BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 33
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|Author: |Quirk |
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|Version: |6/23/2015 |Hearing | 7/15/2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: California Global Warming Solutions Act of 2006: Energy
Sector Emissions Reduction Advisory Council.
ANALYSIS:
Existing law, under the California Global Warming Solutions Act of
2006 (Health and Safety Code 35800 et seq.), requires:
1) The California Air Resources Board (ARB) to adopt a statewide
greenhouse gas (GHG) emissions limit equivalent to 1990 levels
by 2020 and adopt regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions.
2) Prepare and approve a scoping plan, on or before January 1, 2009
and once every five years thereafter, for achieving the maximum
technologically feasible and cost-effective reductions in GHG
emissions from sources of emissions by 2020 and requires ARB to
consult with the Public Utilities Commission (PUC) and the State
Energy Resources Conservation and Development Commission (CEC)
on all elements of its plan that pertain to energy-related
matters.
This bill:
1)Establishes the Energy Sector Emissions Reduction Advisory
Council consisting of the following members or their designees:
a) Chair of the CEC.
b) The president of the PUC.
AB 33 (Quirk) Page 2 of ?
c) The president of the California Independent System Operator
(CAISO).
d) The chair of the State Water Resources Control Board.
e) The Chair of ARB.
2)Requires the council to make recommendations of strategies for
the electricity sector, other than, or in addition to, a
market-based mechanism adopted by ARB, for incorporation in to
the scoping plan based on the following:
a) An analysis of approaches to reduce GHG emissions from the
electricity sector and integrate increasing amounts of
renewable energy into the electricity grid, comparing the
technical feasibility, cost-effectiveness and the extent to
which they would minimize over-generation, maintain the
reliability of the grid, and reduce GHGs, and requires the
analysis to consider various strategies, including the
following:
i) Increasing the volume of renewable energy generation by
the amount required by state law or otherwise needed to
achieve the 2020 GHG emissions limit set by AB 32.
ii) Deepening regional coordination in the Western
Interconnection.
iii) Increasing energy storage, including
pumped-hydroelectric storage.
iv) Retrofitting existing natural gas-fired powerplants to
increase operational flexibility and using renewable energy
generation facilities to provide operational flexibility.
v) Deploying carbon capture and storage and other GHG
emission reduction technology at existing fossil fuel-fired
electrical generation facilities.
vi) Increasing the role of demand response, as specified.
vii) Increasing energy efficiency.
AB 33 (Quirk) Page 3 of ?
viii) Ensuring adequate generating capacity remains available
to meet demand through measures such as multi-year capacity
or reliability payments.
b) An economic analysis using the best available economic
models and data of the various strategies.
c) An analysis of the benefits to the health, safety, and
welfare of state residents, worker safety, the state's
environment and quality of life, and any other benefits
associated with the strategies.
3)Requires the council to convene no later than February 1, 2016,
to develop a schedule with the chair of ARB for delivery of
recommendations that ensure the recommendations are delivered
early enough to be considered during the next scoping plan
update, make preliminary recommendations available for public
comment for at least 30 days; and consider public comments before
finalizing and delivering recommendations and analyses to ARB.
4)Specifies that the council, after completion of its duties,
ceases to exist as of the following December 31.
5)Specifies that the council's recommendations are intended to
assist in updating the scoping plan, and informing the
regulations and approaches of the agencies on the council and do
not change statute, regulation, or regulatory decision.
Background
1)The Global Warming Solutions Act of 2006. In 2006, the Global
Warming Solutions Act of 2006, AB 32 (Núñez, Pavley, Chapter
488, Statutes of 2006) established a statewide GHG emissions
limit by 2020. AB 32 defines greenhouse gasses (GHGs) as carbon
dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride and requires ARB to
determine the 1990 statewide GHG emissions level and approve a
statewide GHG emissions limit that is equivalent to that level,
to be achieved by 2020.
AB 32 also requires ARB, among other things, to inventory GHGs
in California, outline a Scoping Plan for achieving the 2020 GHG
emission limit, and implement regulations that achieve the
maximum technologically feasible and cost-effective reduction of
GHG emissions.
AB 33 (Quirk) Page 4 of ?
