The topic of climate change, or anthropogenic global warming (AGW), has somehow been linked – directly or indirectly – with nearly every policy area debated at the State Capitol. While I am not a scientist, I recognize there are many differing views on what the climate-related scientific research actually means. I have been and continue to be willing to have conversations on the implications concerning policy prescriptions to address this purported global warming.
However, as I am an accountant, data and models are important to me in making informed decisions about complex issues. It is unclear to me how significant human activity is in climate change, since change is an inherent characteristic of climate. From what I have seen, the data does not convince me that human activity is a primary or significant driver in warming the globe.
I struggle with the failure of even the most advanced computer models in the world to accurately predict climate outcomes. I am even less sure that dramatic action in the halls of government will have a meaningful impact on global temperatures without damaging a fragile economy still recovering from one of the worst downturns since the Great Depression.
Even so, the California Legislature has decided to aggressively move forward on policies meant to address AGW ever since the codifying of Assembly Bill 32, the Global Warming Solutions Act of 2006. Cap and trade – a major component of the first stage of California’s burdensome regulatory regime concerning greenhouse gas (GHG) emission reductions – has nearly run its course.
To alleviate the billions of dollars in compliance costs for the 600 industrial facilities and electricity generators captured by the most cumbersome regulations, there is a strong push to rework and reauthorize the cap-and-trade program. It has been estimated that gas prices could increase by 73 cents a gallon under a mature cap-and-trade program. That would be in addition to the transportation tax increases of 12 to 19 cents per gallon taking effect this Nov. 1.
Supporters of the cap-and-trade program argue that, if nothing happens, direct regulatory actions by the Air Resources Board (ARB) could cost around $1.50 per gallon. These unnecessary and costly regulations on California residents will not substantively reduce GHGs here, or anywhere in the world, no matter how much California tightens its belt.
Further, all this really does is reorganize California’s economy to be even less competitive (if that’s possible) with the other 49 states, requiring an even greater centralized government approach, while abandoning true market-based incentives.
Another problem not often considered is that such large price increases could also increase black-market gasoline sales and gasoline theft, requiring even greater government policing.
Even though California has the largest gross domestic product (GDP) in the nation, I agree with Gov. Jerry Brown that there is likely to be another negative economic adjustment soon. My legislative colleagues have engaged in a passionate debate about global warming and the need for California to be the world leader on the issue, but where is the dialogue about fixing California’s balance sheet, which carries the largest unrestricted net deficit in the United States?
Our state’s unfunded pension liabilities, unfunded retiree medical liabilities and unaddressed infrastructure deficits total a combined $400 billion or more in red ink. If we do not have our fiscal house in order, efforts to address climate-change policy will have been for naught. This misdirected effort will only further jeopardize this state’s fiscal plight. This is a disturbing sacrifice to impose on our residents.
Based on the cold, fiscal facts, I do not understand why the costs of addressing a nominal change in temperature one hundred years from now should rest primarily upon the shoulders of California’s taxpayers, ratepayers and consumers today, simply to demonstrate climate leadership. Polls of the voters bear out my concerns. We must consider if higher transportation, energy and food prices, in the billions of dollars in economic costs, are worth the Legislature’s continued liaison with climate-change mitigation.
I am in favor of being good stewards of our environment and resources and have supported legislation to improve our state’s ecology. In fact, I have probably backpacked more miles in California’s mountain ranges, and summited more of its peaks, than 99 percent of its residents. I am a bona fide tree hugger. But, believing that issues of science are not settled by political votes, I think the jury is still out about the impacts humans have on climate.
We need leadership to deal with the very real fiscal challenges that continue to distress our economy in a real, tangible and immediate way so that we can act accordingly, rather than pursue more state-sponsored policies on global climate change – policies that are costly distractions in addressing a matter in which the state has very little control.
The debate on the science of anthropogenic global warming (AGW, or human-caused/induced climate change) is heated and often reinforced by rigid ideological positions and skewed scientific discourse. It is usually focused around the purported impact of mankind’s greenhouse gas (GHG) emissions on long-term temperatures.
The prescriptions to mitigate the perceived consequences of climate change range from severe command and control dictates to innovative strategies undertaken by the free market without government coercion.
California’s elected leaders (generally) consider AGW to be an issue of imminent concern and believe that catastrophic consequences could imperil our Earth if immediate action is not taken.
On June 1, 2005, Governor Schwarzenegger signed Executive Order S-3-05, which established unprecedented targets in reducing greenhouse gases. The Governor declared, “I say the debate is over. We know the science. We see the threat. And we know the time for action is now.”
When the former governor held a summit on global warming on April 11, 2006, he embraced the inaugural Climate Action Team report as “a ground-breaking blueprint”. Despite his requests to delay a cap and trade system until after 2010 pending further study of its economic impacts, environmentalists succeeded in moving landmark legislation, Assembly Bill 32, the California Global Warming Solutions Act of 2006 to the Governor’s desk for his signature. AB 32 created a comprehensive, multi-year program to reduce California’s GHG emissions to 1990 levels by the year 2020. The legislation gave the Air Resources Board (ARB) the responsibility of implementing regulations based upon a Scoping Plan that was adopted in 2008. Since then, California’s State Legislature has continued to prioritize policies and resources to address climate change, often above other goals.
At a federal level, Congress has been reluctant to burden the national economy with rigid GHG reduction regulations. Despite several plans to move forward on a emissions trading plan in the 2009 Waxman-Markey legislation, President Obama and his administration spent years circumventing Congress with several executive orders and welcomed a United States Supreme Court ruling in Massachusetts v. EPA that provided for the classification of carbon dioxide as a pollutant so it could be regulated under the Clean Air Act.
