California’s cap-and-trade program withstood a battle in court, and now the Legislature is proposing changes to the controversial program.  Senator Bob Wieckowski (Democrat – District 10), Chair of the Environmental Quality Committee, has authored Senate Bill 775 (“SB 775”) which would extend the cap-and-trade program to 2030 with modifications.  The existing cap-and-trade program, established under Assembly Bill 32 (2006) or the California Global Warming Solutions Act (“Act”), expires in 2020.  The Act requires the State Air Resources Board (“ARB”) to approve a statewide greenhouse gas emissions limit equivalent to 1990 greenhouse gas emissions level to be achieved by 2020, and to ensure that statewide greenhouse gas emissions are reduced to at least 40% below the 1990 level by 2030, as outlined in Senate Bill 32 (2016).
Continue Reading Senate Bill Proposes Major Market-Based Remodel of Cap-and-Trade Program

This is the third update on environmental regulatory and legal developments in Los Angeles and adjacent counties, as well as the Southern San Joaquin Valley.  We welcome your comments and updates.

South Coast Air Quality Management District

*Governing Board Shift:  New Governing Board Member Sheila Kuehl replaced Mike Antonovich, returning the Board to a Democratic Majority.  Ms. Kuehl calls upon the South Coast Air Quality Management District (District) to use its full regulatory power, and she has strong ties with the California Legislature.  New emphases now include further regulations of stationary facilities, such as warehouses and shopping malls that are considered “indirect sources” of air emissions because they attract emissions from cars and trucks, as well as a termination of the RECLAIM Program.  Questions on the latter include when (2025, 2023, 2031?), treatment of credits from shutdowns, and how companies that invested in long-term credits will be dealt with.  In addition, the District wants to achieve the NOx shave under RECLAIM and at the same time sunset the Program.  Collaterally, the District is pushing the California Air Resources Board (CARB) and US EPA to do their “fair share” to regulate mobile sources so that further efforts to improve air quality will not be piled on the backs of stationary businesses.Continue Reading SOUTHERN CALIFORNIA ENVIRONMENTAL UPDATE #3 – APRIL 24, 2017

The recent wave of climate change legislation in California also included a new and not particularly well-known law aimed at curbing greenhouse gas (“GHG”) emissions associated with water use. SB 1425 will create a voluntary registry to track the water sector’s energy use and GHG emissions.

According to Senator Pavley, the author of SB 1425, “While some of the water-energy related climate pollution is already covered in the state’s cap-and-trade program (via the electricity generation sector), the state does not currently have a clear accounting of the total greenhouse gas emissions associated with the water system.”

SB 1425 requires CalEPA to oversee the development of a registry for GHG emissions that result from the “water-energy nexus” using the best-available data. Participation in the registry is voluntary and open to water agencies, large water consumers, businesses and others conducting business in the state.  SB 1425 provides that entities participating in the registry may qualify for GHG emission reduction incentives.
Continue Reading New Law Takes Aim at GHG Associated with California’s Water Sector

Late Tuesday, the California Air Resources Board (ARB) released draft amendments to the state’s cap and trade regulation, including revisions to the current program in place through 2020, an extension of the program through 2030, and setting the stage for continued emissions reductions under the program through 2050.  ARB’s proposed amendments come in the middle of a recent milieu of uncertainty:  pending litigation challenging the legality of the existing program, an opinion from Legislative Counsel that ARB lacks authority under AB 32 to continue cap and trade past 2020, unprecedented weak demand at the most recent allowance auction, and legislation to establish a statutory emissions reductions mandate for 2030 still in process this session.  With all of these balls in the air, ARB has doubled down and drafted regulations dropping the program’s emissions cap from 334.2 million metric tons (MMT) of CO2e in 2020 to 200.5 MMT in 2030, with major elements of the cap and trade regulation continuing in effect past 2020 to achieve the emissions reductions.
Continue Reading What You Need to Know about the Proposed Revisions to Cap and Trade

The Sacramento Bee has reported that the Legislature’s budget proposal for the high-speed rail project has been finalized.  Gov. Jerry Brown and Democratic lawmakers have agreed to use 25 percent of future cap-and-trade funds, totaling $250 million, to continue construction of the $68 billion California High-Speed Rail Project (the “Project”).  The floor votes for the

The California Air Resources Board has released its first semi-annual report to the California Legislature on the agency’s AB 32 programs, designed to meet the state’s goal of reducing greenhouse gas emissions to 1990 levels by 2020.  The report details recent developments and anticipated milestones for three of CARB’s major AB 32 initiatives:  the cap and trade program, the low carbon fuel standard (LCFS), and the advanced clean cars program.  For our primer on the cap and trade program, see our earlier post.  Some highlights from these programs in 2012 and things to look for in 2013: 

