BILL ANALYSIS Ó AB 197 Page 1 (Without Reference to File) CONCURRENCE IN SENATE AMENDMENTS AB 197 (Eduardo Garcia) As Amended August 19, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | |(June 2, 2015) |SENATE: |23-13 |(August 22, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- (vote not relevant) ---------------------------------------------------------------------- | | | | | | | | | | | | |COMMITTEE VOTE: |6-1 |(August 24, |RECOMMENDATION: |concur | | | |2016) | | | | | | | | | | | | | | | | | | | | | | | | | | | ---------------------------------------------------------------------- (Nat. Res.) Original Committee Reference: U. & C. SUMMARY: Creates the Joint Legislative Committee on Climate Change Policies (JLCCCP), requires the Air Resources Board (ARB) AB 197 Page 2 to prioritize direct emission reductions and consider social costs when adopting regulations to reduce greenhouse gas (GHG) emissions beyond the 2020 statewide limit, requires ARB to prepare reports on sources of GHGs and other pollutants, establishes six-year terms for voting members of ARB, and adds two legislators as non-voting members of ARB. The Senate amendments delete the Assembly version of the bill, and instead: 1)State the following findings: a) The California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488] authorizes ARB to adopt regulations to achieve the maximum technologically feasible and cost-effective GHG emissions reductions. b) AB 32 requires ARB to reduce statewide GHG emissions to at least the 1990 emissions level by 2020 and to maintain and continue reductions thereafter. c) Continuing to reduce GHG emissions is critical for the protection of all areas of the state, but especially for the state's most disadvantaged communities, as those communities are affected first, and most frequently, by the adverse impacts of climate change, including an increased frequency of extreme weather events, such as drought, heat, and flooding. The state's most disadvantaged communities also are disproportionately impacted by the deleterious effects of climate change on public health. d) ARB's actions to reduce GHG emissions must be done in a manner that is transparent and accountable to the public and the Legislature. To this end, ARB must enhance the accessibility of information used to inform and evaluate regulatory measures developed to reduce GHG emissions. AB 197 Page 3 e) Transparency and accountability also are essential to ensuring the state's actions are done in an equitable fashion that is protective and mindful of the effects on the state's most disadvantaged communities. f) In recognition of the need for ongoing, permanent oversight over the implementation of the state's climate policies, the Joint Legislative Committee on Climate Change Policies will be established. The committee will uniquely provide an oversight perspective that connects the jurisdictions of several legislative standing committees, including those that have the issues of air quality, transportation, energy, and local government within their jurisdiction, which is critical given that the state has integrated climate change policies throughout the activities of many state agencies in addition to ARB. 2)Create the JLCCCP, consisting of at least three Senators and three Assembly Members, and require the committee to make recommendations concerning the state's programs, policies, and investments related to climate change. 3)Authorize the JLCCCP to establish a panel of experts to provide an independent analysis of the state policies. 4)Define, for purposes of AB 32, "social costs" as an estimate of the economic damages, including, but not limited to, changes in net agricultural productivity; impacts to public health; climate adaptation impacts, such as property damages from increased flood risk; and changes in energy system costs, per metric ton of GHG emission per year. 5)Require ARB to publish emissions of GHGs, criteria pollutants and, no later than January 1, 2018, toxic air contaminants, for each facility that is a major source of GHG emissions AB 197 Page 4 required to report its emissions pursuant to AB 32. 6)Require ARB to annually appear before the JLCCCP to present ARB's informational report on emissions of GHGs, criteria pollutants, and toxic air contaminants from all sectors covered by the AB 32 scoping plan. 7)Require ARB, when it adopts regulations to achieve GHG emission reductions beyond the statewide limit, to consider social costs and prioritize direct emission reductions at large stationary, mobile, and other sources. 8)Require each scoping plan update to identify for each emission reduction measure: a) The range of projected GHG emissions reductions that result from the measure; b) The range of projected air pollution reductions that result from the measure; and c) The cost-effectiveness, including avoided social costs, of the measure. 9)Establish terms of six years for each of the 14 voting members of ARB, require ARB to establish initial staggered terms, permit reappointment, and provide that the six local air district representatives must maintain their air district board membership to remain on ARB. 10)Add two members of the Legislature as ex officio, non-voting members, one appointed by the Senate Rules Committee and one appointed by the Speaker of the Assembly. AB 197 Page 5 11)Require ARB to make available on its Web site the emissions of GHGs, criteria pollutants, and toxic air contaminants throughout the state broken down to a local and sub-county level for stationary sources and to at least a county level for mobile sources. Requires the emissions reported to include data on the emissions of criteria pollutants and toxic air contaminants emitted by stationary sources as provided to ARB by air districts. Requires the information to be displayed graphically and updated at least once a year. 12)Provide the bill becomes operative only if SB 32 (Pavley) of the current legislative session is enacted and becomes effective on or before January 1, 2017. EXISTING LAW: 1)Establishes ARB consisting of 14 members. Twelve members serve at the pleasure of the Governor and are subject to confirmation by the Senate. These members are appointed on the basis of interest and ability in the field of air pollution control, understanding of the needs of the general public in connection with air pollution problems, and additional specific qualifications, including six members from specified air districts. Two members are appointed by Legislature, one by the Senate Committee on Rules, and one by the Speaker of the Assembly. These members must work directly with communities in the state that are most significantly burdened by, and vulnerable to, high levels of pollution, including communities with diverse racial and ethnic populations and low-income populations. Members serve part-time, with the exception of the Chair, who is appointed by the Governor and serves full-time. ARB's primary duties are controlling motor vehicle emissions, coordinating activities of air districts for the purposes of the federal Clean Air Act, and implementing AB 32. 