As a candidate, President Trump campaigned on a promise to reduce regulations promulgated by the previous administration that constrained energy development and conveyance. Soon after taking office, President Trump overturned several of the previous administration's executive orders and signaled a different path with Congress, showing little interest in supporting aggressive climate change policies. In withdrawing from the highly-touted, but unratified, Paris Accord, President Trump stated, “[T]he United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country.” Congress has also been quick to overturn a few contentious regulations through the Congressional Review Act in the first half of 2017 and does not appear to be interested in climate change policy as a legislative or budgetary priority.
Fearing that the federal government will reverse course on climate change policy, California’s elected officials in the majority party have established themselves as the putative national and international leaders on climate change. As such, they will continue to aggressively pursue policies they believe will reduce GHGs worldwide, though much of the high costs will be born by consumers, ratepayers and taxpayers in California.
As AB 32 nears its expiration date in 2020, SB 32 (2016) pushes emission reduction goals to 40% of 1990 by 2030 and newer Renewable Portfolio Standard (RPS) goals from SB 350 (2015) come into force, the debate for a long-term, predictable, cost-constrained cap and trade system is in full force under the cupola.
This webpage seeks to outline some of the issues and consequences associated with climate change policy so the public can be better aware of the debate in the legislature, as well as the position and/or votes on which Senator Moorlach will be taking.
Issues to Consider
Why pursue climate change policy exclusive to California?
AB 32 was sold to stop global warming and do so in “a manner that minimizes costs and maximizes benefits for the California economy.” The costs of AB 32 are already in the billions of dollars of compliance and mitigation and focused on California residents. And yet, it was likely an economic recession that led to most of the state’s reductions in emissions, not California’s climate change policies.
California is not an eco-island, separate from the environmental negative externalities of other places. Its air is impacted by many other factors than what is done in California alone. It has been demonstrated that Mexico and China’s air pollution constantly drift over our state and any caps or emission reductions that take place in the state will do so at the cost of the economy. The atmospheric overlords claim that while California contains only 0.5 percent of the world’s population, it produces 7 percent of the world’s carbon dioxide emissions. Even if one were to assume these numbers are accurate (or relevant), they are a result of this California’s economic prowess. Consider the following: California is the world’s 9th largest economy, producing over $2.6 trillion in goods and services each year which includes more than half the nation’s fruits, nuts and vegetables on only 3 percent of the nation’s farmland. Further, California has traditionally been the number one agricultural producer and exporter in the United States.
One may wonder why we are placing the responsibility of reducing global warming on California taxpayers and students when China and other emerging economies show no desire to slow their growth in fossil fuel use, while at the same time, allowing foreign countries to profit off our poor public policy. Additionally, the state’s fiscal problems remain and an uneven focus on climate change and other anti-business policies may impact future generations more directly than a nominal change in long-term temperatures.
What does the polling say?
Polls show most Americans, even when they believe climate change/global warming is occurring, don’t want their living standards sharply reduced by new laws, regulations and bureaucratic impositions. As respondents learn more about the costs of the program and its impacts to other higher priorities, they are less inclined to support climate change policies, or they become more irrelevant.
A Pew Research 2017 Survey found climate change ranks 18th on Public Policy Rankings (at 38% rating as a top priority), well behind Terrorism (76%), Economy (73%), Education (69%), Jobs (68%), etc.
A March 2017 Yale Program on Climate Communication survey, summarized in the NY Times, found only 33% of Americans “said they discuss global warming at least occasionally with friends and family — and 31 percent said they never do. But there are distinct regional patterns.” Basically, Red counties not too concerned, Blue counties really concerned.
A June 1, 2007 Fox News poll found only "29% of voters are ‘extremely concerned’ about climate change. That put it in a tie for fourth place with a potential war with North Korea. Ahead of climate change were government spending (36%), Russian meddling in the U.S. election (33%) and the economy (30%)."
A June 6, 2017 Rasmussen Report Survey found Voters are NOT willing to pay to fight climate change.
What other entities are involved with California’s climate change policies?
The Western Climate Initiative (WCI) is an initiative started in 2007 by states and provinces along the western rim of North America to deal with climate change by compacts acted upon independent of their national governments. The stated purpose of the WCI is to identify, evaluate and implement ways to collectively reduce GHG emissions in the region. The initiative requires partners to set an overall regional goal to reduce emissions, develop a market-based, multi-sector mechanism to help achieve that goal, and participate in a cross-border GHG registry. The WCI originally planned to lay the foundation for an international cap and trade program that would involve both the United States and Canada. On September 23rd, 2008, the WCI released an outline for the implementation of its cap and trade proposal. The first phase of this plan would be implemented on January 1, 2012, followed three years later by a broader cap on carbon emissions in 2015.
The initiative included two types of membership: partners and observers. Originally included as partners: Arizona, California, Montana, New Mexico, Oregon, Utah, and Washington, and the Canadian provinces of British Columbia, Manitoba, Ontario, and Quebec. Eventually, all the other states dissolved their partnerships, leaving California as the sole United States participant. British Columbia, California, Ontario, Quebec and Manitoba are continuing to work together through the Western Climate Initiative to develop and harmonize their emissions trading program policies. On April 19, 2013, the ARB voted to approve a date of January 1, 2014 to officially link California’s cap-and-trade program with that of Québec.
The ARB incorporated the Western Climate Initiative, Inc. (WCI, Inc.) in cooperation with the Province of Quebec (Canada) in November 2011 as a non-profit in Delaware to provide coordinated administrative and technical services in support of state and provincial GHG emissions trading programs. Both the Secretary for the California Environmental Protection Agency and the Executive Director of the ARB sit on the Board of Directors. The oversee the quarterly cap and trade auctions.
How should policymakers consider the impacts of GHGs on the climate?
