BILL ANALYSIS
SB 333
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2009-2010 Regular Session
BILL NO: SB 333
AUTHOR: Hancock
AMENDED: As Introduced
FISCAL: Yes HEARING DATE: April 27, 2009
URGENCY: No CONSULTANT: Bruce Jennings
SUBJECT : VOLUNTARY GREENHOUSE GAS EMISSION OFFSET
PROGRAM FUND
SUMMARY :
Existing law :
1) Requires the Air Resources Board (ARB) do all of the
following before including a market based compliance
mechanism in its regulations:
a) Consider 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.
b) Design any market-based compliance mechanism to
prevent any increase in the emissions of toxic air
contaminants or criteria air pollutants.
c) Maximize additional environmental and economic
benefits for California, as appropriate, pursuant to
Health and Safety Code 38570(b).
2) Authorizes ARB to adopt regulations, by January 1, 2011, to
establish a system of market-based declining annual
aggregate emissions limits for sources or categories of
sources of GHGs.
Requires that such regulations ensure that all market-based
reductions are real, permanent, quantifiable, verifiable,
and enforceable by the state. (Health & Safety Code 38562
(d) (1)).
SB 333
Page 2
This bill :
1) Establishes the Voluntary Greenhouse Base Emission Offset
Program Fund within the State Treasury. This bill would
allow the Treasurer to receive funds on a voluntary basis
from various sources (e.g., federal government, businesses)
for expenditure by the Resources Agency, upon appropriation
by the Legislature, for the following purposes and meeting
specified conditions:
a) Projects to reduce GHG emissions consistent with
protocols adopted by the ARB;
b) Projects to protect public trust resources and
natural systems from unavoidable impacts of climate
change;
c) Urban greening projects (e.g., urban forestry
projects);
d) Conditions shall include collaboration with the
California Conservation Corps or others; and, shall
require an education and skills development component,
as specified.
2) Requires the Resources Agency, upon Legislative
appropriation, to direct the California Conservation Corps
and local conservation corps to conduct tree planting and
related activities recognized by the state board to
mitigate the effects of global warming, as specified.
3) Allows the Resources Agency to also direct moneys to
nonprofit conservation organizations, and other nonprofit
organization for the planting and maintenance of trees and
plants consistent with protocols established by ARB for
purposes of mitigating the efforts of global warming, as
specified.
4) Requires the Resources Agency to adopt by October 1, 2010
guidelines for the distribution of moneys pursuant to this
act, as specified.
SB 333
Page 3
5) Requires the Resources Agency to adopt by October 1, 2010
strategies for the sale of voluntary greenhouse gas
emission offsets by the state that contribute to the Fund.
6) Allows ARB, in collaboration with the Resources Agency, to
use any appropriate system to determine the value of any
greenhouse gas emission offsets for the purposes of this
act and to deposit the proceeds of such sales in this fund.
COMMENTS :
1) Purpose of Bill . The author explains the background and
purpose of the bill as follows: "Currently there are more
than 28 private and not for profit entities in the US which
collect "voluntary carbon offset" contributions from
individuals, businesses and industry and reinvest funds in
projects which mitigate the effects of carbon emissions.
In California, there are no state regulations on the
collection of funds or verification on the actual
completion of projects listed to be funded by the
organizations or businesses. There are organizations in
California (and the nation) which are in the process of
establishing standards for verification, there are no
strong accountability standards in place. With the
creation of the State voluntary carbon offset fund, held by
the State Treasurer, the accountability for collection and
the distribution of funds would be greatly enhanced."
By ensuring carbon emissions mitigation projects are compliant
with the ARB's protocols and work is done by the California
Conservation Corps or local conservation corps, the benefit
to the State, businesses, industry and individuals would
be: 1) mitigation, 2) support for new initiatives, 3)
education and jobs skills, 4) consumer confidence for
verifiable projects, and 5) new opportunities to implement
strategic urban forest plans.
