BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                               Senator Wieckowski, Chair
                                 2015 - 2016  Regular 
           
          Bill No:            AB 1965
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          |Author:    |Cooper                                               |
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          |Version:   |5/31/2016              |Hearing      |6/29/2016       |
          |           |                       |Date:        |                |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Rebecca Newhouse                                     |
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          SUBJECT:  Vehicle retirement and replacement.

            ANALYSIS:
          
          Existing law:                                                    
          
          1) Establishes the Enhanced Fleet Modernization Program (EFMP),  
             which allows for the voluntary retirement of passenger vehicles  
             and light-duty and medium-duty trucks that are high polluters  
             and requires the program be administered by the Bureau of  
             Automotive Repair (BAR) pursuant to guidelines adopted by the  
             California Air Resources Board (ARB).  (Health and Safety Code  
             §44125)  

          2) Establishes the Charge Ahead Initiative administered by ARB  
             with the goals of reaching at least one million zero-emission  
             and near-zero-emission vehicles by January 1, 2023, and  
             increasing accessibility for disadvantaged, low-income, and  
             moderate-income communities. ARB is required to establish  
             programs that further increase access to and direct benefits  
             for disadvantaged, low-income, and moderate-income communities  
             and consumers from electric transportation. (HSC §44258 et  
             seq.)

          3) Under the California Global Warming Solutions Act of 2006 (also  
             known as 
             AB 32), requires 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.   







          AB 1965 (Cooper)                                        Page 2 of ?
          
          
             ARB is authorized to include the use of market-based mechanisms  
             to comply with these regulations.  (Health and Safety Code  
             §38500 et seq.) 

          4) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the  
             State Treasury, requires all moneys, except for fines and  
             penalties, collected pursuant to a market-based mechanism be  
             deposited in the fund.  (Government Code §16428.8)

          5) Prohibits the state from approving allocations for a measure or  
             program using GGRF moneys except after determining that the use  
             of those moneys furthers the regulatory purposes of AB 32, and  
             requires moneys from the GGRF be used to facilitate the  
             achievement of reductions of GHG emissions in California.  (HSC  
             §39712)

          This bill:  

          1) Requires ARB, in consultation with BAR, to set specific,  
             measurable goals for the retirement and replacement of  
             passenger vehicles and light-duty and medium-duty trucks that  
             are high polluters, for fiscal year 2017-18 and every fiscal  
             year thereafter.

          2) Requires ARB, in consultation with BAR, to meet these goals by  
             updating the program guidelines by July 1, 2018, to:

             a)    Require specific steps to be taken to ensure that the  
                vehicle replacement component of the program is available in  
                all districts that have more than one million residents. 

             b)    Require program funding for targeted outreach in  
                low-income communities or disadvantaged communities for the  
                program is evaluated and, if necessary, enhanced to obtain  
                the program's retirement and replacement goals.

             c)    Require, where applicable improved coordination,  
                integration, and partnerships with other programs that  
                target disadvantaged communities and receive GGRF moneys.

          3) Requires ARB, by July 1, 2018 and every other year thereafter,  
             to collect and post on its Internet website the following  
             information:

             a)    Program performance relative to the goals it adopted  








          AB 1965 (Cooper)                                        Page 3 of ?
          
          
                pursuant to this bill.

             b)    An accounting that includes, but need not be limited to,  
                funding allocated to the program, funding sources, and  
                program expenditures by region.

             c)    An analysis broken down by district of the program's  
                performance to identify areas to be emphasized when setting  
                future goals or updating the program guidelines.

          4) Authorizes ARB, upon appropriation by the Legislature, to  
             allocate moneys to expand the vehicle replacement component of  
             the program from the Enhanced Fleet Modernization Subaccount,  
             the High Polluter Repair or Removal Account, or the Vehicle  
             Inspection and Repair Fund.

            Background
          
          1) Air pollution in California and the transportation sector. The  
             federal Clean Air Act, and its implementing regulations are  
             intended to protect public health and environmental quality by  
             limiting and reducing pollution from various sources. Under the  
             federal Clean Air Act, the United States Environmental  
             Protection Agency (US EPA) establishes National Ambient Air  
             Quality Standards (NAAQS) that apply for outdoor air throughout  
             the country.  These federal standards exist for several air  
             pollutants due to their negative impact on public health above  
             specified concentrations, including ozone, particulate matter  
             (PM), NOx, oxides of sulfur (SOx), carbon monoxide, and lead.   
             US EPA reviews each NAAQS at five-year intervals to ensure that  
             the standards are based on the most recent scientific  
             information. 

