BILL ANALYSIS �
AB 2083
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Date of Hearing: April 7, 2014
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 2083 (Gaines) - As Amended: March 20, 2014
SUBJECT : California Global Warming Solutions Act of 2006:
offsets
SUMMARY : Requires the Air Resources Board (ARB) to permit the
use of compliance offsets regardless of the geographic location
of the offset.
EXISTING LAW :
1)Requires ARB 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, under
limited circumstances once specified conditions are met.
3)Requires any direct regulation or market-based compliance
mechanism to achieve GHG reductions that are real, permanent,
quantifiable, verifiable, and enforceable by ARB.
4)Requires ARB, in adopting regulations, including market-based
compliance mechanisms, to design the regulations in a manner
that is equitable, seeks to minimize costs and maximize the
total benefits to California, and encourages early action to
reduce GHG emissions.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background on cap-and-trade . According to 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 direct regulations. ARB
proposes to achieve the balance of reductions necessary to
meet the 2020 limit (approximately 18 MMT) through a
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cap-and-trade program that covers an estimated 600 entities.
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
for cumulative emissions from all the covered sectors. These
allowances may be auctioned and/or freely given to regulated
entities or other parties. In addition to allowances,
emissions reductions from sources that are outside the cap
coverage, called offsets, can be used to meet compliance
obligations. 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 surrender enough compliance
instruments to match their emissions during this time period.
2)The role of offsets in cap-and-trade . AB 32 makes no mention
of offsets, instead focusing on direct GHG emission reductions
and only permitting market-based mechanisms to the extent they
produce equivalent results. The use of offsets for compliance
with AB 32, as envisioned in the cap-and-trade program, has
been invented by ARB without any statutory guidance. While
ARB has justified the reliance on compliance offsets as an
opportunity for low-cost reductions from outside the cap,
others have questioned how offsets, particularly from sources
outside the state, might meet AB 32's requirements or
otherwise produce benefits in California.
ARB's cap-and-trade regulation allows, but does not require,
the use of offsets to meet a limited portion of regulated
entities' compliance obligation. Each regulated entity may
meet up to 8 percent of their total compliance obligations
with offsets, which is equivalent to approximately 50 percent
of their GHG reduction obligation. ARB recognizes only
compliance offsets generated by sources that adhere to a
compliance offset protocol adopted by ARB. To date, ARB has
adopted protocols for the following four project types:
livestock manure management, ozone depleting substances, urban
forestry, and U.S. forestry. Like other emission reduction
measures, GHG reductions associated with offset projects must
be real, permanent, quantifiable, verifiable, and enforceable
by ARB. Currently, there is no preference for offset projects
located in California and no limit on offsets from outside of
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California, apart from the limit to the United States and
Quebec (with whom California has an enforceable agreement
through the Western Climate Initiative) to assure the projects
can meet the requirements of AB 32, including being verifiable
and enforceable by ARB.
3)Policy on offset use and location . This committee has
previously passed legislation (e.g., AB 1404 (De Leon) in
2009) to apply stringent limits to ARB's use of offsets for AB
32 compliance. AB 1404 also prioritized the use of compliance
offsets to favor local sources that resulted in local air
quality benefits. AB 1404 was vetoed by Governor
Schwarzenegger.
In addition to AB 1404 from 2009, other recent legislation has
expressed a preference for direct emission reductions over
offsets, and for local offset sources over distant sources.
For example, SB 292 (Padilla), Chapter 353, Statutes of 2011,
and SB 743 (Steinberg), Chapter 386, Statutes of 2014, each
contained the following provision:
Offset credits shall be employed by the applicant only
after feasible local emission reduction measures have been
implemented. The applicant shall, to the extent feasible,
place the highest priority on the purchase of offset
credits that produce emission reductions within the city or
the boundaries of the (air district).
REGISTERED SUPPORT / OPPOSITION :
Support
California Chamber of Commerce
California League of Food Processors
California Manufacturers & Technology Association
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
AB 2083
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