Download May 9 Jason Gray – Cap and Trade

Overview of California Climate Programs
Focus on Scoping Plan and Cap-and-Trade
Jason Gray, Manager
California Air Resources Board
UC Davis International Seminar on Climate Change and Natural
Resources Management
May 9, 2016
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Presentation Outline
 AB 32 Objectives
 Scoping Plan & California Climate Strategy
 2030 Target Scoping Plan Update
 Overview of Cap-and-Trade Program
 Linkage Process and Sector-Based Offset Credit Potential
 Additional Opportunities to Engage
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AB 32 Objectives
 Global Warming Solutions Act of 2006
 Develop a balanced approach to address climate
change
 Improve air quality and public health
 Provide a consistent policy approach to drive investment
in clean technology
 Provide a model for future national and international
climate change efforts
 Achieve 1990 emissions by 2020; maintain and continue
reductions past 2020 to achieve 2030 and 2050 goals
 Coordinate efforts across government agencies
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AB 32 Scoping Plan
 Initial plan adopted in 2008
 First economy-wide climate change plan
 Pioneered concept of a market-based program
supplemented with complementary measures
 Sector-by-sector approach
 Public outreach and education
 Must be updated at least every 5 years
 First Update adopted in 2014
 Governor Executive Order for 2030 Target
 2030 Target Scoping Plan
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Path to 2050 Greenhouse Gas Target
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Achieving the 2030 Target
 Continuation of programs established to reach the 2020
GHG emission reduction target
 Cap-and-Trade Program
 Low Carbon Fuel Standard
 Renewable Portfolio Standard
 Advanced Clean Cars Program
 Zero Emissions Vehicle Program
 Sustainable Freight Strategy
 Short-Lived Climate Pollutant Strategy
 SB 375 Sustainable Communities Strategy
 Incentive programs and investments of GGRF
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Cap-and-Trade Program Overview
 One of a suite of measures to reduce greenhouse gas (GHG)
emissions under AB 32
 The economy-wide cap limits annual GHG emissions from all
regulated sources, and it declines each year
 Covered entities must purchase and surrender allowances and
offsets to match their emissions at the end of each compliance
period

This places a price on emissions and incentivize reductions

Allowances are permits issued by the state each equal to 1
MTCO2e

Offset credits act as one of several cost-containment features
and incentivize reductions outside of covered sectors
 Participants are allowed to trade allowances and offsets

Trading provides flexibility and reduces compliance costs
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Cap-and-Trade Program Goals
 Reduce GHG emissions by putting a firm limit on total
emissions from all covered sources
 Allow the price of carbon to motivate the most costeffective reductions and spur innovation
 Complement existing programs to reduce smog and air
toxics
 Ensure AB 32 emissions goals for GHGs are realized
through a strict limit
 Facilitate integration of regional, national, and
international GHG reduction programs
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Cap-and-Trade Program Scope
 Stationary sources with GHG emissions at or above 25,000 metric
tons of CO2e per year, imports of electricity, and supplied fuels:
 Large industrial sources
 Electricity generation
 Electricity imports
 Transportation fuels
 Natural gas and propane
 These sources cover 85% of California’s GHG emissions
 Limited use of offsets from uncapped sectors
 Entities can use offsets for up to 8% of their compliance
obligation
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Cap-and-Trade Program Statistics
 Annual Allowance Budgets:
 2016: 382.4 MMTCO2e
 2020: 334.2 MMTCO2e
 ~400 entities are covered by the Program
 ~260 voluntary entities are in the Program
 ~760 million compliance instruments are held in private accounts.
Approximate market value of compliance instruments in circulation is
$9.67 billion
 $4 billion in auction proceeds to date
 To be spent through annual budget act on greenhouse gas
reductions (placed in Greenhouse Gas Reduction Fund)
 Six protocols: US forests, urban forests, livestock digesters, rice
cultivation, mine methane capture, ozone depleting substances
 39.5M issued to date (23M forestry, 11M ODS, 2M Livestock, 2.8M
MMC)
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Cap-and-Trade Program Linkage
 California Program linked with Québec beginning Jan. 2014

Western Climate Initiative linked regional program

Six joint auctions held to date
 Ontario announced intentions to develop a cap-and-trade
program with a launch in 2017