             Regions that do not meet the national standards for any one of  
             the standards are designated nonattainment areas.  The Clean  
             Air Act sets deadlines for attainment based on the severity of  
             nonattainment and requires states to develop comprehensive  
             plans, known as the state implementation plan (SIP), to attain  
             and maintain air quality standards for each area designated  
             nonattainment for an NAAQS.

             California has some of the most severe air pollution problems  
             in the country. The South Coast and San Joaquin air basins,  
             which contain over half of the state's population, are extreme  
             nonattainment regions (the highest degree of severity) for  








          AB 1965 (Cooper)                                        Page 4 of ?
          
          
             ozone pollution and are both nonattainment regions for  
             particulate matter (PM). 

             Ground level ozone (or tropospheric ozone) is a primary  
             component of smog and is formed from the reaction of NOx with  
             volatile organic compounds in sunlight. Ozone has a number of  
             negative health effects including irritated respiratory system,  
             reduced lung function, aggravated asthma and inflammation and  
             damage of the lining of the lung. Active children are at  
             highest risk from ozone exposure.

             PM can be directly emitted from combustion or can be formed in  
             the atmosphere when gaseous pollutants such as SO2 and NOx  
             react to form fine particles.  Very fine particulate matter is  
             particularly dangerous since it burrows deep into the lungs  
             where it can enter the bloodstream and harm the heart and other  
             organs.  Fine particulate pollution poses an especially  
             critical health danger for children, the elderly, and people  
             with existing health problems.  Exposure to PM 2.5 is also  
             linked to cardiovascular disease.  A 2010 ARB analysis based on  
             scientific assessments by US EPA, reported that approximately  
             9,000 people in California are estimated to die prematurely  
             each year as a result of exposure to fine particle pollution.

             Nationally and statewide, the transportation sector is  
             responsible for a major fraction of air pollution, and in  
             particular NOx, which contributes to both ozone and PM  
             formation.  Across the US, motor vehicles emit more than half  
             of all NOx emissions.  In California, the transportation sector  
             accounts for approximately 80% of the NOx emissions, and  
             according to ARB, 75% of vehicular air pollution in the state  
             is caused by just 25% of the fleet.  

          2) Car scrap program. The Consumer Assistance Program (CAP) was  
             created to encourage voluntary accelerated vehicle retirement  
             ("car scrap") which provides monetary incentives to vehicle  
             owners to retire older, high-polluting vehicles.  Under this  
             program owners who scrap their vehicles are given $1,000  
             ($1,500 for low income consumers) for vehicles that have failed  
             their last smog test.

          3) EFMP and EFMP Plus-Up.  Existing state law establishes the  
             Enhanced Fleet Modernization Program (EFMP), administered by  
             the ARB and BAR.  EFMP provides for the voluntary retirement of  
             passenger vehicles and light- and medium-duty trucks that are  








          AB 1965 (Cooper)                                        Page 5 of ?
          
          
             high polluters.  Unlike CAP, EFMP allows vehicles to be retired  
             without first having to fail a smog test, and offers a $1,000  
             voucher ($1,500 for low-income owners) to retire a  
             high-polluting vehicle.  

             EFMP includes a vehicle replacement component, now known as  
             EFMP Plus-Up, which is operated by the San Joaquin and South  
             Coast air districts in partnership with ARB (both designated  
             extreme non-attainment areas for ozone).  Under EFMP Plus-Up, a  
             low-income owner who lives in one of these districts can get a  
             $2,500 "replacement" voucher in addition to the $1,500 base  
             EFMP "retirement" voucher.  The owner may use the funds to  
             either purchase a car that is less than eight years old, or to  
             obtain a public transit voucher.  If a low-income owner lives  
             within a disadvantaged community in one of these air districts,  
             and wants to purchase a hybrid, plug-in hybrid, or battery  
             electric vehicle, he or she can "stack" additional incentives  
             on top of these two vouchers.  While the program allows  
             individuals to trade in their high-polluting cars for cleaner  
             gas-powered cars, greater incentives are provided if the  
             individual opts to purchase a hybrid, hybrid-electric, or fully  
             electric vehicle.  Depending on income and the type of  
             replacement vehicle, the owner can get up to $12,000 total  
             toward the purchase of a new car.

