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