BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 1288
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|Author: |Atkins |
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|Version: |2/27/2015 |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:
regulations.
ANALYSIS:
Existing law, under the California Global Warming Solutions Act
of 2006 (Health and Safety Code §38500 et seq.):
1)Requires the California Air Resources Control Board (ARB) to
determine the 1990 statewide greenhouse gas (GHG) emissions
level and approve a statewide GHG emissions limit that is
equivalent to that level, to be achieved by 2020, and to adopt
GHG emissions reductions measures by regulation.
2)Authorizes ARB, in furtherance of achieving the statewide GHG
emissions limit to adopt a regulation, by January 1, 2011,
that establishes a system of market-based declining annual
aggregate emission limits for sources or categories of sources
that emit GHGs, applicable from January 1, 2012, to December
31, 2020, inclusive.
This bill eliminates the December 31, 2020 limit on
applicability of a market-based mechanism to reduce GHG
emissions that may be adopted by ARB.
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
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limit by 2020. AB 32 defines 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.
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, including
localized impacts in communities that are already adversely
impacted by air pollution, and must design any market-based
compliance mechanisms to prevent any increase in the
emissions of toxic air contaminants or criteria air
pollutants. The statute also specifies that market-based
compliance mechanisms must also maximize additional
environmental and economic benefits for California, as
appropriate.
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
AB 1288 (Atkins) Page 3
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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 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
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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% 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:
Livestock manure management
Ozone depleting substances
Urban forestry
U.S. forestry
Coal mine methane
An offset protocol for rice cultivation is currently being
developed. The cap-and-trade regulation establishes that
offset projects must be located in the United States and its
territories, Canada, or Mexico. However, all current offset
protocols require that they be generated within the United
States.
Linkage: The cap-and-trade regulations approved on December
13, 2011, include general requirements for linking to other
trading programs, where 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, "In 2006, the
Legislature passed AB 32 - the California Global Warming
Solutions Act - which requires California to reduce
greenhouse gas emissions to 1990 levels by 2020. AB 32 tasked
the Air Resources Board with developing a comprehensive
Scoping Plan to serve as the state's blueprint for meeting
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the 1990 limit.
"One of the tools identified in the Scoping Plan of
regulatory, programmatic, and market-based measures to
achieve GHG emission reductions is a cap and trade program.
The cap and trade program, which was officially launched in
2013, provides a mechanism for specific industry sectors with
high GHG emissions to meet their GHG reduction requirements
in a cost-effective manner. Since its launch, the cap and
trade program has proven to be an effective and complementary
strategy for meeting our greenhouse gas reduction goals.
"California's climate programs continue to serve as the
national and international gold standard for tackling climate
change in a manner that maintains our economic vibrancy.
While we have made great strides in meeting our GHG reduction
goals, there is more work to be done.
"Recognizing California's commitment to setting new statewide
greenhouse gas limits beyond 2020, AB 1288 clarifies that
market-based mechanisms should continue to play a key role in
achieving those reductions."
2) What is the status on emissions reductions from
cap-and-trade? It may be too soon to tell. The
cap-and-trade program has been operating since January 1,
2013. However, because of the time it takes for regulated
entities to report emissions, and for the state to verify and
analyze that information, an ARB summary of 2013 GHG
emissions became available only last month. Therefore, at
this time, the state only has one year of GHG emissions data
with which to access the efficacy of the cap-and-trade
program.
The summary states that total 2013 statewide GHG reported
emissions decreased by approximately 2.7 million metric tons
of CO2e, or 0.6%. The statewide reduction is attributed
mostly to a decrease in emissions in the electricity sector
due to efficiency improvements and decreases in cogeneration
activity. However, some sectors showed emissions increases,
such as cement plants and oil and gas production. According
to ARB, the increase in emissions for cement plant was due to
increased production.
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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.
SOURCE: Author
SUPPORT:
American Lung Association, California
Audubon California
California League of Conservation Voters
California Trout
Californians Against Waste
Calpine Corporation
CALSTART
Environmental Defense Fund
EtaGen
Natural Resources Defense Council
ReLeaf
Sierra Club California
Silicon Valley Leadership Group
The Nature Conservancy
Union of Concerned Scientists
OPPOSITION:
California Manufacturers & Technology Association
Center on Race, Poverty & the Environment
ARGUMENTS IN
SUPPORT: Supporters state that California's cap-and-trade
program is a cornerstone of the state's strategy to achieve the
emissions limits
established by AB 32 and it acts as an insurance policy to
ensure we meet our
goals by providing a firm limit on the GHGs emitted by the
state's largest
polluters. Silicon Valley Leadership Group states that AB1288
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is critical to
maintain the state's leadership on climate action, provide
businesses with
regulatory certainty and continue to drive innovation. They
note that Cap and trade is an effective way to send clear market
signals by creating a financial incentive for reducing pollution
and a profit motive for developing clean technologies.
ARGUMENTS IN
OPPOSITION: The Center for Race, Poverty and the
Environment states that cap and trade allows major polluters to
pay their way out
of making real, on-site reductions at the expense of low-income
communities,
communities of color and indigenous communities. They note that
reductions in
GHGs also lead to reductions in co-pollutants, such as PM 2.5
and air toxics,
emitted into the surrounding community, which is a benefit that
is foregone when
that facility buys allowances or offsets. They also argue that
AB 1288 has been
improperly designated as a majority vote bill, and should
instead require a two-
thirds vote, due to Proposition 26 requirements. California
Manufacturers and
Technology Association argues that, before establishing any
post-2020 plan, it is
critical that California understand the full extent of the
current program, address
necessary pre-2020 reforms and establish robust, enforceable
economic impact
analysis requirements going forward, which they note the state
has yet to do.
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