United States: California Doubles Greenhouse Gas Emission Reduction Targets

Ten years after adopting the nation's first program to reduce statewide greenhouse gas (GHG) emissions, California is doubling its GHG emission reduction goals while adopting new measures to reduce short-lived climate pollutants. However, the future of California's embattled Cap-and-Trade program remains up in the air.

Deeper GHG Emission Cuts

California Gov. Jerry Brown (D) has signed SB 32 legislation mandating deeper cuts in GHG emissions. Gov. Brown is also expected to sign SB 1383 addressing short-lived climate pollutants.

SB 32 directs the California Air Resources Board (ARB) to cut GHG emissions to 40 percent below 1990 levels by 2030. Current state law mandates a 20 percent cut of GHG emissions below 1990 levels by 2020 under the landmark Global Warming Solutions Act of 2006 (AB 32).

"This is big, and I hope it sends a message across the country," Gov. Brown said as he signed the measure.

Passage of SB 32 represents a major political victory for Gov. Brown, who will retire in 2018 after serving a record eight terms as governor and who views leadership on climate policy as a major part of his legacy. In 2015, Gov. Brown signed legislation (SB 350) boosting California's renewable-energy procurement goals and issued an executive order directing regulators to look at ways to reduce GHG emissions 40 percent below 1990 levels by 2030. However, passage of SB 32 was stalled in the legislature for a year due to heavy lobbying by the oil industry and concerns by some democratic legislators about the costs of climate change programs to poor communities.

Short-Lived Climate Pollutants

Gov. Brown also supported passage of SB 1383 to reduce emissions of black carbon, fluorinated gases and methane, which are considered potent contributors to climate change and dangerous to public health. Because these pollutants have atmospheric lifetimes of only days to a decade and a half, they are referred to as short-lived climate pollutants. The measure requires the ARB to develop a comprehensive strategy to reduce emission of methane by 40 percent, of hydro fluorocarbons by 40 percent and of black carbon by 50 percent below 2013 levels by the year 2030 operations.

Renewable Gas Infrastructure and Incentives

SB 1383 also seeks to foster the development of renewable gas from landfills, digesters and renewable hydrogen. The Brown administration secured language in SB 1383 to require the California Energy Commission, ARB and California Public Utilities Commission to develop recommendations for the development and use of renewable gas as part of the state's long-term energy policy strategy. The measure requires regulators to consider how to create incentives for development of renewable gas through a multitude of existing state programs, including the Renewable Portfolio Standard, Low Carbon Fuels Standard, waste diversion, and Cap-and-Trade . SB 1383 also authorizes a series of pilot projects to help dairies harvest methane from manure operations and interconnect to natural gas transportation pipelines.

While California's renewable natural gas industry had advocated for stronger language requiring gas utilities to procure renewable biogas from landfills, anaerobic digesters and renewable hydrogen, the SB 1383 language undoubtedly represents a major step forward for the nascent industry. Renewable gas developers and the utilities will be watching closely as state energy regulators formulate a strategy to encourage increased injection of biomethane into gas pipelines.

Impact on Regulated Industries

What do the new measures mean for regulated industries? It seems clear that many of California's existing GHG emission reduction policies will play an important role in moving the state toward the bigger goals, although SB 32 does not spell out how state regulators will meet the newly doubled GHG reduction goals. California is already a leader in renewable energy, energy efficiency, and promotion of zero and near-zero emission vehicles. However, given that many of those measures are calculated to help California meet current 20 percent GHG reduction targets, more aggressive measures will be needed if the state is to double its GHG emissions reductions.

Last year, California boosted utility renewable energy procurement goals from 33 percent to 50 percent. The Public Utilities Commission and Energy Commission are currently working on implementing the broader targets. The transportation sector is also likely to be singled out for additional regulation since it accounts for one-third of California's GHG emissions. Gov. Brown has called for a 50 percent reduction in petroleum use by 2030. Earlier this year, the ARB proposed spending $150 million in Cap-and-Trade auction proceeds on incentives to replace older diesel-powered, heavy duty vehicles with low carbon emission engines in addition to expanding the number of zero-emission passenger vehicles on the road. California will likely look to expand the state's innovative Low Carbon Fuels Standard, which allows low carbon transportation fuel producers and vendors to generate credits that can be sold to high carbon fuel producers. The program has come under fire from the petroleum industry, which has sought its elimination.

SB 1383 will bring new regulation to California's dairy and livestock industry and waste disposal industries. According to the ARB, agriculture accounts for 60 percent of California's methane emissions, and 80 percent of those emissions are associated with enteric fermentation and manure management from dairy and livestock operations. Landfills, meanwhile, account for 20 percent of statewide methane emissions. SB 1383 would require the ARB to set new rules for dairy and livestock manure management practices to reduce methane emissions from manure up to 40 percent below 2013 levels by 2030, provided that those practices are technologically and economically feasible. It would also require a 75 percent reduction in organic waste disposal in landfills from 2014 levels by 2025.

