BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1288|
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THIRD READING
Bill No: AB 1288
Author: Atkins (D)
Amended: 9/4/15 in Senate
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 7/15/15
AYES: Wieckowski, Hill, Jackson, Leno, Pavley
NOES: Gaines, Bates
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 51-28, 6/3/15 - See last page for vote
SUBJECT: California Global Warming Solutions Act of 2006:
regulations
SOURCE: Author
DIGEST: This bill eliminates the December 31, 2020 limit on
applicability of a market-based mechanism for greenhouse gas
(GHG) emissions reductions that may be adopted by California Air
Resources Control Board (ARB).
Senate Floor Amendments of 9/4/15 express the intent of the
Legislature to ensure that disadvantaged communities continue to
receive moneys from the state's cap-and-trade program beyond
2020.
ANALYSIS: Existing law, under the California Global Warming
Solutions Act of 2006 (Health and Safety Code §38500 et seq.):
1)Requires the ARB to determine the 1990 statewide GHG emissions
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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 the ARB to adopt a regulation 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:
1)Eliminates the December 31, 2020 limit on applicability of a
market-based mechanism for GHG emissions reductions that may
be adopted by the ARB.
2)Expresses the intent of the Legislature to ensure that
disadvantaged communities continue to receive moneys beyond
2020 from market-based compliance mechanisms 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 (Núńez, Pavley, Chapter
488, Statutes of 2006) established a statewide GHG emissions
limit by 2020. AB 32 defines GHGs as carbon dioxide (CO2),
methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons,
and sulfur hexafluoride and requires the 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 the 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 the ARB may include
market-based compliance mechanisms in the AB 32 regulations,
after considering the potential for direct, indirect, and
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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, the 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 CO2 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.
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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 the ARB
allowances sufficient to match its GHG emissions during the
period.
The 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% 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, the ARB has adopted protocols for the following
project types:
Livestock manure management
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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 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.
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"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)Statewide GHG emissions in 2013. 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 earlier
this year. 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 MMT 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 the ARB, the
increase in emissions for cement plants were due to increased
production.
Related/Prior Legislation
SB 32 (Pavley, 2015) requires the 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 on the Assembly
Floor.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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According to the Senate Appropriations Committee:
Potential ongoing costs of $6.5 million annually beginning in
2020 from the Cost of Implementation Account (special) for the
ARB to continue to administer the cap-and-trade program beyond
2020.
Potential ongoing costs in the low millions of dollars to the
Cost of Implementation Account (special) for the contract with
the Western Climate Initiative, Inc. to support the
cap-and-trade auctions.
Potential ongoing auction revenues in the billions of dollars
to the GHG Reduction Fund (special)
SUPPORT: (Verified9/4/15)
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: (Verified 9/4/15)
California Manufacturers & Technology Association
Center for Community Action and Environmental Justice
Center on Race, Poverty & the Environment
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Communities for a Better Environment
PODER
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 the goals are met by providing
a firm limit on the GHGs emitted by the state's largest
polluters. Silicon Valley Leadership Group states that AB 1288
is critical to maintain the state's leadership on climate
action, and 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 & 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.
ASSEMBLY FLOOR: 51-28, 6/3/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson,
Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,
Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin,
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Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas,
Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber,
Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Grove, Hadley,
Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis,
Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner,
Waldron, Wilk
NO VOTE RECORDED: Olsen
Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108
9/8/15 21:01:44
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