Proposing to link their program with California/Québec

Ongoing collaboration on reporting, market rules, and
offset protocols to support linkage
 Potential for linkage with jurisdictional, sector-based
crediting programs (e.g., jurisdictional program to reduce
tropical deforestation)
 Potential linkages under federal Clean Power Plan
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What is Linkage?
 Process of approving compliance instruments issued by
another jurisdiction’s climate program (e.g., an emissions
trading system) to be eligible for use by entities to meet
compliance obligations under California’s program
 Current linkage
 Instruments from another ETS can be used in California and
where California instruments can be used in the other ETS
 Ex., Québec
 Potential linkage to Jurisdictional Sector-Based Crediting
Programs
 Instruments from an approved sector-based offset program
can be used in California, but California instruments would
not be used in the sector-based offset program
 Ex., Acre, Brazil
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Sector-Based Offset Credits
 Sector-based Offset Credit Program – Jurisdiction-wide
crediting program in subnational jurisdiction in developing
country –
 Jurisdictional, not project-based
 Cap-and-Trade Regulation allows sector-based offset credits
issued by approved sector-based offset credit programs for
compliance if the Board finds they meet rigorous criteria
 Limited to 4% of total compliance obligation between
2018-2020 (subset of the 8% offsets limit)
 Criteria for sector-based offset credits are the same as for
domestic project-based offset credits
 Real, quantifiable, verifiable, quantifiable, permanent,
enforcement, and additional (AB 32 and Cap-and-Trade
Regulation)
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Tropical Forestry Sector
 Jurisdictional programs designed to reduce emissions from
tropical deforestation and degradation
 Addresses significant portion of global emissions (roughly 11%-14%)
 Tropical forest sector is a heavily studied sector
 California program already includes domestic forestry offsets
 Multiple co-benefits, including:
 Link to California precipitation
 Biodiversity
 Forest-dependent community livelihoods
 Water management
 Soil conservation
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Engagement on Tropical Forests
 AB 32 Scoping Plan recognizes important role of tropical forests as
carbon sink and emission source
 California founded Governors’ Climate and Forests Task Force (GCF)
in 2008
 29 subnational jurisdictions sharing information and best practices
 Rio Branco Declaration – 80% reduction in tropical deforestation
by 2020, contingent on financing
 REDD Offset Working Group – MOU between CA, Acre, and Chiapas
in 2010
 Recommendations for how to link Acre and Chiapas programs
with California's Cap-and-Trade Program
 Cap-and-Trade Regulation contains placeholder provisions on
tropical forests for jurisdictional programs
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Potential Next Steps on Tropical Forests
 California recognizes we cannot fully address climate change
without addressing emissions from deforestation of tropical forests
 GCF partner jurisdictions are developing robust programs
 California recognition in a compliance market can set high
standards and leverage further emissions reductions and co-benefits
 Limited domestic offset protocols because most emission sources
already regulated in California
 Offset credit shortfall predicted beginning in 2018
 Sector-based offset crediting provisions already exist in regulation
 Continued engagement with GCF, stakeholders, & community
groups to assess potential linkages and regulatory amendments
 Ongoing workshops, starting in October 2015 through April 2016
 Whitepaper contains full history of California’s collaborative efforts
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SB 1018 Requirements
 Gov. Code section 12894(f)
 Prior to approving any linkage:
 ARB would have to notify the Governor that it intends to take
such action, and
 The Governor must make all of the following findings:
1) Partner Jurisdiction has adopted program requirements for
GHG reductions and offset credits which are equivalent to or
stricter than California’s
2) California has continued ability to enforce its laws and
regulations
3) Partner Jurisdiction has ability to enforce its laws and
regulations, and enforcement requirements are equivalent to
or stricter than California’s enforcement requirements
4) Proposed linkage does not impose any significant liability on
California for any failure associated with the linkage
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SB 1018 Process to Propose Linkage
 Review potential partner jurisdiction’s program (or proposed
program if not yet adopted)
 Assess partner jurisdiction program against SB 1018 requirements
 Equivalency of GHG reduction requirement
 Monitoring, Reporting, and Verification
 Accuracy requirement
 Program coverage (i.e., who is regulated)
 Market/trading rules (if an ETS)
 Offset provisions and requirements
 Enforcement mechanisms within potential partner jurisdiction
 Develop recommendations
 Send notification package to Governor
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Next Steps
 Public Workshops Held between Oct. 2015 and May 2016
 Rulemaking Schedule
 July 2016: Public Notice of Draft Regulation
 September 2016: First Board Hearing to Consider Approving
Draft Regulation
 Potential 15-Day Revisions
 Spring 2017: Second Board Hearing to Vote on Approving
Regulatory Amendments
 Summer 2017: Response to Comments, Final Statement of
Reasons, Submittal of Final Regulation Documents to Office of
Administrative Law
 October 2017: Regulatory Amendments become effective
(some would be specified to become applicable starting
January 1, 2018)
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Other Opportunities for Engagement
 Subnational Global Climate Leadership MOU (Under 2 MOU)
 Subnational (and national) governments committing to reduce
GHGs to below 2oC. Achieving emissions level of under 2 tons
per capital, and/or 80-95% below 1990 levels by 2050
 Sharing of technology, scientific research, and best practices
 128 jurisdictions to date, representing 740 M people and $20.7
trillion in GDP
 50-80% of mitigation & adaptation actions necessary to tackle
climate change will be implemented at the subnational level
 16 signatories are from GCF jurisdictions – connecting Rio
Branco Declaration with Under 2 MOU
 Other international partnerships
 ZEV Alliance
 Pacific Coast Collaborative
 Air pollution collaboration
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Other Opportunities for Engagement
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Additional Materials
 California Air Resources Board webpage:
http://www.arb.ca.gov/homepage.htm
 AB 32 Scoping Plan webpage:
http://www.arb.ca.gov/cc/scopingplan/scopingplan.htm
 Cap-and-Trade webpage:
http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm
 Sector-Based Offset Program webpage:
http://www.arb.ca.gov/cc/capandtrade/sectorbasedoffsets/se
ctorbasedoffsets.htm
 Cap-and-Trade Workshops:
http://www.arb.ca.gov/cc/capandtrade/meetings/meetings.ht
m
 Under 2 MOU: http://under2mou.org/
 Contact: Jason Gray, [email protected]
California Air Resources Board
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Questions?
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