"Cap-and-Trade" Caps California's Climate Change Regulations

Posted on October 24, 2011 by Barbara E. Lichman, Ph.D., J.D.

On October 20, 2011, the California Air Resources Board (“CARB”) adopted a new set of rules, called “cap-and-trade,” implementing the requirements of AB32, California’s groundbreaking climate change law. Enacted in 2006, AB32 requires reduction in carbon emissions, usually credited as the cause of “global warming,” to 1990 levels by the year 2020. The new cap-and-trade regulations will be implemented in phases, with the State’s largest emitters required to meet the caps beginning in 2013; and remaining emitters, collectively about 85%, required to begin compliance in 2015.

Essentially, the cap-and-trade program began with the establishment of maximum emissions benchmarks or “caps” for each category of major emitting industry sector, derived from a three year study of emissions data from the largest industry sectors. Businesses will be allowed to emit up to 90% of those benchmarks (“Carbon Allowance”) in the first year. If a company operates efficiently, and below the “cap,” it may sell its excess as a Carbon Allowance on the market to industries unable to reduce their own carbon emissions.

While it sounds relatively simple, there will be additional government regulations involved, as well as private businesses who will benefit from the new system. While CARB will operate the market, it will have to retain auction hosts and monitors to operate the system which could handle as much as $10 billion in Carbon Allowances by the year 2016.

Moreover, there are perceived to be significant downsides to the system. Emitting industries are not overly enthusiastic, because of the increased regulation and higher emissions standards in the form of caps, which may make it more expensive for them to operate in California. According to the Legislative Analyst’s Office independent review, some industries will likely leave the State, and jobs be lost, as a result of the new “cap-and-trade” program.

Environmentalists are not wild about the system either, because they believe it does not reduce emissions, but merely transfers the right to emit. What is certain is that California is once more in the forefront of environmental regulation, for good or ill, in the nationwide effort to limit emissions of greenhouse gases.
 
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California Air Resources Board Approves Scoping Plan for Implementation of AB 32

Posted on December 13, 2008 by Chevalier, Allen & Lichman, LLP

The California Air Resources Board unanimously adopted its Scoping Plan to implement the sweeping changes in greenhouse gas emission dictated by AB 32.

As envisaged by the Scoping Plan, the state's greenhouse gas emissions would be cut by 15% over the next 12 years.  Although it seems to lay out targets for most sectors of the economy, there are some sectors that are missing, like aircraft and airports. All told,  it amounts to an average cut of four tons of carbon dioxide and other greenhouse gases for every person in the state.

The Scoping Plan, which  will be implemented over the next two years, puts California at the forefront of national climate policy at a time when President-elect Barack Obama has vowed to put control of greenhouse gas emissions at the top of his environmental agenda.

Past posts on this topic:

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California's Proposal for Interim Significance Thresholds for Greenhouse Gases Will Affect Airport Planning

Posted on October 29, 2008 by Chevalier, Allen & Lichman, LLP

As part of the California Air Resources Board's (CARB) "Climate Change Proposed Scoping Plan," the Board, on October 24, 2008, released its Preliminary Draft Staff Proposal on recommended approaches for setting Interim significance thresholds for greenhouse gases under the California Environmental Quality Act (CEQA).  Since these thresholds of significance will affect the conduct of EIRs for projects subject to CEQA, such as airport development projects and Airport Land Use Compatibility Plans, participation in the setting of these standards is critical.

California law provides that climate change is an environmental effect subject to the CEQA.  Lead agencies, such as Airport Land Use Commissions, are therefore obligated to determine whether a project's climate change-related effects may be significant, thereby requiring preparation of an Environmental Impact Report and to impose feasible mitigation to substantially lessen any significant effects.

CARB is specifically requesting participation from the public stakeholders and local lead agencies.  The Preliminary Draft Staff Proposal suggests a "sector approach" due to the fact that "(1) some sectors contribute more substantially to the problem, and therefore should have a greater obligation for emissions reductions, and (2) looking forward, there are differing levels of emissions reductions expected from different sectors in or to meet California's climate objectives."

The PDSP includes flowcharts that address CARB's "threshold concepts" for industrial projects and for residential and commercial projects.  The PDSP also states that that the staff is working on a proposal for an interim approach for thresholds for transportation projects.  CARB proposes, for example, a significance threshold of 7,000 metric tons of CO2e/year.  For Projects that go over that amount, an EIR would have to be prepared and "all feasible GHG mitigation measures implemented."

CARB has identified a few questions to solicit public comment, but notes that the "list is not exhaustive."

  • Will the recommended approaches have any unintended consequences, for example, encouraging the piecemealing of projects?
  • As set out in the attachments to the Staff Proposal, staff proposes to define certain performance standards (e.g., for energy efficiency) by referencing or compiling lists from existing local, State or national standards.  For some sub-sources of GHG emissions (e.g., construction, transportation, waste), ARB staff has not identified reference standards.  How should the performance standards for these sub-sources be defined?
  • Are any of the industrial, residential, or commercial project types eligible for categorical exemptions likely to contribute more significantly to climate change than staff's preliminary analysis indicates?
  • For residential and commercial projects, staff has proposed that the GHG emissions of some projects that meet GHG performance standards might under some circumstances still be considered cumulatively considerable and therefore significant.  What types of projects might still have climate change-related impacts?

As noted above, since these thresholds of significance will affect the conduct of EIRs for projects subject to CEQA, such as airport development projects and Airport Land Use Compatibility Plans, participation in the setting of these standards is critical.

 

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