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SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 AB 197 THIRD READING Bill No: Author: Amended: Vote: AB 197 Eduardo Garcia (D), et al. 8/19/16 in Senate 21 PRIOR VOTES NOT RELEVANT SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 6/29/16 AYES: Wieckowski, Hill, Jackson, Leno, Pavley NOES: Gaines, Bates SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/11/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen SUBJECT: State Air Resources Board: greenhouse gases: regulations SOURCE: Asian Pacific Environmental Network California Environmental Justice Alliance DIGEST: This bill creates the Joint Legislative Committee on Climate Policies, requires the Air Resources Board (ARB) to prioritize direct emissions reductions when adopting rules and regulations to achieve emissions reductions beyond the statewide greenhouse gas (GHG) limit, and specifies requirements for reporting GHG emissions, criteria air pollutants, and toxic air contaminants, for facilities, sectors, and emissions reduction measures. This bill also requires that two legislative members serve as ex-officio, nonvoting members of ARB. Senate Floor Amendments of 8/19/16 make a number of changes including 1) adding intent language, 2) modifying provisions related to the Joint Legislative Committee, 3) defining social costs, 4) requiring ARB to consider social cost and prioritize rules and regulations that achieve direct emissions reductions and when adopting rules and regulations to obtain emissions reductions beyond the statewide GHG emissions limit, 5) removing the requirement to rank emissions reduction AB 197 Page 2 measures, and 6) specifying how ARB is required to report GHG and air pollution emissions for facilities, sectors, and emissions reduction measures. ANALYSIS: Existing law: 1) Establishes ARB with 14 members, 12 of which are appointed by the Governor with consent of the Senate, and two members appointed by the Senate Committee on Rules and the Speaker of the Assembly, respectively. Of the 12 members appointed by the Governor, six must have specified qualifications and six must be board members from air districts, and the two members of the Legislature are required to be persons who work directly with pollutionburdened and vulnerable communities. (Health and Safety Code §39510) 2) Requires, under the California Global Warming Solutions Act of 2006 (HSC §38500 et seq.), ARB to do the following: a) Determine the 1990 statewide GHG emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emissions reductions measures by regulation to achieve the maximum technologically feasible and costeffective reductions in GHG emissions in furtherance of achieving the statewide GHG emissions limit. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. b) Prepare and approve a scoping plan by January 1, 2009, for achieving the maximum technologically feasible and cost-effective GHG emissions reductions from sources or categories of sources of GHGs by 2020. The plan must be updated at least once every five years. c) Adopt regulations to require the reporting and verification of statewide GHG emissions. 3) Requires ARB to establish a program to inventory sources of air pollution within air basins and monitor air pollutants in cooperation with local air districts. This bill: 1) Establishes the Joint Legislative Committee on Climate Change Policies, consisting of at least three members of the Senate and at least three members of the Assembly, to ascertain facts and make recommendations to the AB 197 Page 3 Legislature concerning the state’s climate change programs, policies, and investments. 2) Requires ARB to post and update at least annually on ARB’s Web site GHG emission and criteria pollutants, and toxic air pollutants emissions no later than January 1, 2018, for all facilities subject to GHG emission reporting requirements in a manner that illustrates emissions levels over time. 3) Requires ARB to post and update at least annually graphs of GHG emissions, criteria pollutants and toxic air contaminants throughout the state broken down to a local and subcounty level for stationary sources, and at least a county level for mobile sources. 4) Requires ARB to prepare an informational report that evaluates emissions trends and influences for those trends for GHG emissions, criteria pollutants, and toxic air contaminants from sectors covered by the Scoping Plan, and authorizes the report to include recommendations for legislative action and consideration. 5) Requires the chair of ARB to present the informational report annually to the Joint Committee on Climate Change Policies. 6) Requires ARB when adopting rules and regulations to achieve emissions reductions beyond the 2020 statewide GHG emissions limit, to consider the social cost of GHG emissions, follow specified requirements, and prioritize rules and regulations that result in direct emissions reductions at large stationary sources of GHGs, direct emissions reductions from mobile sources, and direct emissions reductions from other sources. 7) Defines “social cost” as an estimate of the economic damages, including but not limited to changes in agricultural productivity, public health impacts, climate adaptation impacts, and changes in energy system costs, per metric ton of greenhouse gas emissions per year. 8) Requires each Scoping Plan update to identify the range of GHG emissions reductions, range of air pollution reductions, and cost-effectiveness, including avoided social costs, for each emissions reduction measure. 9) Establishes six-year terms for voting members of ARB and authorizes voting members to serve additional terms. 10) Specifies that a member of ARB whose appointment satisfies local air district membership requirements for ARB’s makeup, shall not be a member of ARB AB 197 Page 4 effective immediately if they cease to hold the qualifying membership of a local air district. 11) Requires that two legislative members serve as ex-officio, nonvoting members of ARB, with one member appointed by the Senate Committee on Rules, and the other member appointed by the Speaker of the Assembly. 12) Makes various findings and declarations, including the need to protect the state’s most disadvantaged communities from the effects of climate change, and for ARB’s GHG reduction actions to be performed in a transparent and accountable manner. 13) Provides that the provisions of this bill are only operative if SB 32 (Pavley) is enacted and becomes law on or before January 1, 2017. Background 1) Air Resources Board. ARB was created in 1967 through the Mulford-Carrell Act, which combined two Department of Health bureaus, the Bureau of Air Sanitation and the Motor Vehicle Pollution Control Board. Six of the board members must have certain qualifications (e.g., automotive engineering; chemistry, meteorology, or related field; surgeon or an authority on health effects). The other six members must be board members from the following entities: South Coast Air Quality Management District (AQMD), Bay Area AQMD, San Joaquin Valley AQMD, San Diego APCD, one of six Sacramento region air districts, and a board member from any other district. These board members must reflect the “qualitative requirements” of the other six members to the extent practicable. AB 1288 (Atkins, Chapter 586, Statutes of 2015) added two additional members to the board, which increased the membership from 12 to 14, appointed by the Senate Committee on Rules and the Speaker of the Assembly, and requires those members be persons who work directly with pollutionburdened and vulnerable communities. 