No matter what a particular person believes about the impacts of GHGs on the planet’s climate, policymakers have a responsibility to weigh the costs and benefits of action and inaction amongst other competing policy priorities and scarce resources. Some ask if it would not be a better use of our scarce resources to prioritize dollars on more pressing and urgent issues, such as feeding the poor and inoculating against deadly diseases, then to divert billions of dollars into a carbon trading scheme that has yet to work anywhere else.
With that, it should be remembered that CO2 is a gas that occurs naturally in the atmosphere. Out of the entire atmospheric composition, less than two percent is made up of GHG’s with the majority being nitrogen (about 78 percent) and oxygen (about 21 percent). Of that two percent, CO2 comprises only 3.62 percent while water vapor encompasses 95 percent. And of the amount of carbon dioxide in the atmosphere, humans cause only 3.4 percent of annual CO2 emissions. It is exhaled by humans, is absorbed by trees and plants to produce oxygen, it is essential to life on earth. Ironically, scientists know that the estimated ten percent increase in agricultural production in recent decades is directly attributable to the fertilization effect of increased carbon dioxide in the air.
Freeman Dyson, onetime deputy director of the Los Alamos National Laboratory (who, incidentally, accepts the basic physics of CO2-induced warming) said in a statement on what the physics confesses to when tortured by a computer: “The models solve the equations of fluid dynamics and do a very good job of describing the fluid motions of the atmosphere and the oceans. They do a very poor job of describing the clouds, the dust, the chemistry and the biology of fields, farms and forests. They do not begin to describe the real world that we live in.”
The option of having a free-market response to climate change does not displace the government, but shifts its responsibility to clarifying and protecting property rights for persons or corporations. Those who feel strongly about reducing GHG emissions could create public education and awareness campaigns and encourage others to change behaviors in a way that is consistent with public opinion and economically viable in a public, but voluntary, marketplace. Should a person or corporation violate a mutual agreement on reducing GHGs, the courts could provide legal remedies based upon those agreements. Economic growth, allowing for adaptation and resilience measures provide other options to a changing climate.
For additional policy briefs on free-market options for climate policy:
Market Adaptation to Climate Change, Property and Environment Research Center, Volume 35, No.2, Winter 2016 - “The real challenge is to avoid [climate change] policies that distort prices, make society poorer, or prevent markets from adapting. Trade barriers, immigration restrictions, federal flood insurance, agricultural subsidies, and zoning regulations each impose obstacles to climate adaptation. This special issue challenges how we think about climate change and highlights the importance of markets and property rights in helping us adapt to our ever-changing world.”
How the IPCC Reports Mislead the Public, Exaggerate the Negative Impacts of Climate Change and Ignore the Benefits of Economic Growth, Reason Foundation, Indur M. Goklany and Julian Morris, December 7, 2011 - “Building on the notion that the current adaptive capacity of poor countries is low, the IPCC, among others, claims that global warming could also hinder their sustainable development. Others argue that the impact of global warming could overwhelm weak or poor governments, leading to economic and political instability, which, in turn, could breed terrorism and conflict, and precipitate mass migration to richer countries. This paper seeks to assess whether these assertions are justified. It begins with a discussion that sheds light on the main factors that affect the trends in climate-sensitive indicators of human wellbeing. The discussion recognizes the role of fossil fuels in powering economic and technological development. Next, it examines the notion—implicit in the view that poor countries will be swamped by the future impact of GW—that their adaptive capacity will remain low in the future. It specifically examines whether this view is justified in light of the economic assumptions built into the IPCC scenarios.”
Command and control:
With command and control strategies, the government sets a threshold for which GHG reductions must be met and requires direct mechanisms and/or technologies to achieve that end. Carbon taxes can also be used in this way, driving up the cost of a carbon-intensive process so that the costs for doing so become prohibitive and require another method to reduce GHG emissions. Strong proponents of GHG emission reductions believe that this is the best strategy, as it is simple and direct.
Cap and trade:
Under a cap and trade mechanism, regulators establish a declining cap on GHG emissions. Regulated entities, such as power plants, would obtain permits or allowances to emit emissions up to their cap. Those allowances could then be traded among regulated entities with a purported result that those entities that could lower their GHG emissions least expensively will do so and sell their “excess” allowance to those who find it more costly to lower their GHG emissions. An issue with such a program is how regulated entities obtain the emission allowances. A broader concern is whether the auctioning of allowances is enforceable, transparent, and allows public participation and whether many will simply experience the same shortcomings that affected personal portfolios when it was determined those derivatives and other financial instruments were essentially unregulated market mechanisms.
Beyond the economic costs, there are direct fiscal costs to state and municipal budgets. Money derived from the cap and trade does not go into the general fund. Instead, it goes into mitigation projects, rebates for low-level energy consumers and the high-speed rail project.
CALmatters cap and trade explainer:
A part of some cap and trade programs is the creation of offsets whereby a regulated entity can pay another entity for its GHG reductions, which can then be used by the regulated entity to meet its GHG cap. Other than geologic carbon capture and storage, examples may include planting trees, or developing landfill gas capture and wind farm projects. The ARB has a list of their compliance offset protocols. Firms currently sell carbon offsets which are used by those who want to “green” their activities. A major concern with offsets is the validity of their activities and the durability and longevity of their offsets. Yet legislation seeking to ensure the legitimacy of offsets is also opposed by those advertising their use.
Low Carbon Fuel Standard:
The Low Carbon Fuel Standard (LCFS) is a regulatory mandate adopted by the ARB. It requires fuel producers to reduce the carbon content of their fuels by 10% by 2020. The regulation was adopted in April 2009. In December 2011 a federal judge granted a preliminary injunction against the implementation of California's LCFS. In three separate rulings the judge rejected the ARB's defense as he concluded that the state acted unconstitutionally and the regulation “impermissibly treads into the province and powers of our federal government, reaches beyond its boundaries to regulate activity wholly outside of its borders.” In April of 2012, a panel of the U.S. 9th Circuit Court of Appeals in San Francisco removed the lower court’s injunction, which allows the ARB to continue crafting the new regulations while the dispute is resolved on its merits in the courts.
