Regulatory Round-up: California defiant in face of crumbling EPA

March 30, 2017 by Billy Hamshaw

(CaliforniaCarbon.info, March 30, 2017)

A round up of key regulatory developments over the past month

Whilst climate policy has been making national headlines for all the wrong reasons this week, California has been maintaining its footing as a climate leader with a number of new bills and amendments made over the past few months. This article provides a round-up of the key developments within the State’s climate agenda and what these mean for California’s cap-and-trade future.

Balancing Environmental Justice causes and gaining supporting for AB 151

Introduced in January, Assembly Bill (AB) 151 has been the center of attention for regulation regarding the state’s cap-and-trade program. With the support of Governor Jerry Brown, the bill aims to secure the current market based system. If passed with a two-thirds vote, the bill would protect the auctions integral to the market from the charge of being an unlawful tax. By doing so, the legislation would nullify California Chamber of Commerce (CCC)’s claims in the appeals court and safeguard the program from the legal uncertainty that has plagued the market in recent times. A ruling on the CCC vs ARB is required no later than April 24^th.

Although the Democrats hold a supermajority in both the assembly and senate, gaining enough votes to pass AB 151 is by no means a given. Key criticisms surrounding the state’s carbon program from vocal environmental justice groups have centered around claims over the lack of direct emission reductions, as well as the use of carbon offsets. In particular, there has been a growing consensus that the program, in its current embodiment, is not doing enough to confront air quality and health concerns amongst disadvantaged communities within the state. These concerns have been echoed by Democratic assembly members who introduced a separate bill, AB 378, in February of this year. The bill represents an opening bid to prioritize the concerns of environmental justice groups, and to deliver a workable cap-and-trade program in the eyes of disadvantaged communities.

Amendments were made to AB 151 earlier this month to address the issue of offsets. These provisions include the establishment of a Compliance Offsets Protocol Task Force with a priority on developing offset protocols that can achieve in-state GHG reductions. Although ARB has already adopted an urban offset protocol for compliance, offset developers have not viewed this protocol as commercially viable as of yet.

In conjunction with the taskforce, new text within the bill highlights plans to create a multi-tiered incentive system to promote credits generated within disadvantaged communities, communities neighboring stationary sources of regulated emissions, communities on tribal lands and within California and its WCI linking partners. With the bill still in its preliminary stages, it is yet unclear how this proposed system would look and function.

Talking with CC.info, Jon Costantino, policy expert and founder of Tradesman Advisors, suggests that the taskforce should favour incentives developing offset projects, rather than for offset purchasers. ‘With an undersupplied market of carbon offsets, once created, all credits will be used. You therefore don’t need an incentive for the end user but an impetus for the development of projects within these communities, where the benefits are felt as soon as the project is implemented.’

The next version of the legislation will be presented to the committee towards the end of April. Until then the Capitol Staff will be working on the mentioned proposals. ‘Right now the focus in Sacramento is how do you make cap-and-trade sustainable, cost effective and reliable. You get support from those you need once stakeholders feel that these criteria are met’ said Jon on securing the required supermajority to pass AB 151.

Senate ramps up clean energy ambitions

Whilst renewable energy targets have been in the firing line of a federal government intent on thwarting any climate policy developments, California’s Senate President, Kevin de León, has introduced a senate bill to mandate 100% electricity procurement from renewables sources by 2045. If passed, SB 584, would be the single most aggressive renewable energy mandate in the US and one of the most in the world, accelerating California’s previous commitments of 100% by 2030.

Under the cap-and-trade program, state utilities have been incentivized to procure energy from renewable sources when possible. However, instead of developing large scale renewable projects within the state, California has relied heavily on imported renewable energy from neighboring states. Those same states will simply divert their renewable generation to California, whilst ramping up GHG emitting plants in-state. Critics argue that because of this there is no net effect of the cap-and-trade regulations on overall emissions. A more aggressive Renewable Energy Portfolio Standard Program, proposed by De León, would better address this phenomenon known as ‘resource shuffling’.

