BILL ANALYSIS
SB 722
Page 1
SENATE THIRD READING
SB 722 (Steinberg)
As Amended June 25, 2009
Majority vote
SENATE VOTE :21-15
NATURAL RESOURCES 7-3 JUDICIARY 7-3
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|Ayes:|Skinner, Brownley, |Ayes:|Feuer, Brownley, Evans, |
| |Chesbro, | |Jones, Krekorian, Lieu, |
| |De Leon, Hill | |Monning |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Gilmore, Knight, Logue |Nays:|Tran, Knight, Silva |
| | | | |
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SUMMARY : Establishes advertising and documentation requirements
for sales of greenhouse gas (GHG) credits or emission reductions
and provides for civil penalties for violations of those
requirements. Specifically, 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 or
standards adopted or approved by the Air Resources Board
(ARB) pursuant to the California Global Warming Solutions
Act (AB 32 (Nunez and Pavley), Chapter 488, Statutes of
2006).
b) The credit or emission reduction complies with 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
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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; and,
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; and,
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 Federal Trade Commission (FTC)
adopts binding and enforceable trade rules for GHG credit
claims.
6)Defines GHG credit and similar terms as a voluntary reduction
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
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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.
EXISTING LAW :
1)AB 32 requires 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 FTC.
FISCAL EFFECT : Non-fiscal
COMMENTS : 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 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
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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.
Under this bill, in order for a person to claim that a GHG
credit reduces GHG emissions, the credit must meet methodologies
or standards adopted or approved 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 bill permits ARB
to approve these standards.
Related legislation: AB 376 (Nava) requires a person selling a
GHG emission offset for voluntary purposes to disclose specified
information in advertising materials, ensure the offset has a
unique serial number, is tracked by a registry, and provides for
civil penalties up to $10,000 for each violation. AB 376 is a
two-year bill pending in the Assembly Appropriations Committee.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0001700