Renewable Portfolio Standard:
Originally enacted in 2002 (SB 1078, Sher), the Renewable Portfolio Standard (RPS) requires obligated investor-owned utilities (IOU), energy service providers, and community choice aggregators meet annual targets by increasing procurement of non-hydro, renewable energy by at least one percent of annual retail sales per year until renewables make up 20% of their total portfolio, no later than 2017. In September 2006, Governor Schwarzenegger signed SB 107 (Simitian), which officially accelerated the RPS targets to 20% by 2010, subject to CPUC discretion regarding flexible compliance.
While on its face, using “renewable” energy may look like a laudable goal, there are many challenges that make such a standard economically infeasible, thus, progressive government mandates. According to the Energy Information Administration (EIA), the average retail price of electricity in California was almost 50% higher than the national average in 2016. Accelerating the compliance period and increasing the RPS mandate will likely increase the rates and continue to widen the gap between California and the national average. The EIA reports the average retail price of electricity for residential customers in California increased $0.41/kwh between 2015 and 2016, but the national average declined $0.10/kwh for residential customers. Accelerating the compliance time table and raising the RPS mandate will increase the cost of doing business in California. Therefore, families will feel the effects in their home energy bills and when they purchase goods and services that have higher prices.
California is already experiencing an overgeneration of power issue. Renewable resources, such as solar and wind, are intermittent and complicate the ability to ensure reliable power on the grid. California has largely relied on natural gas fired power plants to smooth out the intermittency of the renewable resources. The infamous "duck chart" has shown excess power being generated during the middle of the day when demand is lower and steep ramps when demand peaks in the evening. As of May 3, 2017 the California Independent System Operator (CAISO) reports it has curtailed 248,549 MWH of wind and solar generation due to oversupply and local congestion. If curtailments are increasing in occurrence now, when the current mandate has not been met, how will new resources be integrated?
Legislation on increased RPS goals continue to pick winners and losers in the attempt to create a cleaner electric system in California. The RPS is one of many tools that have become part of the larger climate change discussion and attempts to reduce greenhouse gas emissions. However, bills continue to focus on mandating the procurement of renewable resources despite the fact there may be other more cost effective means to obtain the same result. These kinds of mandates restrict the flexibility of the grid and therefore continues to increase costs for the ratepayers.
As of now, large hydropower (larger than 30 MW of generation) is not considered for zero-carbon electric generating facilities. Large hydropower is a clean, non-polluting resource that should be an eligible RPS resource for all load serving entities.
To find the cost of electricity, the Energy Information Administration has information at their website, Average Price of Electricity to Ultimate Customers by End-Use Sector (Data for April 2017).
In the News...
By: Kerry Jackson, Fox & Hounds - July 21, 2017
The mood was reportedly celebratory on the evening of July 17 after legislators approved a decade-long extension of the state’s carbon dioxide cap-and-trade program. But that’s not to say everyone was happy, or should be.
Jerry Brown wins on cap-and-trade, but is it just symbolism?
By: Dan Walters, CALmatters - July 19, 2017
“I’m not here about some cockamamie legacy that people talk about,” Brown told a legislative hearing audience. “This isn’t for me. I’m going to be dead. It’s for you. And it’s damn real.” And he told senators, “This is the most important vote of your life.”
By: Dale Kasler, Sacramento Bee - July 19, 2017
Californians pay more for gasoline – and food, cement and other goods – to finance the state’s fight against climate change. They’ll continue doing so at least through 2030, thanks to a landmark bill extends California’s cap-and-trade program for another decade. Gov. Jerry Brown was able to push the bill through the Legislature late Monday.
By: The Editorial Board, Wall Street Journal - July 18, 2017
Republicans in Sacramento handed Jerry Brown the biggest legislative victory of his governorship on Monday by reauthorizing carbon cap and trade. This act of political self-sabotage and voter betrayal ranks close to the Senate GOP’s ObamaCare failure.
By: The Editorial Board, Sacramento Bee - July 18, 2017
Already, the market is turning bullish for permits to pollute, otherwise known as carbon allowances. California cap-and-trade allowances sold for less than $13 per ton last year, and would have been like Monopoly money if the cap-and-trade extension failed.
By: Melanie Mason and Liam Dillon, Los Angeles Times - July 16, 2017
“THIS ISN'T FOR ME, I'M GOING TO BE DEAD. IT'S FOR YOU AND IT'S DAMN REAL! So I just ask you, take it seriously,” blared the email signed by Brown, along with an all-caps plea for readers to call their legislators.
By: Christopher Cadelago, Sacramento Bee - July 11, 2017
“If we don’t get it, it’d be a tragedy for California, and for the world,” Brown said. “Because from China, to the European Union, people are looking to the California cap-and-trade program.”
By: Loren Kaye, Fox & Hounds - July 11, 2017
Whatever deal on cap-and-trade eventually emerges to engage legislative scrutiny, it will need supermajority approval to reach the Governor’s desk.
GOVERNOR BROWN, SENATE PRESIDENT PRO TEMPORE AND ASSEMBLY SPEAKER ANNOUNCE LANDMARK LEGISLATION TO REDUCE AIR AND CARBON POLLUTION
SACRAMENTO - Governor Edmund G. Brown Jr., Senate President pro Tempore Kevin de León and Assembly Speaker Anthony Rendon today announced a legislative package that will launch a landmark program to measure and combat air pollution at the neighborhood level - in communities most impacted - and extend and improve the state's world-leading cap-and-trade program to ensure California continues to meet its ambitious climate change goals.