One big unanswered question is what role California's embattled Cap-and-Trade program will play in meeting the higher targets. Adopted in 2013, Cap-and-Trade is the centerpiece of the ARB's implementation of AB 32. The program was envisioned as a way to provide a cost-effective way to reduce GHG emissions from key sectors and is the ARB's primary mechanism for meeting its GHG emissions targets. It features a declining cap on GHG emissions from affected sectors accompanied by allocation and auction of emission allowances by the ARB. The agency controls the auction by setting a floor for allowance pricing. Under the program, regulated sectors are allowed to sell allowances that they do not need to participants whose emissions exceed allowance levels. Revenues generated by the auction are statutorily required to be spent on initiatives that reduce GHG emissions. The nonpartisan Legislative Analyst office estimated that the allowance auctions would generate $2.4 billion in revenues in fiscal year 2014-15.

Many analysts view Cap-and-Trade as an essential part of any strategy to achieve deeper GHG reductions in California. However, legal and political attacks on Cap-and-Trade threaten to complicate matters for the Brown administration going forward. Business interests filed suit, alleging that the Cap-and-Trade allowance auction exceeds the authority delegated to the ARB under AB 32 and that the auction revenue constitutes an unconstitutional tax because the statute was not adopted by a two-thirds vote of the legislature as required by Art. xii (a) of the state constitution for a tax levy. California Chamber of Commerce v. California Air Resources Board, Morning Star Packing Co. v. California Air Resources Board (Sacramento County Superior Court Case No. 34-2012-8001313). A Sacramento Superior Court judge denied the petitions, but conceded that "it is a close question" on whether the allowance charges were a "tax" or a "regulatory" fee because the charges have attributes in common with both. Chamber of Commerce v. California Air Resources Board, id. at p. 16. Petitioners have appealed, and a decision is expected this fall from the California Court of Appeals. While the ARB has expressed confidence that the trial court ruling will be upheld, questioning by the justices during oral arguments appeared hostile to the trial court's holding that the auction fees are more like traditional regulatory fees than taxes.

An adverse decision on Cap-and-Trade would not only be a setback for California's GHG emission reduction efforts, but it could also punch a huge hole in the state budget. Auction revenues currently fund a wide variety of GHG reduction initiatives, including a controversial high-speed rail system championed by Gov. Brown. If the courts find that the allowance auction is unconstitutional, future funding for many GHG initiatives could be jeopardized, and the state could be required to refund billions collected from participants.

Gov. Brown and Cap-and-Trade advocates are seeking to blunt the legal and political attacks on the program. Some are concerned that legal and political uncertainty over the future of Cap-and-Trade is responsible for the dramatic decline in allowance purchases in the past two quarters. While allowance auctions initially attracted strong interest and generated billions for state GHG reduction initiatives, recent auctions have fallen flat. In May, only 11 percent of the permits offered for sale were purchased. In August, only 30.8 million of 96 million available carbon credits were sold. A continued slide in auction revenues would jeopardize funding of GHG reduction projects across the state.

It is too early to write off the Cap-and-Trade program. Even if the courts strike down the auction, the legislature could authorize continuation of the program with a two-thirds vote, or California voters could sanction the program through a statewide ballot measure. Gov. Brown has vowed to protect the program. In August, Gov. Brown opened a committee to raise funds for a possible 2018 initiative campaign while seeking a two-thirds legislative vote on SB 32. Although SB 32 did not receive a supermajority vote, its passage puts enormous pressure on the legislature and the administration to ensure that Cap-and-Trade continues to serve as a mechanism to meet GHG reduction targets and as an alternative to more restrictive and costly command and control measures.

In a possible hedge, or an indication of future approaches to climate policy in California in light of the litigation, a recent nonbinding California Assembly Joint Resolution emphasized the critical role that putting a price on GHG emissions through a carbon tax can play in the United States and globally. A "national carbon tax would make the United States a leader in mitigating climate change and the advancing clean energy technologies of the 21st Century, and would incentivize other countries to enact similar carbon taxes, thereby reducing global carbon dioxide emissions without the need for complex international agreements." California AJR 43.1 California urged Congress to "enact a national carbon tax on fossil fuels, based on the amount of carbon dioxide the fuel will emit when burned."

In sum, meeting California's new deeper GHG reduction targets will require more aggressive measures impacting the dairy, waste disposal, transportation and electricity sectors. Many of these reductions will come through existing initiatives. Some, like reduction of methane, will require new incentives and infrastructure programs. Despite legal and political challenges, California's Cap-and-Trade program will likely continue to be a centerpiece of GHG reduction strategy.

Footnote

1. https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160AJR43

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
 
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.