2) Background: Offsets - A Complex Policy. As described in
an analysis authored by Randy Chinn, with the Senate
Committee on Energy, Utilities and Communications on a
related measure presented last year:
"?under a cap and trade approach, a company's GHG emissions
SB 333
Page 4
will be capped and that cap will steadily decline over the
years. The company can choose to reduce its GHG emissions
or pay another regulated company to reduce its GHG
emissions. In theory this allows the GHG emission
reductions to happen in the least costly way. A variation
on this is to allow the company to pay another unregulated
entity to reduce GHG emissions. For example, an electric
generator could pay a Malaysian landowner not to cut down
his forests or pay a Ukrainian oil producer to capture the
waste methane gas coming out of the well. This is known as
an offset. Offsets are not tangible goods. The seller of
an offset is representing that an activity which results in
a greenhouse gas reduction has occurred or will occur.
Tracking these types of activities, and thereby ensuring
that the customer is getting what she paid for, can be
complicated.
There is controversy over whether a cap and trade system or
offsets are good ideas, though in a [then] recent filing
the CPUC and the California Energy Commission (CEC)
recommended a cap and trade system to the ARB. They did
not, however, address the issue of offsets. ARB is
considering a cap and trade system, and a decision on
whether it should be adopted could come as early as the
beginning of next year. But the ARB Chairman has indicated
that even if ARB were to approve a cap and trade system,
the actual implementation of such a system is several years
away because of the complexity and detail required to make
such a program work."
3) Suggested Amendments .
a) Timing Issue: SB 333 Timelines and ARB Adoption of
Regulations .
The current adoption of regulations by ARB for the
implementation of AB 32 occurs on January 1, 2011 for
rules to take effect on January 1, 2012. The
requirement of SB 333 for the Resources Agency to adopt
guidelines and strategies by October 1, 2010 appears to
lack the necessary coordination with ARB's more general
adoption of regulations, including prospective actions
relative to offsets. In order to ensure that this bill
is properly coordinated with ARB's actions, it is
SB 333
Page 5
recommended that the bill be amended to have the
operative dates follow ARB's timeline for the adoption
of regulations.
b) Offsets: Real, Verifiable, Additional, Permanent,
and Enforceable ? The requirements of AB 32 identify
five requisite elements needing to be satisfied when
adopting regulations establishing a market-based
approach by January 1, 2011: the credits must be real,
verifiable, additional (surplus to regulatory efforts),
permanent, and enforceable.
While the fact sheet for this bill states that involving
the State Treasurer in the process of receiving funds
for specified projects aids verification, the actual
verification process is not articulated in this bill.
Furthermore, the bill is silent on the additional four
elements (i.e, that credits be real, additional,
permanent, and enforceable). The ramifications with
advancing a voluntary offset scheme which lacks a sound
basis for ensuring that claimed reductions are real,
additional, permanent, and enforceable are daunting.
The author's office has explained that their intent is to
have the Resources Agency ensure that all projects
involved in this program fulfill the five basic elements
(i.e., that offsets are real, additional, verifiable,
permanent, and enforceable). If so, the bill needs to
be amended accordingly.
4) Final Comment: For Further Consideration .
Mitigation & Adaptation: Missing the Climate for the
Trees? Programs to promote urban forests, tree planting,
and the promotion of carbon sinks are clearly positive
steps to address global warming -or are they?
In the variety of bills that have begun to appear in the
California Legislature addressing climate change, a popular
legislative theme is to promote a variety of programs to
soften the anticipated negative consequences, ranging from
the planting of trees to the rescue of charismatic
mega-fauna (e.g., polar bears). Yet, these approaches,
SB 333
Page 6
from mitigation to adaptation, can arguably be at cross
purposes to what climate scientists and others regard as
the policy imperative of global warming: to dedicate all
available resources to rapidly reduce the release of
greenhouse gas emissions - especially the largest sources,
including those emissions from cars, energy producers, and
agriculture. The issue has been sometimes framed as
mistaking symptoms for causes. The Senate Environmental
Quality Committee and the Legislature more generally must
begin to grapple with such difficult questions. Simply
endorsing a myriad of policies to address a crisis of
global scale, especially in an era of scarce resources, may
be tantamount to missing the forest for the trees.
SOURCE : Senator Hancock
SUPPORT : None on file
OPPOSITION : None on file