2) The Global Warming Solutions Act of 2006. In 2006, the Global Warming Solutions Act of 2006, AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006) established a statewide GHG emissions limit by 2020. AB 32 defines GHGs as carbon dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride and requires ARB to determine the 1990 statewide GHG emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020. AB 197 Page 5 AB 32 requires ARB, among other things, to inventory GHG emissions in California; implement regulations that achieve the maximum technologically feasible and cost-effective reduction of GHG emissions and impose fees for administrative implementation costs; adopt discrete early action measures; prepare and approve a scoping plan; convene an Environmental Justice Advisory Committee; and appoint an economic advisory committee to obtain recommendations for GHG reduction measures. The statute also specifies that ARB may include market-based compliance mechanisms in the AB 32 regulations after considering the potential for direct, indirect, and cumulative emission impacts from these mechanisms, including localized impacts in communities that are already adversely impacted by air pollution, and must design any market-based compliance mechanisms to prevent any increase in the emissions of toxic air contaminants or criteria air pollutants. 3) AB 32 Scoping Plan. Pursuant to AB 32, ARB approved the first Scoping Plan in 2008. The Scoping Plan outlined a suite of measures aimed at achieving 1990-level emissions, a reduction of 80 million metric tons of CO2 (MMT CO2e). The 2008 Scoping Plan recommended that reducing GHG emissions from the wide variety of sources that make up the state’s emissions profile could best be accomplished through a cap-and-trade program along with a mix of other strategies including: A low carbon fuel standard (LCFS); Light-duty vehicle GHG standards; Expanding and strengthening existing energy efficiency programs, and building and appliance standards; Achieving a 33% Renewable Portfolio Standard; Regional transportation-related GHG targets; and Creating targeted fees on water use and high global warming potential pollutants. The basic design of the program, as recommended by the original Scoping Plan, is that the combination of direct regulatory measures and cap-and-trade is intended to achieve the emission reduction target by 2020. Specifically, the Scoping Plan lays out a strategy where the overall limit on GHG emissions from most of the California economy is “capped” through a cap-and-trade AB 197 Page 6 program, and direct regulations within both capped and uncapped sectors would achieve additional emissions reductions. Pursuant to authority under AB 32, ARB adopted a LCFS in 2009, and a capand-trade program, approved on December 13, 2011. Scoping Plan update. ARB approved an update to the Scoping Plan on May 22, 2014. The update asserts that California is on track to meet the near-term 2020 greenhouse gas limit and is well positioned to maintain and continue reductions beyond 2020 as required by AB 32. Comments Purpose of Bill. According to the author, “In order for California to remain an economic and environmental leader the state will need to also be a leader on issues related to equity. Placing the health and economic impacts of climate policy on vulnerable populations second will stunt the state’s prosperity. A great degree of transparency and investment in California’s environmentally and socioeconomically disadvantaged populations has the potential to yield significant climate, economic, public health and quality of life benefits while knocking down barriers to opportunity.” Related/Prior Legislation SB 32 (Pavley, 2016) requires ARB to approve a statewide GHG emissions limit of 40% below the 1990 GHG emissions level to be achieved by 2030 and specifies the bill only becomes operative if AB 197 is enacted and becomes effective on or before January 1, 2017. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: One-time costs of $100,000 (various special funds) to the ARB for construction to enlarge the hearing room dais and to provide the equipment needed to accommodate two additional board members. $233,000 annually (Cost of Implementation Fund) to the ARB for staffing needs to support new board members and develop ranking criteria. SUPPORT: (Unable to verify at time of writing) Asian Pacific Environmental Network (co-source) AB 197 Page 7 California Environmental Justice Alliance (co-source) Clean Power Campaign The Nature Conservancy OPPOSITION: (Unable to verify at time of writing) Agricultural Council of California Association of California Egg Farmers Building Owners & Managers Association of California California Association of Wheat Growers California Bean Shippers Association California Building Industry Association California Business Properties Assoc. California Chamber of Commerce California Farm Bureau Federation California Grain and Feed Association California Independent Oil Marketers Association California Independent Petroleum Association California League of Food Processors California Manufacturers and Technology Association California Pear Growers Association California Railroad Industry California Seed Association California Taxpayers Association Family Business Association International Council of Shopping Centers NAIOP of California, Commercial Real Estate Development Association National Federation of Independent Business, California Western States Petroleum Association ARGUMENTS IN SUPPORT: The Nature Conservancy argues this bill would work alongside SB 32 to ensure that the state continues to develop and implement the most effective climate policies in order to prevent climate change problems from worsening. Clean Power Campaign states that AB 197 will strengthen the role of the Legislature in advising ARB and climate change policies and will direct ARB to prioritize measures that result in direct GHG emissions reductions from large sources across sectors. ARGUMENTS IN OPPOSITION: Opponents argue that while AB 197 does not mandate a specific regulatory mechanism, it directs ARB to prioritize commandand-control regulations over a market-based compliance mechanism, which would AB 197 Page 8 undermine flexibility required for manufacturers to meet reduction obligations in the most cost-effective manner. Opponents state that the creation of a Joint Legislative Committee on Climate Change Policies and adding two non-voting legislators to the board does not justify the empowerment of ARB with a post-2020 goal that does not include further limits on their authority. Prepared by: Rebecca Newhouse / E.Q. / (916) 651-4108 8/22/16 12:07:12 **** END ****