With around 22% of energy deriving from renewable sources in 2015[i], California seems well on track to meet its 50% energy target by 2030 under the previous renewables portfolio standard, as well as exceeding the ‘would be’ targets set by the Clean Power Plan. Scaling up these efforts to meet a 50% goal by 2025, however, poses a number of physical and economic challenges.

In a bid to overcome intermittency issues associated with renewable energy generation, and encourage clean energy use during peak times, Assemblyman Kevin Mullin has floated a Clean Peak Energy Standard Bill: AB 1405. The bill would mandate utilities to procure a minimum percentage of clean energy during peak load times for at least 15 days during each month. In doing so, the bill aims to spur innovation in battery storage systems and energy efficiency programs required to meet a zero emission energy grid.

The California Energy Commission have also pitched in to reduce the dependency on fossil fuels within California’s energy mix by funding new studies in geothermal energy. Whilst geothermal energy does not face the same intermittent challenges as wind and solar and has vast potential across California, its high generation costs have hampered its growth as a reliable source of clean energy.  

California resistant to Trump’s vehicles standards

One of the few areas on California’s climate agenda that could fall victim to President Trump’s anti-environment attacks is the regulation of vehicle emissions. Tail pipe emissions standards where brought in during the final day’s of the Obama’s administration, and designed with legislators in California to improve the fuel economies of vehicles and promote hybrid and Zero-Emissions Vehicles (ZEVs). In a quest to cut government regulation however, these policies face their marching orders under the new Presidency.

On Friday, California’s Air Resources Board unanimously voted in favor of upholding the stricter vehicle emission standards that would require the auto industry to double the average fuel economy of new vehicles by 2025. Although previously supporting the plan, a number of automakers have appealed to the new administration, claiming the regulations represent significant challenges to their operations.

In further support of Gov. Brown’s objectives of mobilizing 1.5 million ZEVs on California’s roads by 2025, Assemblyman have introduced AB 1081, a bill that vows to provide tax incentives for the purchase for ZEVs.

Board votes to cut harmful “super pollutants”

Last week ARB board members passed a new plan to reduce short lived “super pollutants” which account for around 12% of overall GHG emissions. The Short-Lived Climate Pollutant Reduction Strategy, a key part of the 2030 scoping plan, includes measures to reduce methane emissions from oil and gas leakages. Members from the oil and gas industry have criticized the measures, expressing concerns with the economic constraints imposed.

The regulations are the first to be enacted by the board since SB 1383 was signed last fall which targeted the curtailment of methane emissions to 40% below 2013 levels by 2030, Hydrofluorocarbons (HFCs) by 40% and black carbon by 50%.

Under California’s cap-and-trade program, over 7.3 million tons of ozone depleting substances (CFCs and HFCs) have been destroyed through ARB’s Compliance Offset Protocol for Ozone Depleting Substances. CC.info’s data also indicates that a further 1.5 million tons of methane emissions have been prevented from reaching the atmosphere from offsets generated through the Livestock protocol. Whilst SLCP calls for further emissions from these sources, it remains to be seen how these regulations would conflict the additionality clauses of ARB’s offset protocols.

In what is likely to be a busy time for the US courts as the Trump administration go about dismantling the previous governments’ environmental policies, one thing remains certain – California will continue to demonstrate true climate leadership.

Billy Hamshaw (billy@californiacarbon.info)

Jon Costantino oversaw the development and publication of the original AB 32 Scoping Plan when he served as Climate Change Planning Manager at the ARB. He is currently the owner and principal at Tradesman Advisors in Sacramento and regular guest contributor to CC.info. Tradesman Advisors provide West Coast regulatory consulting and advocacy for clients in the areas of climate change, clean energy and other environmental issues. Mr. Costantino can be reached at (916) 716-3455, or jon@tradesmanadvisors.com.

[i] California Energy Commission