Gov. Brown and Democratic leaders offer plan to extend cap and trade, with aim for approval this week
By: Melanie Mason, Los Angeles Times - July 10, 2017
After weeks of back-and-forth between environmentalists and business interests, Gov. Jerry Brown and legislative leaders introduced a proposal Monday evening to reauthorize California's cap-and-trade program, the centerpiece of the state's efforts to battle climate change.
The inconvenient truth about AB 32, as well as Cap and Trade, is that we now have higher gasoline prices and higher electricity costs. The coastal elites who support “going green” at all costs just don’t care that the working poor and struggling middle class living away from California’s coast are bearing the brunt of higher energy costs.Tellingly, our state has the worst poverty rate in the nation where 1 out of 5 California families are barely hanging on.
Of course it is a tax – and a huge one. The program sets arbitrary caps on greenhouse gas emissions for anyone producing them, and then basically charges them a lot of money if they bust those caps. It moves hundreds of millions of dollars from the private sector into the hands of a greedy state government to spend on favorite programs. In Jerry Brown’s case, he loves spending money from this tax for his high-speed rail boondoggle.
A breakneck effort to extend the life of cap and trade, California’s signature program to combat climate change, just got more difficult — thanks to one assemblyman starting his new job.
But, new research, published today in the journal Nature Communications, predicts that California will actually get wetter. The scientists from the University of California, Riverside predict the state will get an average of 12 percent more precipitation through the end of this century, compared to the last 20 years of last century.
In recent months, Gov. Jerry Brown has made clear that an extension of the state’s cap-and-trade program will need GOP support.
CALIFORNIA GOVERNOR BROWN ANNOUNCES GLOBAL CLIMATE ACTION SUMMIT IN SAN FRANCISCO IN SEPTEMBER 2018
"The growing threat of climate change demands an immediate and unified global response," said Senate Leader Kevin de León. "California remains committed to a clean energy future and we welcome the responsibility to lead on America's behalf. My colleagues in the Senate appreciate Governor Brown agreeing to hold this global summit and look forward to working with him to welcome our partners from around the world."
But new data on the world’s biggest developers of coal-fired power plants paints a very different picture: China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.
California has some of the world’s most extensive policies for slashing greenhouse gas emissions, including regulations on vehicle tailpipes and requirements for renewable energy. But none of them has drawn as much attention as the cap-and-trade program, which requires companies to buy permits to release emissions into the atmosphere.
California’s top politicians are trying to fashion a new assault on greenhouse gas emissions, and what they decide, perhaps within a few weeks, will have immense effects on what consumers spend for gasoline and myriad other products and services.
Analysis & Commentary
Cap-and-Trade briefing for Senate Environmental Quality Committee, Legislative Analyst’s Office, May 10, 2017 - Discussion on impacts of cap and trade system as currently constituted and as it may be implemented in the future.
Letter to Honorable Vince Fong Regarding Potential Future Effects of Fuels in Cap-and-Trade Program, Legislative Analyst’s Office, April 3, 2017 - “Answers two questions regarding the potential future effects of having fuels in California’s cap-and-trade program: 1) How much would gas prices increase under different cap-and-trade allowance price scenarios included in the administration’s regulatory analysis documents? and 2) What would be the additional costs borne by consumers under these allowance price scenarios?”
The 2017-18 Budget: Cap-and-Trade, Legislative Analyst’s Office, February 13, 2017 - “In this report, we provide comments and recommendations related to the Governor’s proposal. We recommend the Legislature authorize cap-and-trade (or a carbon tax) beyond 2020. If the Legislature approves cap-and-trade, we recommend the Legislature strengthen the allowance price ceiling and provide clearer direction to ARB regarding the criteria that the board should use to determine whether a complementary policy should be adopted. We also recommend the Legislature approve cap-and-trade (or carbon tax) with a two-thirds vote because it would provide greater legal certainty and ensure ARB has the ability to design an effective program. With a two-thirds vote, we recommend the Legislature broaden the allowable uses of auction revenue because it would give the Legislature flexibility to use the funds on its highest priorities. When finalizing its 2017-18 cap-and-trade spending plan, we recommend the Legislature (1) reject the administration’s proposed language making spending contingent on future legislation, (2) consider alternative strategies for dealing with revenue uncertainty, and (3) allocate funds to specific programs rather than providing DOF that authority.”
Economic Impacts of Major California Climate Change Goals, NERA Economic Consulting for California Manufacturers & Technology Association, August 2, 2016 – “In the ARB SP scenario, the average California household would experience a loss of $1,200 per year in the near-term and $3,100 per year in the long-term. In the Market Driven scenario, the average household would experience about half the economic loss of about $740 per year in 2020 rising to $1,100 per year in 2030. Thus, achieving the 2020 and 2030 emission reduction targets by relying on the transportation specific policies in ARB’s Scoping Plan (SP) creates twice the loss to households in the near term and three times the loss to households in the long term. The magnitude of the impacts on employment differs significantly for the two options. Job equivalents decline by 570,000 and 1,600,000 for the Market Driven and ARB SP scenarios, respectively, in 2030.”
Administration’s Cap-and-Trade Report Provides New Information, Raises Issues for Consideration, Legislative Analyst’s Office, April 20, 2016 - Presented to Assembly Budget Subcommittee No. 3 on Resources and Transportation on issues surrounding cap and trade.
Letter to Honorable Tom Lackey on Including Transportation Fuels in the Cap-and-Trade Program, Legislative Analyst’s Office, April 7, 2016 - “This letter to Honorable Tom Lackey, Assembly Member, 36th District, estimates the effects of including transportation fuels in California’s cap-and-trade program on: (1) the retail price of gasoline and diesel fuel and (2) the additional amount motorists are spending on gasoline and diesel fuel as a result of the program.”
