United States: California Energy Legislative Roundup 2017: A Focus On Protecting The Environment And Environmental Justice

For energy industry observers, the 2017 California state legislative session produced a few significant bills (concerning extension of the cap and trade program and regulation of criteria air pollutants and toxic air contaminants) along with a host of more minor bills. Two of the most closely watched legislative initiatives of the year—SB 100, which would have significantly increased California's Renewable Portfolio Standard (RPS) from 50% to 100%, and AB 817, which would have further facilitated expansion and regionalization of the California electric grid with neighboring states—ultimately failed to pass at the end of session, although it is expected the 100% RPS bill will resurface in some form in the 2018 session.

While protecting the environment, the legislature also sought environmental justice. A number of bills that passed include provisions related to "disadvantaged communities" and provide for regulatory action and targeted funding to reduce localized pollution: AB 398, (prioritizing offset projects benefiting disadvantaged communities), AB 617 (prioritizing monitoring and assessment of pollutants in disadvantaged communities), AB 523 (funding for energy technology demonstration projects in disadvantaged communities), and SB 338 (prioritizing reduction of pollutants in disadvantaged communities in utility Integrated Resource Plans). In addition, the 2017 legislation, as in past years, facilitated development and deployment of distributed energy resources, including rooftop solar, electric vehicles, and battery storage. There were also a number of bills related to consumer protection for rooftop solar, PACE financing, and retail utility service disconnection.

Most of the newly enacted laws will require implementation by state agencies, including the California Public Utilities Commission (CPUC), the California Air Resources Board (CARB) and regional air districts, the California Energy Commission, and municipal authorities, over the coming year. Affected companies and other interested stakeholders should monitor relevant regulatory proceedings.

For your reference, the energy-related bills enacted in 2017 are summarized below.


Governor Schwarzenegger signed the California Global Warming Solutions Act of 2006 (AB 32), which introduced "cap and trade," market-based regulations designed to reduce greenhouse gas (GHG) from multiple sources by placing a firm limit on GHGs. A decade later, the California legislature revisited the program, extending it and reforming it, in line with Governor Brown's proactive climate policies. With bipartisan support, the new cap and trade legislation solidifies the state's battle against global warming.


Amends, repeals, and adds select provisions at §§ 38501 et seq. of the Health and Safety Code. Adds § 4213.05 to, adds Article 3 (commencing with § 4229) to Chapter 1.5 of Part 2 of Division 4 of, and repeals Chapter 1.5 (commencing with § 4210) of Part 2 of Division 4 of the Public Resources Code, and amends § 6377.1 of the Revenue and Taxation Code.

Extension. With AB 398, California extended its greenhouse gas cap and trade program through 2030; under AB 32 the program was scheduled to sunset in 2020. The bill also requires CARB to undertake specified carbon market reforms, including:

Allowance Price Cap. CARB must establish and implement a price cap on auctioned allowances. CARB retains broad discretion in setting the specific level of the price ceiling but must consider several factors, including "the need to avoid adverse impacts on residential households, businesses, and the state's economy." The mechanics of the price ceiling work as follows: (1) CARB must sell any allowances remaining in CARB's allowance price containment reserve as of Dec. 31, 2020 at the newly established price ceiling; and (2) issue new allowances at the price ceiling, and direct the proceeds from the sale of such allowances to projects designed to reduce GHGs, if allowances allocated for sale at the price ceiling are exhausted. Depending on how CARB implements the price cap, it could represent a significant change to the program and provide greater certainty regarding the maximum cost of compliance. Allowance costs, however, have not been a significant issue in the program to date and have generally remained closer to the price floor.

Additional Cost Containment. CARB must implement two interim "price containment points" below the price ceiling, at which CARB must offer non-tradable allowances at a specified price. This is similar to the existing price containment reserve.

Continues Free Allocations of Allowances. Under the current program, certain categories of covered entities are allocated free allowances that they can either use to satisfy their own compliance obligation, or, sell on the secondary market. Under the current program, free allocations were to phase out over time. AB 398 requires that CARB extend allocation of free allowances at the same levels applicable to the 2015-2017 compliance period. This provision was highly controversial with environmental groups insofar as it reduces the need to purchase allowances at auction and undermines the incentive to invest in actual GHG reductions.

Addresses Over-Allocations of Allowances. The bill directs CARB to evaluate and address concerns related to the over-allocation of allowances, which depresses prices of allowances and reduces the incentive to invest in GHG reduction. CARB must transfer allowances that remain unsold after 24 months to the allowance price containment reserve, which may reduce the amount of allowances available.

Addresses Speculation and Volatility. CARB is required to establish allowance banking rules to discourage speculation, avoid financial windfalls, and consider the impact on complying entities and volatility in the market.

Limits Use of GHG Offsets. Currently, the program allows covered entities to use GHG offsets to cover up to 8% of their compliance obligations. Historically, environmental justice advocates have opposed the use of offsets, which they claim enable higher levels of emissions from industrial facilities, such as refineries and power plants, which are more commonly located in or close to disadvantaged communities.

Under AB 398, from 2021 through 2025, covered entities may only use offsets for up to 4% of their compliance obligation; from 2026 through 2030, covered entities may use offsets to cover 8% of their compliance obligation. Additionally, beginning in 2021, AB 398 requires that half of the offsets used by covered entities are generated by projects that provide "direct environmental benefits" to the state. Finally, AB 398 calls for the creation of a new Compliance Offsets Protocol Task Force, which is responsible for increasing the development of in-state offset projects.

To view the full article, please click here

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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