA, 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee, potential
costs of up to $75,000 from the Cost of Implementation Account
to comply with the CPRA, depending on the number and complexity
of actual requests. Minor, if any, costs to comply with the
Bagley-Keene Open Meeting Act.
RM:ejm 9/12/13 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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