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
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.