2)Requires ARB, pursuant to AB 32, to adopt a statewide GHG emissions limit equivalent to the 1990 level by 2020 and adopt regulations to achieve maximum technologically feasible and AB 197 Page 6 cost-effective GHG emission reductions. FISCAL EFFECT: According to the Senate Appropriations Committee (prior version): 1)One-time costs of $100,000 (various special funds) to the ARB for construction to enlarge the hearing room dais and to provide the equipment needed to accommodate two additional board members. 2)$233,000 annually (Cost of Implementation Fund) to the ARB for staffing needs to support new board members and develop ranking criteria. COMMENTS: The 5th assessment report from the Intergovernmental Panel on Climate Change (IPCC) notes that atmospheric concentrations of global warming pollutants have risen to levels unseen in the past 800,000 years. Carbon dioxide concentrations have increased by 40% since pre-industrial times. There is broad scientific consensus that these global GHG emission increases are leading to higher air and water temperatures, as well as rising sea levels. Sea level is expected to rise 17 to 66 inches by 2100, and the frequency of extreme events such as heat waves, wildfires, floods, and droughts is expected to increase. 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. AB 197 Page 7 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 a low carbon fuel standard (LCFS), light-duty vehicle GHG standards, expanding and strengthening existing energy efficiency programs, and building and appliance standards, a 33% Renewable Portfolio Standard (RPS), and regional transportation-related GHG targets. Pursuant to authority under AB 32, the ARB adopted a Low Carbon Fuel Standard in 2009, and a cap-and-trade program approved on December 13, 2011. ARB approved an update to the Scoping Plan in 2014. The update describes policies, actions, and strategies in the energy, transportation, fuels, agriculture, waste, and natural lands sectors as a means to continue emissions reductions in each of these sectors. The update also asserts that California is on track to meet the near-term 2020 GHG limit and is well positioned to maintain and continue reductions beyond 2020 as required by AB 32. In 2005, Governor Schwarzenegger issued Executive Order S-3-05 and called for GHG emissions reductions to 1990 levels by 2020 and 80% below 1990 levels by 2050. On April 29, 2015, Governor Brown issued Executive Order B-30-15, which established an interim statewide GHG emission reduction target to reduce GHG emissions to 40% below 1990 levels by 2030, "in order to ensure California meets its target of reducing greenhouse gas emissions to 80% below 1990 levels by 2050." The order also directed all state agencies with jurisdiction over sources of GHG emissions to implement measures, pursuant to statutory authority, to achieve reductions of GHG emissions to meet the 2030 and 2050 GHG emissions reduction targets. On June 17, 2016, ARB released a "2030 Target Scoping Plan Update Concept Paper." The paper includes four potential high-level concepts for achieving a 40% GHG reduction by 2030. Concept 1 calls for enhancements to existing, successful AB 197 Page 8 programs and implementation of SB 350. It suggests investment of funds from the cap-and-trade program in areas that would further the goals of AB 32. Concept 2 extends the actions in Concept 1 to specifically address the industrial sector through industrial facility caps. It would have no cap-and-trade regulation post-2020 and no statewide limit on GHG emissions. Concept 3 focuses on transportation-oriented policy aimed at ambitious reductions in vehicle miles traveled (VMT) and increased number of zero-emission and plug-in vehicles by 2030. It would not continue cap-and-trade regulation post-2020. Concept 4 includes the same complementary policies as Concept 1, but in lieu of a cap-and-trade program, suggests a carbon tax applied at a value predetermined by a method such as economic modeling or the use of United States Environmental Protection Agency (US EPA) social cost of carbon. It is not clear if this scenario would ultimately achieve the 2030 target because it would not include a statewide limit on GHG emissions, and it is unknown how the monies generated by a carbon tax would be used. According to the author, "In order for California to remain an economic and environmental leader the state will need to also be a leader on issues related to equity. Placing the health and economic impacts of climate policy on vulnerable populations second will stunt the state's prosperity. A great degree of transparency and investment in California's environmentally and socioeconomically disadvantaged populations has the potential to yield significant climate, economic, public health and quality of life benefits while knocking down barriers to opportunity." This bill provides direction to ARB regarding its actions to achieve GHG reductions beyond the 2020 statewide limit, including reiterating existing requirements of AB 32 and introducing the consideration of "social costs," as defined. Some elements of social cost, such as public health impacts, are accounted for in ARB's current approach to analyzing economic impacts and cost-effectiveness. Other elements, changes to agricultural productivity and property damage, are new and their impact is unclear. AB 197 Page 9 The bill further requires ARB to prioritize regulations that result in direct emission reductions at large stationary, mobile and other sources. While this appears to favor direct "command and control" regulation over market-based compliance mechanisms or incentive programs, it is essentially consistent with the current program and structure of AB 32, where ARB is required to adopt regulations to achieve the maximum technologically feasible and cost-effective GHG reductions, and authorized to include the use of market-based compliance mechanisms. In practice, direct regulations are prioritized over cap-and-trade, which operates as a backstop to achieve the reductions in excess of reductions achieved by direct regulations that are necessary to achieve the statewide limit. This bill creates the JLCCCP to study climate change policies and make recommendations to the Legislature. In addition to a broad "study and recommend" role, the committee is the venue for presentation of annual report on emissions by ARB required by the bill. This bill is contingent on SB 32 (Pavley), which requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by 2030. Analysis Prepared by: Lawrence Lingbloom / NAT. RES. / (916) 319-2092 FN: 0004908 AB 197 Page 10