BILL ANALYSIS Ó AB 2576 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2576 (Gray) - As Amended April 11, 2016 ----------------------------------------------------------------- |Policy |Natural Resources |Vote:|7 - 2 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allocates up to $20 million from AB 32 cap-and-trade revenues (Greenhouse Gas Reduction Fund) to CalRecycle, upon appropriation, for market development payments of $50 per ton of state-generated cullet used for glass manufacturing in the state. This bill requires market development payments to achieve greenhouse gas (GHG) emissions reductions not otherwise required by law. FISCAL EFFECT: AB 2576 Page 2 1)Cost pressures of up to $20 million (Greenhouse Gas Reduction Fund) for the market development program at CalRecyle. 2)Increased ongoing annual costs of approximately $235,000 (Greenhouse Gas Reduction Fund) for the California Air Resources Board (ARB) to revise funding guidelines, develop quantification methods and consult with CalRecycle. 3)Increased ongoing annual costs of between $250,000 and $400,000 (Greenhouse Gas Reduction Funds) for CalRecyle to administer a $20 million program. COMMENTS: 1)Purpose. According to the author, furnace-ready recycled glass (cullet) is expensive and hard to acquire. Single-stream recycling systems result in low-quality glass that cannot be used in a furnace. Often, this glass is disposed of in landfills rather than recycled. This bill is intended to provide an incentive to glass manufacturers to fund the use of recycled cullet, thereby reducing GHG emissions and their costs. 2)Background. The California Global Warming Solutions Act of 2006 (AB 32) requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations, including market-based compliance mechanisms, to achieve maximum technologically feasible and cost-effective GHG emission reductions. As part of the implementation of AB 32 market-based compliance measures, ARB adopted a cap-and-trade program that caps the allowable statewide emissions and provides for the auctioning AB 2576 Page 3 of emission credits, the proceeds of which are quarterly deposited into the GGRF available for appropriation by the Legislature. The 2014-15 Budget Act allocated cap-and-trade revenues for the 2014-15 fiscal year and established a long-term plan for the allocation of cap-and-trade revenues beginning in fiscal year 2015-16. The Budget continuously appropriates 35% of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Twenty-five percent of the revenues are continuously appropriated to continue the construction of high-speed rail. The remaining 40% are to be appropriated annually by the Legislature for investments in programs that include low-carbon transportation, energy efficiency and renewable energy, and natural resources and waste diversion. An expenditure plan for the 40% was not included in the 2015-16 Budget Act, with the exception of $227 million appropriated to continue funding for specified existing programs. The remaining 2015-16 revenues, along with 2016-17 revenues totaling $3.1 billion, are available for appropriation this year. 3)Glass recycling in California. California is home to four glass manufacturers: Owens Illinois has facilities in Vernon and Tracy; Ardagh Glass has a facility in Madera; and, Gallo Glass has a facility in Modesto. Until last fall, Owens Illinois also operated a plant in Oakland. The California Beverage Container Recycling and Litter Reduction Act (Bottle Bill): requires glass beverage containers to contain 35% recycled AB 2576 Page 4 content. In addition to the benefits of recycling (e.g., reductions in virgin material use, reduced landfilling, energy savings, and providing markets for recycled materials), recycled cullet produces significantly fewer GHG emissions than virgin glass production. According to the Glass Packaging Institute, every six tons of recycled cullet used in glass manufacturing reduces GHG emissions by one ton. The Bottle Bill allocates $10 million annually for quality incentive payments of up to $60 per ton of color sorted (green, brown, or clear) recycled glass cullet to glass recyclers. Recyclers sell the recycled cullet to glass manufacturers based on market pricing. 4)Leaky emissions. Leakage refers to GHG emissions reductions in state that are replaced by increased GHG emissions out of state. AB 32 requires ARB to design measures to minimize leakage. Industries for which production is highly emissions intensive, which results in high compliance costs, and industries facing strong competition from out-of-state producers are generally at highest risk of leakage. Glass manufacturing is classified by ARB as a high risk industry and glass manufacturers receive a base amount of free allowances. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081 AB 2576 Page 5