BILL ANALYSIS                                                                                                                                                                                                    



                                                                      AB 23


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          Date of Hearing:  March 23, 2015


                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES


                                 Das Williams, Chair


          AB 23  
          (Patterson) - As Introduced December 1, 2014


          SUBJECT:  California Global Warming Solutions Act of 2006:   
          market-based compliance mechanisms:  exemption


          SUMMARY:  Exempts distributors of fuels, including gasoline,  
          diesel and natural gas, and any other entities that were not  
          covered on January 1, 2013, from the cap-and-trade regulation  
          adopted by the Air Resources Board (ARB).


          EXISTING LAW, pursuant to the California Global Warming  
          Solutions Act (AB 32):


          1)Requires ARB to adopt a statewide greenhouse gas (GHG)  
            emissions limit equivalent to 1990 levels by 2020 and to adopt  
            rules and regulations to achieve maximum technologically  
            feasible and cost-effective GHG emission reductions.

          2)Authorizes ARB to permit the use of market-based compliance  
            mechanisms to comply with GHG reduction regulations, once  
            specified conditions are met.  ARB has adopted a cap-and-trade  
            regulation which applies to regulated entities engaged in  
            stationary combustion, cement manufacturing, cogeneration,  
            petroleum refining, hydrogen production, aluminum production,  
            facility operators calcining carbonates, carbon dioxide (CO2)  








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            supplier or transfer recipient, electricity generation, glass  
            production, iron and steel production, lime production,  
            natural gas transmission and distribution, nitric acid  
            production, oil and gas extraction field operation, production  
            of industrial gases, pulp and paper production, soda ash  
            production, electricity deliverers, transportation fuel  
            deliverers, and natural gas deliverers.  The cap-and-trade has  
            covered (i.e., imposed a compliance obligation on) large  
            industrial facilities and electricity generators emitting more  
            than 25,000 metric tons of CO2 equivalent per year since  
            January 1, 2013.  Distributors of fuels, including gasoline,  
            diesel and natural gas, have been covered since January 1,  
            2015.

          THIS BILL:

          1)Limits the compliance obligation under cap-and-trade to those  
            entities covered since January 1, 2013, thereby excluding  
            fuels and any other sources of GHG emissions that may be added  
            in the future.

          2)Defines "compliance obligation" as the quantity of GHG  
            emissions for which a person or entity is required to submit  
            GHG emissions allowances or offsets to ARB pursuant to a  
            market-based compliance mechanism.

          3)Applies retroactively from January 1, 2015.

          4)Includes related findings and declarations.

          5)Includes an urgency clause.

          FISCAL EFFECT:  Unknown


          COMMENTS:  

          1)Background.  According to ARB, a total reduction of 80 million  
            metric tons (MMT), or 16% compared to business as usual, is  








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            necessary to achieve AB 32's 2020 statewide limit.   
            Approximately 78% of the reductions will be achieved through  
            identified direct regulations.  ARB proposes to achieve the  
            balance of reductions necessary to meet the 2020 limit  
            (approximately 18 MMT) through the cap-and-trade regulation.   
            Transportation fuels are included in cap-and-trade beginning  
            January 1, 2015.  

          2)Transportation fuels are the biggest source of emissions.   
            According to ARB, transportation constitutes almost 40% of all  
            carbon pollution produced in California, by far the largest  
            contributor to GHG emissions.  Transportation fuels also  
            produce 80% of smog-causing pollution and more than 95% of  
            fine particle pollution from diesel engines.  Reducing  
            emissions from the transportation sector is critical to  
            achieving the 2020 GHG limit required by AB 32, as well as  
            meeting ambient air quality standards and reducing localized  
            health impacts.

          3)If not cap-and-trade, what then?  It should be noted that  
            cap-and-trade is viewed by economists and many regulated  
            businesses as the most efficient way to reduce GHG emissions.   
            This bill exempts fuels from cap-and-trade, but it does not  
            exempt fuels from AB 32 or ARB's general authority, nor does  
            it relax the GHG reduction obligation necessary to meet the  
            statewide 2020 limit.  

            If GHG emissions from transportation fuels are not addressed  
            through cap-and-trade, those emissions are likely to be  
            addressed through direct regulatory measures on fuel  
            distributors and/or consumers, or placing additional reduction  
            obligations on other sources of GHG emissions, both of which  
            are likely to be more costly.  The likely effect of this bill  
            would be to increase regulatory and consumer costs associated  
            with achieving AB 32's goals, whether at the pump, through  
            utility bills, or other areas of the economy.

          REGISTERED SUPPORT / OPPOSITION:









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          Support


          California Fresh Fruit Association


          City of Clovis


          City of Hanford


          City of Sanger


          George Runner, Board of Equalization 1st District


          Greater Fresno Area Chamber of Commerce


          Howard Jarvis Taxpayers Association


          Johnson Air


          KernTax


          Madera County Board of Supervisors


          National Federation of Independent Business










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          National Petroleum


          Resources for Independence Central Valley


          Tulare County Farm Bureau


          Valley Taxpayer's Coalition


          Western Growers Association


          19 individuals




          Opposition


          American Lung Association in California


          California League of Conservation Voters


          California Municipal Utilities Association


          Catholic Charities, Diocese of Stockton


          Climate Parents


          Climate Resolve








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          Consumers Union


          Environmental Defense Fund


          Natural Resources Defense Council


          Nature Conservancy


          TransForm







          Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)  
          319-2092