BILL ANALYSIS �
AB 333
Page 1
Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 333 (Grove) - As Amended: May 11, 2011
SUBJECT : California Global Warming Solutions Act of 2006: cap
and trade program
SUMMARY : Requires the Air Resources Board (ARB) to report to
the Legislature by July 31, 2011 on the readiness of its
proposed cap and trade program to begin January 1, 2012.
Authorizes ARB to delay cap and trade implementation up to one
year. Requires ARB to report annually on the status of the cap
and trade program until 2016.
EXISTING LAW :
1)Requires ARB, pursuant to AB 32, to adopt a statewide
greenhouse gas (GHG) emissions limit equivalent to 1990 levels
by 2020 and adopt regulations to achieve maximum
technologically feasible and cost-effective GHG emission
reductions.
2)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, to be
adopted by 2011 and operative by 2012, under limited
circumstances once specified conditions are met.
THIS BILL :
1)Contains findings regarding the cap and trade program adopted
by ARB pursuant to AB 32.
2)Requires ARB to make findings and submit a status report to
the Legislature by July 31, 2011 on the readiness of the cap
and trade program to begin January 1, 2012. The report is
required to address 15 specified issues listed in the bill
that mirror issues ARB itself requested its executive officer
to report on when it approved the cap and trade program in
December 2010.
3)Authorizes ARB to commence the cap and trade program after
January 1, 2012, but not later than January 1, 2013, if ARB
finds that an adjustment to the start date is appropriate to
AB 333
Page 2
ensure successful implementation.
4)Requires ARB to thereafter provide an annual cap and trade
status report to the Legislature until 2016.
5)Contains an urgency clause.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. The AB 32 Scoping Plan is a description of the
specific measures ARB and others must take to meet the
objective of AB 32: Reduce statewide GHG emissions to 1990
levels by 2020. The reduction measures identified in the
Scoping Plan must be proposed, reviewed, and adopted as
individual regulations by January 1, 2011, to become operative
beginning on January 1, 2012.
According to recently revised estimates from ARB, a total
reduction of 80 million metric tons (MMT), or 16 percent
compared to business as usual, is necessary to achieve the
2020 limit. Approximately 78 percent of the reductions will
be achieved through identified "regulatory" measures. ARB
proposes to achieve the balance of reductions necessary to
meet the 2020 limit (approximately 18 MMT) through a cap and
trade program.
In December 2010, ARB adopted a proposed cap and trade program
that would apply to an estimated 600 regulated entities
engaged in stationary combustion, cement manufacturing,
cogeneration, petroleum refining, hydrogen production,
aluminum production, facility operators calcining carbonates,
CO2 supplier or transfer recipient, electricity generation,
glass production, iron and steel production, lime production,
natural gas transmission and distribution, nitric acid
production, oil and gas extraction field operation, production
of industrial gases, pulp and paper production, soda ash
production, electricity deliverers, transportation fuel
deliverers, and natural gas deliverers.
In a cap and trade program, a limit, or cap is put on the
amount of pollutants (GHGs) that can be emitted. Each
allowance equals one metric ton of carbon dioxide equivalent.
The total number of allowances created is equal to the cap set
AB 333
Page 3
for cumulative emissions from all the covered sectors. These
allowances may be auctioned and/or freely given to companies
or other groups. In addition to allowances, emissions
reductions from sources that are outside the cap coverage,
called offsets, could be authorized. This would allow
emissions in the capped sectors to exceed the allowances
issued. After initial distribution of allowances-or in the
use of offsets-compliance instruments may be traded among
entities. At the end of each compliance period, covered
entities are required to turn in, or surrender, enough
compliance instruments to match their emissions during this
time period.
Although slated for final adoption later this year and
implementation beginning in 2012, ARB's proposed cap and trade
program has been sidetracked by a recent court ruling in a
lawsuit alleging deficiencies in ARB's CEQA analysis. On May
20, the San Francisco Superior Court, in Association of
Irritated Residents, et al v. ARB, ruled that ARB had failed
to comply with CEQA in adopting its AB 32 Scoping Plan and
enjoining any further cap and trade rulemaking until ARB
remedies its CEQA analysis. The court found that ARB's
discussion of alternatives was inadequate and that ARB
improperly approved the Scoping Plan prior to completing its
environmental review. On June 13, ARB released a revised
alternatives analysis intended to comply with the Superior
Court ruling, which is scheduled for board consideration in
August. ARB has also appealed the ruling.
2)ARB has committed to report on issues listed in the bill. The
issues this bill asks ARB to report on are drawn from
Resolution 10-42, adopted by ARB when it approved the proposed
cap and trade program in December 2010. These issues were
included in the ARB resolution because they were raised by
stakeholders and/or board members during the rulemaking
process. The resolution directs the executive officer to
report to the board no later than July 31, 2011. According to
ARB, staff will present a status report per the resolution at
the August 24 board meeting. The report will likely consist
of a slide presentation, which may be accompanied by a staff
report, and will be published on ARB's website.
3)Must cap and trade begin on January 1, 2012? In two
provisions, AB 32 suggests that its regulations will be
operative beginning January 1, 2012. In particular, the
AB 333
Page 4
provision authorizing cap and trade says ARB "may adopt a
regulation?applicable from January 1, 2012, to December 31,
2020?" (Health and Safety Code Section 38562(c)) Because this
provision authorizes, but doesn't require, cap and trade, it
can't be read to require cap and trade to begin January 1,
2012. However, if ARB proceeds to final adoption of a cap and
trade regulation, the provision suggests the regulation must
be "applicable" beginning January 1, 2012. The meaning of
"applicable," and the scope of the regulation, is subject to
the interpretation and discretion of ARB.
4)"Delay" authority may instead commit ARB to cap and trade.
The provision in this bill that's posed as giving ARB
flexibility to delay implementation of cap and trade may in
fact limit ARB's ability to not proceed with cap and trade.
Proposed Section 38598.5(b) (on page 4, line 13 of the bill)
reads:
If the state board finds in the status report to the
Legislature pursuant to subdivision (a) that an adjustment
to the start date for the cap-and-trade program is
appropriate to ensure successful implementation of
cap-and-trade regulation, the state board may commence the
cap-and-trade program after January 1, 2012, but no later
than January 1, 2013. (emphasis added)
REGISTERED SUPPORT / OPPOSITION :
Support
California Grocers Association
California Independent Petroleum Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
Chemical Industry Council of California
Consumer Specialty Products Association
Western States Petroleum Association
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
AB 333
Page 5
319-2092