Cap & Trade Auction Spending Proposals, California Tax Foundation, Spring 2016 – “Lawmakers have proposed spending more than $7.5 billion in cap-and-trade auction revenue – much more than the $3.09 billion proposed in the governor’s budget for 2016-17. All of these proposals are active and are being considered at a time when expenditures of auction revenue are under scrutiny. The auction operates as a tax, generating revenue for programs that serve the general public. However, it was not approved by a two-thirds majority of lawmakers, as the California Constitution requires for any tax increase.”
Cap-and-Trade Expenditures: Overview of Governor’s Budget and Issues for Legislative Consideration, Legislative Analyst’s Office, February 18, 2016 - Presented to Senate Committee on Budget and Fiscal Review for overview of the Governor’s budget proposal.
Our Nation’s Air – Status and Trends through 2015, U.S. Environmental Protection Agency, 2016 – “The EPA is committed to protecting public health by improving air quality and reducing air pollution. This annual report presents the trends in the nation's air quality, and summarizes the detailed information found at EPA's AirTrends website.”
Framework For Cap-And-Trade Investment Plan Needs Further Development, Legislative Analyst’s Office, September 22, 2015 - “We discuss (1) the purpose of the administration's triennial cap-and-trade Investment Plan, (2) limitations of the administration's recently released Investment Plan concept paper, and (3) several key questions we believe the administration should consider as it further develops the Investment Plan that could result in better information about the potential benefits, tradeoffs, and risks associated with different funding choices.”
The 2014-15 Budget: Cap-and-Trade Auction Revenue Expenditure Plan, Legislative Analyst’s Office, February 24, 2014 - “In order to minimize the negative economic impact of cap-and-trade, it is important that auction revenues be invested in a way that maximizes GHG emission reductions for a given level of spending. In reviewing the Governor's proposed expenditure plan, we find that there is significant uncertainty regarding the degree to which each investment proposed for funding will achieve GHG reductions. This uncertainty is the result of several factors, including there being only limited data and analysis provided by the administration, as well as the fact that the level of emission reductions achieved would depend on the specific projects funded by departments. Given these concerns, we recommend that the Legislature direct ARB to develop metrics for departments to use in order to prospectively evaluate the potential GHG emission benefits of proposed projects, as well as direct the board to establish a set of guidelines for how departments should incorporate these metrics into their decision making processes.”
Briefing Report: Scope of AB 32 Scoping Plan Update is Far-Reaching, California State Senate Republican Policy Office, January 22, 2014 - “According to the World Resources Institute’s most recent data, California produces roughly 1 percent of worldwide GHG emissions. Nonetheless, the Air Resources Board is currently in the process of updating the AB 32 Scoping Plan with recommendations on ways to further slash the state’s emissions. Like the initial 2008 Scoping Plan, the Scoping Plan Update lays out targets for virtually every sector of the economy, including automobiles, refineries, buildings and landfills. If approved, the updated plan will not only serve as a guide but is also intended to aid the state in measuring our progress in reducing GHG emissions.”
Briefing Report: More on the Brown Administration's Climate Change Indicators
Wednesday, California State Senate Republican Policy Office, September 11, 2013 - “This report further examines some of the issues presented in, ‘Indicators of Climate Change in California’ by the California Environmental Protection Agency, which the agency describes as ‘reveal[ing] evidence of the already discernible impacts of climate change, highlighting the urgency for the state, local government [sic] and others to undertake mitigation strategies.’ Last week's Senate Republican Caucus briefing report, ‘What Does the Brown Administration's Report on Climate Change Indicators Really Indicate’, lays out the numerous caveats and contradictions contained within the report itself. This report builds upon those and provides additional examples of potential weaknesses from a selection of the 36 ‘indicators of climate change’ identified.”
Briefing Report: What Does the Brown Administration's Report on Indicators of Climate Change Really Indicate?, California State Senate Republican Policy Office, September 5, 2013 - “Governor Jerry Brown has a warning for you: ‘Whether you live in California, Texas or Timbuktu, climate change is real, and it’s long past time for action.’ With that, he has asked policy-makers to look to science as they implement programs intended to stall global warming and save the very existence of California. However, recent data suggests that global temperatures are stagnant or with very little appreciable change and the climate forecasting models are significantly off in their dooms-day projections.”
Briefing Report: Much Ado About Carbon - Begging the AB 32 Questions, California State Senate Republican Policy Office, April 11, 2012 - “California’s continued obsession with climate change subjects itself to further economic discontent beyond that which the state has experienced in the last decade. Legitimate scientific inquiry on carbon or greenhouse gas (GHG) emissions feedback and their questionable impacts on the climate have effectively persuaded other jurisdictions to avoid substantial emission reduction policies, especially if those policies that may impair a fragile economic recovery. In an effort to better understand the Air Resources Board execution of AB 32—without accepting the premise of catastrophic anthropogenic global warming—here are scores of probing questions every citizen should ask their elected officials regarding the state’s premier policy concerning climate change, regardless of where they stand on the issue. These questions are in no way definitive, but rather serve as a catalyst for a more robust policy debate going forward.”
The 2012–13 Budget: Cap–and–Trade Auction Revenues, Legislative Analyst’s Office,
February 16, 2012 - “This report examines the Governor's budget proposal regarding the use of revenues expected to be generated from the cap-and-trade auctions that the California Air Resources Board (ARB) will hold in 2012-13. These auctions are part of the state's plan to meet the goals of the Global Warming Solutions Act of 2006 (commonly referred to as AB 32). In this report, we recommend that the Legislature first use the revenues in 2012-13 to offset General Fund costs of existing programs designed to mitigate GHG emissions. Since the Legislature will need to decide which General Fund costs to offset as part of the 2012-13 budget process, such decisions are best made this spring. In addition, the Legislature will need to begin the process of determining how effectively to allocate the remaining auction revenues on new or expanded programs.”
