United States: California's New Climate Era: SB 350 And Beyond

Last Updated: October 22 2015
Article by Christopher J. Carr, Megan A. Jennings and Lala T. Wu

Two out of three ain't bad.

Climate change policy advocates may find themselves quoting Meat Loaf with the enactment of Senate Bill (SB) 350, which California's Legislature passed last month and which Governor Jerry Brown signed into law on October 7. SB 350, also called the Clean Energy and Pollution Reduction Act of 2015, requires an increase in California's Renewables Portfolio Standard (RPS) to 50 percent and a doubling of building energy efficiency, both by 2030. The Legislature dropped from the bill a third component, which would have mandated the powerful California to Air Resources Board (CARB) to cut petroleum use from transportation in half by 2030, after months of intense opposition from the oil industry.

Although the failure of the petroleum piece marked a (rare) setback for the Governor's energy and climate change agenda, SB 350 nonetheless continues California's leadership in the field. The enactment of SB 350, coming on the heels of President Obama's Clean Power Plan roll out, and a month before international climate talks start in Paris at the end of November, reflects a dynamic state, national, and international energy regulatory ecosystem that businesses in California and beyond must navigate as they seek to seize the opportunities and mitigate the risks presented by a new era of climate regulation.

This alert examines the results of the recently concluded California legislative session, and what it means for energy policy in California.

SB 350: RENEWABLES AND EFFICIENCY

Introduced by Senate President pro tem Kevin de León, D-Los Angeles, SB 350 advances greenhouse gas (GHG) reduction through two measures, that help to implement Governor Brown's Executive Order on climate policy issued in April.

First, the law increases the RPS goal from 33 percent renewables by 2020 to 50 percent by 2030. Although renewables projects are already coming online quickly in California, this mandate still provides a welcome boost to renewable energy developers, including solar and wind developers.

Second, the law requires the California Energy Commission (CEC) to establish annual targets to double energy efficiency in buildings by 2030. To achieve this goal, the CEC will likely implement a series of incentives and other educational policies targeted at property owners. The law also requires the California Public Utilities Commission (CPUC) to direct electric utilities to establish annual efficiency targets and implement demand-reduction measures to achieve this goal.

The failure of the third set of provisions that would have mandated reductions in petroleum use in the transportation sector should be viewed in the context of an ongoing battle regarding the strength and reach of CARB. In the fight for SB 350, supporters of the bill faced off with not only petroleum industry backers, but also legislators uncomfortable granting more authority to the already-powerful CARB to implement measures they believed would inevitably lead to higher fuel costs that would disproportionately impact low-income communities and constituents.

Although CARB was not given the statutory authority to set policies to reduce transportation-related emissions by 50 percent by 2030, it still wields a tremendous amount of power over GHG-reduction policies. For example, CARB recently voted to restore its low-carbon fuel standard (LCFS), which was originally approved in 2009 but, until recently, had been entangled in litigation. The LCFS requires a more modest 10 percent reduction in transportation fuel emissions by 2020, pursuant to AB 32, the California Global Warming Solutions Act of 2006. By raising the standards for traditional fuels, the program is intended to encourage the use of biofuels and electric vehicles.

SB 32: REDUCTIONS-IN-WAITING

Environmentalists had high hopes for SB 32, the California Global Warming Solutions Act of 2015, but its progress stalled in the last days of the legislative session. It would have built upon the historic passage of AB 32 in 2006, the landmark law that facilitated the establishment of the state's cap-and-trade program. SB 32 would deepen and extend AB 32's goals, requiring a 40 percent reduction in carbon emissions below 1990 levels by 2030, and an 80 percent reduction by 2050. Both bills were introduced by outgoing State Senator Fran Pavley (D-Agoura Hills), a climate policy veteran who may yet see SB 32's passage, because it was converted to a two-year bill (meaning that it can be considered again in January of next year).

SB 286: THE QUIET DIRECT ACCESS REVOLUTION

Although not accompanied by the same fanfare as SB 32 and SB 350, SB 286 would play an important role in moving California toward meeting its climate goals. Sponsored by State Senator Robert Hertzberg (D-Van Nuys), the bill would allow large power consumers to purchase 100 percent renewable energy directly from producers, sidestepping investor-owned utilities (IOUs) such as PG&E. This expansion of direct access by up to 8,000 gigawatt-hours (GWh) would be welcomed by many large power purchasers, including tech companies, hospitals, and universities seeking to deepen their sustainability commitments by using only electricity generated by renewable sources. Expanding direct access will boost demand for solar, wind, and other renewable energy sources, as well as spur innovation and competition among producers.

Unsurprisingly, this measure faces opposition from IOUs, who stand to lose business from large customers, and who have raised concerns about grid reliability and the ability to balance the supply and demand of electricity in the state. If more end users purchase electricity directly from renewable sources, this will make the grid more complex, and make maintaining a balanced grid more challenging. As the energy infrastructure continues to evolve, it will be important for the CPUC and the Legislature to keep up with these changes.

CALIFORNIA'S INFLUENCE OUTSIDE THE STATE . . . AND CHALLENGES WITHIN

Despite the elimination of the petroleum provision, Governor Brown's signing of SB 350 demonstrates yet again that California is on the leading edge of climate policy in the U.S. (along with Hawaii, which recently mandated a transition to 100 percent renewable energy by 2045). Other states are sure to follow, especially where mandates and incentives are needed to shift the market and spur demand. However, renewables are also growing in some states due to a number of non-regulatory factors. For example, Texas is enjoying a solar development boom without major state mandates or incentives because of the falling cost of solar photovoltaic (PV) panels, the state's ongoing investment in transmission line infrastructure, and the ability of the solar industry to complement the state's already strong wind industry.

Texas' investment in transmission stands in contrast to California's grid, which is outdated and overburdened. Especially with the increased RPS, it will take major investments of capital and political will to update the transmission system so that California is ready to handle the new renewables that quickly will be coming online.

Another key to meeting the state's climate goals will be reform of the California Environmental Quality Act (CEQA). Renewable energy project opponents have wielded CEQA as an effective tool for creating expensive delays and, in some cases, blocking projects entirely. Similarly, state and federal endangered species laws can also pose traps for the unwary. While the goals of these laws are laudable, the laws themselves are in great need of reform so they can no longer be used by renewable energy project opponents to make development infeasible. In the meantime, renewable energy developers need to carefully evaluate and understand CEQA and species risks during every stage of the project.

REGIONAL INNOVATION DRIVING CHANGE

While California faces serious challenges to readying its infrastructure to meet its new climate goals, it also benefits from robust energy and technology sectors that are rapidly developing decarbonization technology, especially in Silicon Valley. Companies large and small are focusing on developing and taking to market a broad range of new products and services that are not only improving existing renewable generation such as wind and solar, but also enhancing energy efficiency and conservation (especially at the retail customer level) and addressing transmission and grid reliability challenges.

California needs to continue its "all of the above" approach to meet its ambitious GHG-reduction goals. While the legislative and regulatory paths to achieving those goals are sure to remain bumpy, it is equally certain that California's innovation economy will continue to drive the state forward.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Christopher J. Carr
Lala T. Wu
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions