BILL ANALYSIS Ó
SB 246
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: SB 246
AUTHOR: De León
AMENDED: As introduced
FISCAL: Yes HEARING DATE: May 2, 2011
URGENCY: No CONSULTANT: Peter Cowan
SUBJECT : GLOBAL WARMING SOLUTIONS ACT, OFFSETS
SUMMARY :
Existing law , under the California Global Warming Solutions
Act of 2006 (CGWSA):
1) Requires the Air Resources Board (ARB) to determine the
1990 statewide level of greenhouse gas (GHG) emissions and
achieve a limit that is equivalent to that by 2020 and sets
several requirements to meet that requirement. (Health and
Safety Code §38000 et seq.).
2) Requires ARB in consultation with the Public Utilities
Commission (PUC) and the State Energy Resources
Conservation and Development Commission (CEC), in addition
to all state agencies with jurisdiction over GHG sources,
to develop a scoping plan for achieving the maximum
technologically feasible and cost-effective reductions in
GHG emissions. The plan is required to identify and make
recommendations on direct emission reduction measures,
alternative compliance mechanisms, market-based compliance
mechanisms, and potential monetary and nonmonetary
incentives. The ARB must evaluate the total potential costs
and total potential economic and noneconomic benefits of
the plan for reducing GHGs to the state's economy and
public health, using the best economic models, emission
estimation techniques, and other scientific methods. The
plan must be updated at least once every five years.
(§38561).
3) Requires ARB to adopt GHG emission limits and emission
reduction measures by regulation on or before January 1,
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2011, and meet certain requirements in adopting the
regulations. ARB may include the use of market-based
mechanisms to comply with these regulations. (§§38562,
38570).
This bill :
1) Defines "Compliance offset" to mean a quantified reduction
in GHG emissions in a sector for which the ARB has not
adopted an emission limit and market-based compliance
mechanism, that is used for compliance with that limit by a
regulated GHG source.
2) Requires ARB, if it allows for the use of compliance
offsets, that ARB ensure that:
a) Compliance offsets be permanently retired and the
emission reductions have not been claimed by another
person or entity.
b) Compliance offsets do not cause or contribute to
significant adverse human health or environmental
effects.
c) ARB maintains authority over compliance offset
authority.
d) ARB has conducted an independent review of
third-party claims regarding a compliance offset before
it is credited.
COMMENTS :
1) Purpose of Bill . According to the author, "SB 246 seeks to
hold ÝARB] accountable in achieving the requirements of AB
32 by improving the state's quality control check on
offsetsÝ? , t]rack the registration and sale of offsets to
ensure that the same credits are not sold more than onceÝ,
and e]nforce the rules and standards of the offsets
program"
2) Status of Cap and Trade . ARB on December 16, 2011, adopted
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draft regulations for a proposed cap and trade market-based
compliance mechanism and is expected to produce a final
version of those regulations this fall.
On March 17, 2011, the California Superior Court found ARB
had not properly considered alternatives to cap and trade
and thus failed to comply with the California Environmental
Quality Act (CEQA) and enjoined ARB from proceeding with
cap and trade until the court determines it has fully
complied with CEQA.
3) Offsets . Offsets are a cost containment mechanism used in
cap and trade emission reduction markets. An offset allows
a GHG emitter to avoid a reduction in direct emissions by
undertaking activities, or paying a third party to, that
reduce emissions beyond the expected emissions without the
incentive.
Opponents of SB 246 note that these activities are often
more cost-effective than reducing direct emissions "In some
models (most notably done by USEPA, Center for Resource
Solution and Charles River Associates), cap and trade
program cost reduction range from 40% to 80% depending on
the model ? of offsets".
According to proponents of SB 246 "Accurately measuring and
verifying offsets is inherently difficult. An offsets
program with environmental integrity requires substantial
regulatory oversight to minimize fraud, manipulation, and
faulty calculations and accounting."
4) Verification of offsets . Two criteria for verifying offsets
are ensuring that an offset has both additionality and
permanence. Offset additionality means that the offset
activities would not have occurred without the compliance
credit incentive. Verification of additionality can be
complicated in cases where multiple incentives for the
offset activity exist, such as compliance with existing
regulation or energy savings that might result from the
activity. Permanence refers to the length of time an
emission is avoided and is a consideration in sequestration
projects that seek to remove GHG from the atmosphere or
capture GHG from sources and store it. The additionality
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and/or permanence of certain offset categories are more
verifiable than others.
5) Draft regulations . ARB draft regulation allow compliance
offsets for up to 8% of an entities total emissions
compliance, a quarter of these offset in the first and
second compliance, and up to half in later periods, can be
sector specific offsets (e.g., reducing an entire sector's
emissions in developing countries). Non-sector offsets are
restricted to Canada, the United States, and Mexico.
Offset activities cannot be required by law, regulation, or
other legal mandate applicable to the location of the
activity. The draft regulation does not approve any sector
specific offset programs or sectors at this time. However,
four non-sector specific offset protocols are included in
the draft regulations.
Offset activities are required to result from an approved
compliance offset protocol. The protocols must establish:
the GHG emission reductions or removal resulting from the
protocol, monitoring procedures, a conservative
business-as-usual practice, a means to account for leakage
and uncertainty, mechanism for ensuring performance and
permanence. Protocols for non-sequestration projects are
credited for 7-10 years and may be renewed twice,
sequestration projects are credited for 10-30 years and may
not be renewed.
Non-sequestration offsets must be verified annually and
sequestration projects less frequently, before a
verification statement is completed the verification
findings must be reviewed by an independent reviewer. The
verifier must be rotated every six years.
SB 246 further requires that ARB ensure an offset does not
cause or contribute to significant adverse effects on human
health or the environment as determined by ARB. It also
requires ARB conduct an independent review of all
third-party claims regarding and offset before it is
credited.
SOURCE : Union of Concerned Scientists
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SUPPORT : Breathe California, California Apollo Alliance,
California Interfaith Power and Light, Catholic
Charities, Diocese of Stockton, Clean Power
Campaign, Coalition for Clean Air, Environment
California, Latino Coalition for a Healthy
California, National Parks Conservation
Association, Our Children's Earth Foundation,
Physician for Social Responsibility, Planning
and Conservation League, Public Health Law &
Policy, Regional Asthma Management and
Prevention, Sierra Club California, Union of
Concerned Scientists
OPPOSITION : California Manufactures & Technology
Association, Building Owners & Managers
Association of California, California Business
Properties Association, California Chamber of
Commerce, California Grocers Association,
California League of Food Processors,
Commercial Real Estate Development Association,
NAIOP of California, International Council of
Shopping Centers, Western States Petroleum
Association, Wine Institute