Evaluating the Policy Trade-Offs in ARB's Cap-and-Trade Program, Legislative Analyst’s Office, February 9, 2012 - “This report analyzes the design of the cap-and-trade program as adopted by the California Air Resources Board (ARB). This new, complex program is part of the state's plan to reduce greenhouse gas emissions statewide to 1990 levels by 2020—a goal set by the Global Warming Solutions Act of 2006 (commonly referred to as AB 32). The report examines in detail the specific policy choices made by the ARB in the design of the program, some specific policy trade-offs inherent in those decisions, and options for program design changes that the Legislature may wish to make depending on its policy priorities.”
Briefing Report: The Legislature's Large CARB Footprint, California State Senate Republican Policy Office, April 21, 2010 - “If one were to look for the proto-typical European bureaucracy in America, one would have to look no further than the California Air Resources Board, a department of the California Environmental Protection Agency. The ARB has an 11 member appointed board which is directed by a full-time chairman who oversees an $860 million annual budget and a 1,200 member staff of administrators, regulators, technicians and compliance officers. They are charged with protecting the state’s ambient air quality standards through a menagerie of federal, state and local programs regulating mobile and stationary emissions. They coordinate with 35 regional air quality management districts to accomplish this task. They describe their mission on their website: ‘[T]o promote and protect public health, welfare, and ecological resources through effective reduction of air pollutants while recognizing and considering effects on the economy. CARB oversees all air pollution control efforts in California to attain and maintain health based air quality standards.’ In recent years, they have also been granted broad authority to deal with the Legislature’s global warming initiatives, crosscutting their activities with several other state departments and influencing just about every local government body.”
Briefing Report: What AB 32 Hath Wrought, California State Senate Republican Policy Office, February 10, 2010 - “On September 27, 2006, Governor Schwarzenegger signed AB 32, the Global Warming Solutions Act of 2006 (Núñez) in an effort to reduce GHG emissions that some have attributed as the main cause of anthropogenic global warming AGW. By adopting AB 32, albeit by a slim majority, the Governor and the legislature effectively relegated a substantial body of regulation of carbon dioxide to the Air Resources Board without providing for any true oversight or accountability for the unelected board.”
Major Climate Change Legislation
AB 398 (E. Garcia, 2017) Requires Air Resources Board to update the California Global Warming Solutions Act of 2006 scoping plan by January 1, 2018 and extend the applicability of a regulation that establishes a system of market-based declining annual aggregate emissions limits (cap and trade) for sources or categories of sources that emit greenhouse gases to December 31, 2030. Outlines process for Air Resources Board to specify price ceilings, price containment points, offset credit compliance limits, and industry assistance factors for allowance allocation as part of the cap and trade program. Establishes the Compliance Offsets Protocol Task Force for the purposes of increasing offset projects with direct environmental benefits in the state while prioritizing disadvantaged communities, Native American or tribal lands, and rural and agricultural regions. Prohibits a regional air districts from adopting or implementing an emission reduction rule for carbon dioxide from stationary sources that are also subject to a specified market-based compliance mechanism until January 1, 2031. Suspends the state responsibility area fire prevention fee until January 1, 2031. Exempts qualified tangible personal property purchased for use by a qualified person to be used primarily in the generation or production, or storage and distribution of electric power or purchased for use by a contractor for the qualified person, from specified taxes.
AB 617 (C. Garcia, 2017) Requires Air Resources Board develop a uniform statewide system of annual reporting of emissions of criteria air pollutants and toxic air contaminants for use by certain categories of stationary sources. The bill would require those stationary sources to report their annual emissions of criteria air pollutants and toxic air contaminants. Requires Air Resources Board to prepare a monitoring plan regarding technologies for monitoring criteria air pollutants and toxic air contaminants and the need for and benefits of additional community air monitoring systems. Requires the Air Resources Board to prepare and update a statewide strategy to reduce emissions of toxic air contaminants and criteria pollutants in communities affected by a high cumulative exposure burden every 5 years. Increases the maximum applicable criminal and civil penalties for violations of air pollution laws from nonvehicular sources from $1,000 to $5,000, indexed going forward.
SB 775 (Wieckowski, 2017) Requires Air Resources Board to adopt a market-based program of emissions limits (cap and trade) under the California Global Warming Solutions Act of 2006 applicable on and after January 1, 2021, for covered entities. Requires the cap and trade program to set an initial minimum reserve price and to increase the minimum reserve price each quarter. Establishes the Economic Competitive Assurance Program administered by Air Resources Board to ensure that importers that sell, supply, or offer for sale in the state a greenhouse gas emission intensive product have economically fair and competitive conditions and to maintain economic parity between producers that are subject to the market-based program of emissions limits and those who sell like goods in state that are not subject to that program. Creates the California Climate Infrastructure Fund, the California Climate Dividend Fund, and the California Climate and Clean Energy Research Fund in the State Treasury. Requires the Franchise Tax Board, in consultation with the Climate Dividend Access Board, to develop and implement a program to deliver quarterly per capita dividends to all residents of the state that would maximize the ease with which residents of the state may enroll in the program.
SB 100 (De Leon, 2017) Increases the Renewables Portfolio Standard (RPS) mandate to 60% by 2030, but sets a goal of 100% by 2045. Requires energy and climate programs to incorporate the planning goal and regulatory requirement that eligible renewable energy resources and zero-carbon electric generating facilities supply all electricity to California customers by 2045.
*Senator Moorlach voted NO on the Senate Floor on 5/31/2017.
SB 32 (Pavley, Chapter 249, Statutes of 2016) Establishes a GHG target of at least 40 percent below 1990 levels by 2030.
*Senator Moorlach voted NO on the Senate Floor on 6/3/2015 and 8/24/2015.