Statute requires ARB to consult with all state agencies with
jurisdiction over sources of greenhouse gases, including PUC and
CEC, on all elements of its plan that pertain to energy related
matters to ensure the greenhouse gas emissions reduction
activities to be adopted and implemented by ARB are
complementary, nonduplicative, and can be implemented in an
efficient and cost-effective manner. AB 32 specifies these
energy-related matters may include, but are not limited to,
electrical generation, load based-standards or requirements, the
provision of reliable and affordable electrical service,
petroleum refining, and statewide fuel supplies.
The statute also specifies that ARB may include market-based
compliance mechanisms in the AB 32 regulations, after
considering the potential for direct, indirect, and cumulative
emission impacts from these mechanisms.
2)AB 32 Scoping Plan. Pursuant to AB 32, ARB approved the first
Scoping Plan in 2008. The Scoping Plan outlined a suite of
measures aimed at achieving 1990-level emissions, a reduction of
80 million metric tons of CO2 (MMT CO2e). Average emission data
in the Scoping Plan reveal that transportation accounts for
almost 40% of statewide GHG emissions, and electricity and
commercial and residential energy sector account for over 30% of
statewide GHG emissions. The industrial sector, including
refineries, oil and gas production, cement plants, and food
processors, was shown to contribute 20% of California's total GHG
emissions.
The 2008 Scoping Plan recommended that reducing GHG emissions
from the wide variety of sources that make up the state's
emissions profile could best be accomplished through a
cap-and-trade program along with a mix of other strategies
including, among other measures, a low carbon fuel standard,
light-duty vehicle GHG standards, expanding energy efficiency
programs, and achieving a 33% renewable portfolio standard.
3)Cap and trade overview. Beginning on January 1, 2013, the
cap-and-trade regulations 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 that it emits at the end
AB 33 (Quirk) Page 5 of ?
of a compliance period. Over time, the cap declines, resulting
in GHG emissions reductions. Based on the first update to the
Climate Change Scoping Plan, the cap-and-trade program will be
responsible for approximately 30% of the required GHG emission
reductions to meet the AB 32 goal of reducing GHG emissions to
1990 levels by 2020.
Compliance instruments include allowances and offsets, where
allowances are generated by the state in an amount equal to the
cap, and offsets result from emissions reductions achieved in an
uncapped sector and are quantified and verified using an
ARB-approved compliance offset protocol. The inclusion of
offsets in the cap-and-trade program is intended to help reduce
entities' compliance costs.
For the first compliance period (2013-14), the capped sector
includes the electricity and industrial sectors. Uncapped
sectors throughout the course of the program include small
businesses (with annual emissions under 25,000 metric tons CO2e),
agriculture, and forestry.
In the second compliance period beginning in 2015, distributors
of transportation fuels, natural gas, and other fuels also come
under the cap. Once under the cap, an entity covered by the
regulation must periodically submit to ARB allowances sufficient
to match its GHG emissions during the period.
ARB is allocating most allowances for free in order to provide
transition assistance and to minimize leakage for trade-exposed
industries (leakage refers to increased GHG emissions outside
California either from entities leaving the state and producing
emissions elsewhere, or by reduction of economic activity within
the state that is offset by increased production outside the
state). The remaining allowances (apart from a small amount set
aside in a price containment reserve) are auctioned off.
Electric and natural gas utilities are provided free allocation
of allowances for the benefit of ratepayers.
Offsets: Under the cap-and-trade regulation, offsets may be used
to satisfy up to 8 percent of a covered entity's compliance
obligation. The inclusion of offsets in the cap-and-trade
program is designed to help reduce entities' compliance costs.
To date, ARB has adopted protocols for the following project
types:
AB 33 (Quirk) Page 6 of ?
Livestock manure management
Ozone depleting substances
Urban forestry
U.S. forestry
Coal mine methane
Linkage: The cap-and-trade regulations include general
requirements for linking to other trading programs. Linkage
refers to the use of compliance instruments from a GHG emissions
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. In
April of 2013, the ARB approved the regulatory amendments to
link with Quebec beginning on January 1, 2014.