             Funding.  EFMP is funded through vehicle surcharges, whereas  
             EFMP Plus-Up has been funded through GGRF moneys.  For 2015-16,  
             funding for EFMP and EFMP Plus-Up is around $12.8 million which  
             ARB estimates will provide incentives for about 1,500 vehicles.  
             In the 2016-17 fiscal year, proposed funding for both programs  
             totals $37.4 million (of which $30 million is Greenhouse Gas  
             Reduction Fund), and would provide incentives for about 4,500  
             vehicles.  

             EFMP Plus-Up pilot program was funded in FY 2015-16 with $20  
             million from GGRF.  The 2016-17 FY investment plan for ARB's  
             low carbon transportation investments proposes $30 million from  
             GGRF. 

             Implementing EFMP Plus-Up.  EFMP Plus-Up has been particularly  
             successful in the San Joaquin Valley, resulting in the  
             retirement of 292 high-polluting vehicles in the first six  
             months of the program.  The San Joaquin Valley program uses  
             "grass roots" advertising and outreach to invite low- and  
             moderate-income vehicle owners to participate in "events" where  








          AB 1965 (Cooper)                                        Page 6 of ?
          
          
             they can get a free smog test and undergo pre-screening to  
             determine whether they are eligible for various incentives.   
             The South Coast program uses more traditional outreach tools  
             such as flyers, billboards, and websites.  While the South  
             Coast program is also successful, with a long wait list, it  
             does not necessarily provide the pre-screening that would  
             enable staff to prioritize applications for the oldest, highest  
             polluting cars.  
            
          Comments
          
          1) Purpose of Bill.  According to the author, "AB 1965 will  
             provide financial incentives for low-income individuals to  
             replace their high polluting, less reliable and inefficient  
             vehicles with newer, cleaner and more reliable cars while  
             helping reduce vehicular pollution and improve air quality.   
             Additionally, the bill requires increased targeted outreach to  
             low-income households and disadvantaged communities to ensure  
             that EFMP Plus-Up is accessible to the neediest Californians.   
             AB 1965 also requires ARB to set specific goals for retirement  
             and replacement of high polluting passenger vehicles."

          2) Combining efforts.  The Committee will also be hearing AB 1691  
             (Gipson) which also directs ARB to update their EFMP  
             guidelines, relative to the EFMP Plus-Up program.  AB 1691  
             works to reduce and eliminate backlogs and waitlists for the  
             EFMP Plus-Up program, and prioritize older, higher-polluting  
             vehicles for incentives. 

             AB 1965 (Cooper), the subject of this analysis, also directs  
             ARB to update their EFMP guidelines, and requires the update by  
             July 1, 2018.  Specifically, AB 1965 expands the EFMP Plus-Up  
             program to additional local air districts. 

             Although the bills are not necessarily conflicting, they  
             establish different timelines for when these updates to the  
             EFMP guidelines relative to the EFMP Plus-Up program are  
             required.  As updating guidelines pursuant to the  
             Administrative Procedures Act is a time consuming process, and  
             could result in significant administrative expense, the authors  
             of these measures may wish to combine efforts going forward to  
             consolidate both measures into a single bill.
            
          Related/Prior Legislation









          AB 1965 (Cooper)                                        Page 7 of ?
          
          
          AB 1691 (Gipson) requires ARB to update EFMP, relative to EFMP  
          Plus-Up, to help increase efficiencies and reduce program abuse.  
          This bill will also be heard by this committee today.

          SB 1275 (de León, Chapter 530, Statutes of 2014) established the  
          Charge Ahead Initiative, to provide incentives to increase the  
          availability of zero-emission vehicles and near-zero-emission  
          vehicles, particularly to low-income and moderate-income consumers  
          and disadvantaged communities.

          SB 459 (Pavley, Chapter 437, Statutes of 2013) required ARB to  
          update the EFMP guidelines by June 30, 2015 to, among other  
          things, focus program assistance on lower-income vehicle owners.
            
          DOUBLE REFERRAL:  

          This measure was heard in Senate Transportation and Housing  
          Committee on June 21, 2016, and passed out of committee with a  
          vote of 8-1.

          SOURCE:     Valley Clean Air Now  

           SUPPORT:               

          Alliance of Automobile Manufacturers
          Bay Area Air Quality Management District
          Charge Ahead California
          Coalition for Clean Air
          Communities for a Better Environment
          Environment California Research & Policy Center
          Natural Resources Defense Council
          Sacramento Metropolitan Air Quality Management District
          The Greenling Institute
          Union of Concerned Scientists
           
           OPPOSITION:    

          None received   
                                       -- END --