AB 720, as introduced, Cooley. California Global Warming Solutions Act of 2006: market-based compliance mechanisms.
The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The state board is required to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions level in 1990 to be achieved by 2020, and to adopt rules and regulations in an open public process to achieve the maximum, technologically feasible, and cost-effective greenhouse gas emissions reductions. The act authorizes the state board to include the use of market-based compliance mechanisms.
This bill would require the state board, for any market-based compliance mechanism that the state board might adopt, to allow participating entities to freely sell or transfer greenhouse gas emissions allowances held in a holding account, as defined, or compliance account, as defined, except for allowances that have been expressly retired to meet a compliance obligation, as defined.
This bill would require the state board, for any market-based compliance mechanism that the state board might adopt, to set a price cap on any allowances offered for purchase through the state board.
This bill would exempt from the Administrative Procedure Act and the California Environmental Quality Act a regulation adopted by the state board pursuant to this act.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
The Legislature finds and declares all of the
2following:
3(a) The California Global Warming Solutions Act of 2006
4(Division 25.5 (commencing with Section 38500) of the Health
5and Safety Code) was adopted to reduce carbon emissions
6associated with the state’s economy. Section 38560 of the Health
7and Safety Code charges the State Air Resources Board with the
8duty of adopting rules and regulations “to achieve the maximum
9technologically feasible and cost-effective greenhouse gas
10emissions reductions from sources or categories of sources.”
11(b) One measure that the state board has implemented in
12furtherance of the act is a market-based compliance mechanism,
13known as the
cap-and-trade regulation.
14(c) For a market-based compliance mechanism to operate
15effectively and allow entities covered by the market-based
16compliance mechanism the efficiency and flexibility to achieve
17emissions reductions at the lowest possible cost, the market for
18emissions allowances must promote liquidity while also preventing
19market manipulation.
20(d) As part of the market-based compliance mechanism, the
21state board has adopted a holding limit, placing a limitation on the
22total number of allowances that any entity participating in the
23program can hold at one time, subject to certain exceptions. The
24current holding limit could adversely affect the liquidity and
25efficiency of the emissions allowance market in that the holding
26limit functions to require some entities participating in the
27market-based compliance mechanism to surrender compliance
28instruments for compliance prior
to established regulatory
29compliance deadlines, thus creating artificial scarcity in the market.
30(e) Revising the holding limit to permit entities participating in
31the market-based compliance mechanism to freely transfer
32allowances from a compliance and holding account to meet their
P3 1obligations under the market-based compliance mechanism will
2promote market efficiency and fairness while maintaining the state
3board’s ability to preserve market integrity and prevent market
4manipulation.
Section 38575 is added to the Health and Safety Code,
6to read:
(a) For purposes of this section, the following terms
8have the following meanings:
9(1) “Compliance account” means an account, created by the
10state board for an entity participating in a market-based compliance
11mechanism that has a compliance obligation, to which the entity
12transfers allowances and offsets to meet its compliance obligations.
13(2) “Compliance obligation” means the quantity of verified
14reported greenhouse gas emissions or assigned greenhouse gas
15emissions for which an entity participating in a market-based
16compliance mechanism is required to submit compliance
17instruments to the state board.
18(3) “Holding
account” means an account created for each entity
19participating in a market-based compliance mechanism, or a
20voluntarily associated entity, to hold allowances or offsets.
21(4) “Offset” means a greenhouse gas emissions reduction or
22greenhouse gas emissions removal enhancement verified by the
23state board that may be used by an entity participating in a
24market-based compliance mechanism to satisfy a compliance
25obligation.
26(b) For any market-based compliance mechanism that the state
27board might adopt pursuant to this part, the state board shall allow
28participating entities to freely sell or transfer greenhouse gas
29emissions allowances held in a holding account or compliance
30account, except for allowances that have been expressly retired to
31meet a compliance obligation. This subdivision also applies to
32allowances held jointly by a group of entities with a direct
33corporation
association.
34(c) No later than June 30, 2016, the state board shall promulgate
35a regulation for the purposes of this section. A regulation adopted
36pursuant to this section shall be exempt from the Administrative
37Procedure Act (Chapter 3.5 (commencing with Section 11340) of
38Part 1 of Division 3 of Title 2 of the Government Code) and the
39California Environmental Quality Act (Division 13 (commencing
40with Section 21000) of the Public Resources Code).
Section 38576 is added to the Health and Safety Code,
2to read:
(a) For any market-based compliance mechanism that
4the state board might adopt, the state board shall set a price cap
5on any allowances offered for purchase through the state board.
6(b) No later than June 30, 2016, the state board shall promulgate
7a regulation for the purposes of this section. A regulation adopted
8pursuant to this section shall be exempt from the Administrative
9Procedure Act (Chapter 3.5 (commencing with Section 11340) of
10Part 1 of Division 3 of Title 2 of the Government Code) and the
11California Environmental Quality Act (Division 13 (commencing
12with Section 21000) of the Public Resources Code).
O
99