Comments
1) Purpose of Bill. According to the author, "By Executive Order
B-30-15, the Governor has established a new interim GHG
emissions reduction target of 40% below 1990 levels by 2030. As
climate change policy continues to usher in new ways to grow and
evolve the energy sector, it is imperative that there be a
formalized body to examine the various strategies that could be
implemented to reduce GHG emissions from this sector.
"For example, in his 2015 Inaugural Address, the Governor called
for an increase in the amount of energy generated by renewable
sources from 33% by 2020 to 50% by 2030 as part of a
comprehensive strategy for reaching the state's GHG emissions
reduction goals. As increasing amounts of renewable resources
come on line, challenges emerge for using those resources
efficiently. There are already certain times of the day where
more renewable energy is being generated than there is demand to
use it. Relying more on renewable resources to meet our energy
needs will require new technologies and strategies and increased
regional collaboration to reduce this potential risk of supply
exceeding demand, known as "overgeneration."
"While such challenges exist, they are not insurmountable given
proper analysis and planning. To that effect, AB 33 would
establish the Energy Sector Emissions Reduction Advisory Council
(Council) consisting of the California Energy Commission (CEC),
the California Public Utilities Commission (CPUC), the California
Independent System Operator (CAISO), the State Water Resources
AB 33 (Quirk) Page 7 of ?
Control Board (SWRCB) and the California Air Resources Board
(CARB), and task the council with developing and delivering a
complete set of recommendations to ARB before the next Scoping
Plan update on various strategies that can be used to reduce GHG
emissions from the electricity sector and integrate increasing
volumes of renewable energy. The Council would be required to
analyze these strategies in light of key criteria: (1) technical
feasibility; (2) cost-effectiveness; and (3) the extent to which
implementation would minimize over-generation and maintain
reliability of the electricity grid."
The author notes that while several agencies with complementary
expertise are analyzing and coordinating with each on how best
to reduce GHG emissions from the electricity sector and
integrate increasing amounts of renewable energy, their analyses
often employ different criteria and economic models or are aimed
at different purposes. AB 33 is intended to address this issue
for purposes of inclusion in the AB 32 updated Scoping Plan.
2) Council makeup. AB 33 establishes the energy sector emissions
reduction advisory council and provides that the membership
include the chair of the CEC, the president of the PUC, the
president of CAISO, the chair of the State Water Resources
Control Board (SWRCB) and the chair of the ARB. As this council
is required to provide recommendations on strategies to
integrate increasing amounts renewable technologies, it is not
clear why the SWRCB chair, or his or her designee, is included
on this panel, as their jurisdiction does not include renewable
energy generation.
3) Amendment. AB 33 requires the Council's analyses to consider
"increasing the volume of renewable energy generation to the
amounts required by state law or otherwise needed to achieve the
goals established pursuant to Section 38550." Section 38500 of
the Health and Safety Code requires ARB to approve a statewide
GHG emissions limit, equivalent to the 1990 level of GHG
emissions, to be achieved by 2020.
Although the 2020 GHG emissions limit is currently the only
statutory statewide GHG emissions limit or standard in
California, the Governor's recent executive order has set a GHG
emissions limit 40% below the 1990 level, to be achieved by
2030. Additionally, legislation this session is actively
seeking to codify that goal, as well as a statewide GHG
emissions target for 2050. Also, presumably, the next update to
AB 33 (Quirk) Page 8 of ?
the Scoping Plan to be released in 2019, will focus on time
frames beyond 2020. For these reasons, an amendment is needed
to ensure that any new, post-2020 GHG emissions limits be
considered by the council's analyses, as well.
An amendment is needed to strike the reference to Section 38550,
which references the 2020 GHG emissions limit, and instead refer
broadly to statewide GHG emissions limits.
Related/Prior Legislation
SB 32 (Pavley) of 2015 requires ARB to approve statewide GHG
emissions limits
of 40% below the 1990 GHG emissions level, to be achieved by 2030,
and 80%
below the 1990 GHG emissions level, to be achieved by 2040. SB 32
is currently
in the Assembly Natural Resources Committee.
DOUBLE REFERRAL:
This measure was heard in Senate Energy, Utilities and
Communications Committee on July 7, 2015, and passed out of
committee with a vote of 11-0.
SOURCE: Author
SUPPORT:
California Energy Storage Alliance
California Manufacturers and Technology Association
OPPOSITION:
None received
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