  • The first auction of cap and trade greenhouse gas emission allowances was held in November 2012, raising $233 million for the state’s investor-owned utilities (for the benefit of ratepayers) and $55 million for the state Greenhouse Gas Reduction Fund.  The next auction will take place February 19, 2013 and the first allowance price containment reserve sale will be on March 8, 2013.
  • A trial court decision is expected in 1Q 2013 in the lawsuit challenging the offset protocols adopted for the cap and trade program, Citizens Climate Lobby and Our Children’s Earth Foundation v. CARB.
  • Sacramento Superior Court will hear arguments at the end of May 2013 in California Chamber of Commerce v. CARB, which challenges the cap and trade auction mechanism.
  • In early 2013, Governor Brown will consider the proposed linkage between California’s cap and trade program and Quebec’s program.  Public comments will be accepted on the package considered by the Governor.
  • Proposed amendments to the cap and trade regulation will be released summer 2013.
  • Development of new offset protocols is anticipated for spring 2013.
  • Further study has been initiated on several hot topics in cap and trade – leakage, industry benchmarks for efficiency, and affects of cap and trade on the agricultural sector, including food processors.
  • For the LCFS, hearings will be held in spring 2013 to add fuel pathways and crude oil carbon intensities.
  • Expect amendments to the LCFS in fall 2013, with rulemaking workshops to begin in the first half of 2013.  Workshops topics will include specifications for alternative diesel fuel blends, including biodiesel.
  • Related to the advanced clean cars program, CARB withdrew its Clean Fuels Outlet regulation in December 2012, which would have required fuel providers to build hydrogen stations once a certain number of fuel cell vehicles were in the California market.  Proposed legislation – AB 8 – would reauthorize various clean air fees to fund the hydrogen fueling network.  The Assembly Transportation Committee held its first hearing on AB 8 today.

Continue Reading California Air Resources Board Issues AB 32 Report

California greenhouse gas emitters may be granted a reprieve.  The Executive Director of the California Air Resources Board (CARB), Mary Nichols, testified before the California Senate Select Committee on the Environment, the Economy, and Climate Change yesterday that CARB is proposing to delay requirements for compliance with the state cap-and-trade program for a year.  Nichols

A San Francisco court has issued an eagerly awaited final decision in Association of Irritated Residents v. California Air Resources Board, challenging the California Air Resources Board (CARB) plan for implementation of the Global Warming Solutions Act, otherwise known by its Assembly Bill moniker, A.B. 32.  A coalition of environmental justice advocates sued CARB in an attempt to invalidate the A.B. 32 Scoping Plan, as well as CARB’s environmental review of the Scoping Plan conducted pursuant to the California Environmental Quality Act (CEQA).

The court upheld the validity of the Scoping Plan itself, saving CARB from having to revise the Plan.  But, the court found flaws with CARB’s environmental review of the Scoping Plan and has blocked further rulemaking to implement the Plan until these deficiencies are corrected.  The final decision issued by the court did not differ significantly from the tentative decision released in late January 2011, despite objections to the tentative filed by both sides.  However, the final decision did provide some sought-after clarification on the scope of the court’s remedy.  CARB adopted the Scoping Plan in December 2008 and since that time has adopted various regulations proposed in the Scoping Plan, including the state’s cap-and-trade program.  The tentative decision enjoined CARB from further implementation of the Scoping Plan until it came into compliance with CEQA.  In the final decision, the court clarified that CARB is enjoined from any further rulemaking, presumably on any Scoping Plan program, until CARB amends its environmental review to correct the deficiencies identified by the court. 

Programs stemming from the Scoping Plan that have already made their way through the rulemaking process thus appear unaffected, and their implementation can move forward.  But the cap-and-trade program has not made it out of the formal rulemaking process.  While the Board members of CARB approved the cap-and-trade program in December 2010, it left the Executive Officer to take final action to adopt the proposed regulation (or bring it back to the Board) after more details were sorted out.  CARB had a packed schedule this year to finalize the program prior to its January 1, 2012 start date.  From the court’s statements, below, these activities will be shelved:

Continued rulemaking and implementation of cap and trade will render consideration of alternatives a nullity as a mature cap and trade program would be in place well advanced from the premature implementation which has already taken place.  In order to ensure that ARB adequately considers alternatives to the Scoping Plan and exposes its analysis to public scrutiny prior to implementing the measures contained therein, the Court must enjoin further rulemaking until ARB amends the [environmental review document] in accordance with this decision.

The statutory language of A.B. 32 requires that greenhouse gas emission reduction measures adopted to achieve the goal of 1990 greenhouse gas emission levels by 2020 become operative by January 1, 2012.  If CARB misses this deadline for the cap-and-trade program, the statute (and court’s decision here) are silent on the implications.  Perhaps the release valve in A.B. 32, giving the Governor authority to adjust deadlines for the state under certain circumstances, will come into play if CARB cannot amend its environmental review in time or obtain other relief from the court.  In the meantime, regulated entities may have a temporary reprieve from the onset of cap-and-trade in 2012.  Somehow, though, I doubt these entities are thankful for the continued uncertainty over the details of CARB’s planned greenhouse gas regulation of stationary sources.

For more on the fine points of Judge Goldsmith’s decision, continue reading.Continue Reading California Cap-and-Trade Put On Hold