BILL ANALYSIS
SB 722
Page 1
Date of Hearing: June 22, 2009
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Nancy Skinner, Chair
SB 722 (Steinberg) - As Amended: June 11, 2009
SENATE VOTE : 21-15
SUBJECT : Greenhouse gas (GHG) credits
SUMMARY : Establishes advertising and documentation requirements
for sales of GHG credits or emission reductions and provides for
civil penalties for violations of those requirements.
EXISTING LAW :
1)The California Global Warming Solutions Act (AB 32) requires
the Air Resources Board (ARB) to adopt a statewide GHG
emissions limit equivalent to 1990 levels by 2020 and adopt
regulations to achieve maximum technologically feasible and
cost-effective GHG emission reductions. Requires ARB to adopt
methodologies for the quantification of voluntary GHG emission
reductions and adopt regulations to verify and enforce any
voluntary GHG emission reductions used to comply with GHG
emission limits established by ARB.
2)Generally prohibits the use of false or misleading statements
in advertising, including any untruthful, deceptive, or
misleading environmental marketing claim. Limits civil
penalties to those who prove injury or loss of property.
Provides an affirmative defense when an environmental
marketing claim conforms to voluntary guidelines published by
the Federal Trade Commission (FTC).
THIS BILL :
1)Prohibits any person from representing in sales or promotional
materials that a GHG credit or emission reduction reduces GHG
emissions unless it meets one or more of the following
conditions:
a) The credit or emission reduction meets methodologies
adopted by the ARB in compliance with AB 32.
b) The credit or emission reduction complies with
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protocols adopted by, and is registered with, the
California Climate Action Registry (CCAR).
c) The person demonstrates, and discloses in sales or
promotional materials, that the credit or emission
reduction meets the following conditions:
i. It is quantifiable and measurable in a
manner consistent with reporting regulations adopted
by the ARB pursuant to AB 32.
ii. It is surplus and is in addition to any
GHG emission reduction that otherwise would occur.
iii. It is verifiable by a state, regional, or
local agency within California.
iv. It does not cause or contribute to a
violation of any state or federal ambient air
quality or toxic air contaminant standard.
2)Requires sellers of GHG credits or emission reductions to
maintain, and make available to the public upon request, the
following information and documentation:
a) Documentation that one or more of the above
conditions have been met.
b) Information on any adverse environmental or public
health impacts associated with the creation and
maintenance of the credit or emission reduction,
including impacts on species, habitat, ecosystems, land
use, biodiversity, air quality, water supply and quality,
access to food, and production of food.
3)Establishes a civil cause of action that may be brought by any
person or governmental entity, with civil penalties up to
$2,500 per violation, plus payment of the cost of the GHG
credits and reasonable attorney fees and costs.
4)Provides that a violation of the bill's requirements is not a
crime.
5)Provides that the bill becomes operative January 1, 2011 and
becomes inoperative if the FTC adopts binding and enforceable
trade rules for GHG credit claims.
6)Defines GHG credit and similar terms as a voluntary reduction
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in GHG emissions undertaken for the purposes of selling,
trading, or otherwise providing the credit to another party.
7)Incorporates the definition of "person" from Business and
Professions Code Section 17577.1(c), which defines it as an
individual, partnership, firm, corporation, or association, or
any employee or agent thereof.
8)Makes findings and declarations regarding global warming and
the protections necessary to ensure consumers are purchasing
GHG credits that actually result in emission reductions.
FISCAL EFFECT : Non-fiscal
COMMENTS :
1)History of environmental advertising standards. California
previously has enacted environmental advertising standards for
consumer products in general. To address manufacturers
promoting products as "ozone friendly" and "biodegradable"
when, in fact, such claims were misleading, if not false, the
Legislature enacted AB 3994 (Sher), Chapter 1413, Statues of
1990, to provide for state definitions of environmental terms
and procedures for verifying claims made to the public. A
group of industry and advertising trade associations sued the
state, claiming AB 3994 violated the right of free speech of
advertisers. A 1992 ruling by the 9th U.S. District Court of
Appeal upheld AB 3994, but struck down the term "conveniently
recyclable" as too vague. Several attempts to clarify the
definition through legislation failed in 1991-1995.
Meanwhile, the FTC released voluntary guidelines on the use of
environmental terms in advertising. The FTC guidelines do not
have the force of law. In response to manufacturers'
complaints about interstate commerce problems posed by
California-specific labeling standards, enforcement of AB 3994
effectively was preempted in 1995 by SB 426 (Leslie), Chapter
642, Statutes of 1995, which provided an affirmative defense
when an environmental marketing claim conforms to the FTC
guidelines.
2)New product, new claims. The carbon offset market is fairly
new and growing substantially. Individuals and corporations
purchase carbon offsets to compensate for the GHG emissions
they create or contribute to. However, there are no uniform
guidelines, regulations, or oversight to ensure that
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advertising claims for offsets are valid. Because of
Proposition 64, present law limits those who may raise an
unfair competition claim to individuals who have suffered
injury in fact and have lost money or property. When
Proposition 64 passed in 2004, the carbon offset industry was
minimal in existence. Over the last couple of years, sales of
carbon offsets have grown substantially. Greenhouse gas
reductions are not as tangible or easily defined in terms of
'injury in fact' and 'loss of money or property.' As more
people purchase these reductions to compensate for their
carbon footprint, questions arise as to what is being done to
ensure that they are purchasing genuine carbon offsets. There
is growing concern about the measurement of emissions
reductions from projects sold and the potential for fraud.
However, current law does not provide the necessary tools to
address this evolving industry. This bill, in recognition of
the rapidly developing market for carbon offsets, and
California's stated policy in emission reduction, seeks to
establish consumer protections in the sale of these intangible
products.
3)Are standards adopted by ARB and CCAR the only standards that
should be recognized? Under this bill, in order for a person
to claim that a GHG credit reduces GHG emissions, the credit
must meet methodologies adopted by ARB, comply with protocols
adopted by CCAR, or meet several conditions specified in the
bill, some of which are inconsistent with the characteristics
of many offset projects. It appears that these conditions
will significantly limit the universe of GHG credits that are
recognized as "legitimate," without necessarily corresponding
to whether the credits in fact represent verified emission
reductions. For example, ARB has not yet adopted
methodologies that would be appropriate for many GHG credits
and, while CCAR has adopted some protocols, such as forestry
protocols, that are usable for voluntary GHG credits, CCAR
does not have protocols to suit every type of project. The
alternative conditions in the bill seem to be suited for major
in-state GHG sources, but may not be achievable by smaller
and/or out-of-state projects. There are several other
recognized standards in use in California and elsewhere which
may be appropriate to validate GHG credits sold in the
voluntary market. The author and the committee may wish to
consider permitting ARB to recognize additional standards
which could then be used to support advertising claims.
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4)Related legislation. AB 376 (Nava), approved by this
Committee in April, requires a person selling a GHG emission
offset for voluntary purposes to disclose specified
information in advertising materials and ensure the offset has
a unique serial number and is tracked by a registry. The bill
provides for civil penalties up to $10,000 for each violation.
AB 376 is a two-year bill pending in the Assembly
Appropriations Committee.
5)Double referral. This bill has been double referred to the
Assembly Judiciary Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
Pacific Power (if amended)
Opposition
California Business Properties Association
California Chamber of Commerce
California Grocers Association
California Independent Petroleum Association
California Manufacturers & Technology Association
California Retailers Association
Civil Justice Association of California
EcoSecurities
Western States Petroleum Association
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092