AB 197 (E. Garcia, Chapter 250, Statutes of 2016) Directs ARB to prioritize regulations that result in direct GHG emission reductions.
*Senator Moorlach voted NO on the Senate Floor on 8/22/2016.
SB 350 (De León, Chapter 547, Statutes of 2015) Increases the Renewable Portfolio Standard requirement to 50% by 2030, requires a doubling of statewide energy efficiency savings, requires a study of governance modifications to the Independent System Operator to potentially transform into a regional organization, and requires load serving entities to file integrated resource plans.
*Senator Moorlach voted NO on the Senate Floor on 6/3/2015 and 9/11/2015.
SB 535 (De Leon, Chapter 830, Statutes of 2012) Creates the Greenhouse Gas Reduction Fund Investment Plan and Communities Revitalization Act for the deposit of proceeds from the AB 32 cap and trade auction. Requires those moneys to be redistributed far and wide as a grab-bag to every possible environmental rent-seeker in the state upon development of investment plans and appropriation by the Legislature. Enacts this bill contingently with AB 1532. This bill passed off the Senate Floor 25-14 and off the Assembly Floor 43-29.
AB 1532 (J. Perez, Chapter 807, Statutes of 2012) Requires the moneys in the Greenhouse Gas Reduction Fund to be used for various purposes. Requires the Department of Finance, in consultation with the ARB and any other relevant state entity, to develop a 3-year investment plan that includes specified analysis and information and to submit the plan to the Legislature. Enacts this bill contingently with SB 535. This bill passed off the Assembly Floor 51-28 and off the Senate Floor 21-15.
SB 1018 (Budget Committee, Chapter 39, Statutes of 2012) Enacts provisions of the 2012-13 Budget Bill as the Omnibus Natural Resources trailer bill; authorizes a cap and trade tax under AB 32 estimated to generate $1 billion in revenues in 2012-13 using at least $500 million to offset unspecified statewide General Fund programs.
SB X1-2 (Simitian, Chapter 1, Statutes of 2011) Adjusts the RPS program so that retail sellers must procure the following minimum percentages of renewable resources:
20% by Dec. 31, 2013;
25% by Dec. 31, 2016;
33% by Dec. 31, 2020 and maintained for all subsequent years.
AB 1404 (De Leon, 2009, vetoed) Establishes burdensome restrictions and conditions upon the use of GHG emissions offsets that may be used by entities for compliance with the California Global Warming Solutions Act. This bill passed out of the legislature, but was subsequently vetoed by Governor Schwarzenegger with the following statement, in part: "This bill is premature and restricts the design approaches the ARB is considering for cap-and-trade under the Climate Change Scoping Plan. ARB is working diligently to craft the proper balance of regulatory and market mechanisms to achieve mandated emission reductions while protecting and enhancing California's economy. To that end, ARB has convened a panel of nationally recognized economic and financial experts to serve on the Economic and Allocation Advisory Committee to help design market-based compliance mechanisms as part of AB 32 implementation. A balanced approach is of vital importance and this bill would only serve to foreclose the opportunity to consider more options and fully vet the State's design of an effective compliance offset program."
SB 375 (Steinberg, Chapter 728, Statutes of 2008) Requires each metropolitan planning organization to adopt a sustainable communities strategy in its regional transportation plan to serve as the blueprint for communities to reduce GHG pursuant to AB 32. Requires an alternative planning strategy to be developed if the sustainable communities strategy will not achieve the GHG reduction targets. Requires the ARB to provide each region with GHG reduction targets to be achieved from automobiles and light trucks and further aligns transit and housing plans to be consistent with the strategy. Streamlines the California Environmental Quality Act process for projects that are consistent with this Act. This bill developed stringent, state-imposed new growth guidelines that erode local control and hamper needed housing and economic growth. SB 375 further holds transportation funds hostage as a means of forcing cities and counties to comply with a state-imposed definition of “preferred growth scenario.”
AB 118 (Nunez, Chapter 750, Statutes of 2007) Creates the Alternative Renewable Fuel and Vehicle Technology Program and the Enhanced Fleet Modernization Program and required the ARB in consultation with the Bureau of Automotive Repair to commence a program for the voluntary retirement of passenger vehicles and light and medium duty trucks that are high polluters.
AB 32 (Nunez, Chapter 488, Statutes of 2006) - California Global Warming Solutions Act of 2006 Creates a comprehensive, multi-year program to reduce GHG emissions in the state. The overall goal is to reduce emissions to 1990 levels by the year 2020. The legislation gave the ARB the responsibility of implementing regulation based upon a Scoping Plan adopted in 2008. The following is a timeline of the required actions:
By June 30, 2007: Publicize GHG “early action measures” that can be implemented prior to other ARB emissions reductions and actions that will be enforceable on January 1, 2012.
By July 1, 2007: Convene environmental justice committee, comprised of representatives of communities most significantly exposed to air pollutants, including communities with minority and/or low income population.
By January 1, 2008: Determine statewide GHG emissions level in 1990; Approve 1990-equivalent statewide GHG emissions limit, to be achieved in 2020; Adopt regulations to require reporting and verification of statewide GHG emissions and to monitor and enforce compliance.
By January 1, 2009: Adopt a “scoping plan” to achieve maximum technologically feasible and cost-effective GHG emissions reductions by 2020
By January 1, 2010: Adopt regulations, enforceable by January 1, 2010, to implement “early action measures.”
By January 1, 2011: Adopt regulations on GHG emissions limits and reduction measures (i.e. cap and trade) to become effective on January 1, 2012.
By November 14, 2012: First cap and trade auction.
By January 1, 2013: Official beginning of cap and trade enforcement policies.
The cap and trade program will cover approximately 600 of the state's largest greenhouse gas emission emitting stationary sources, including: public universities, local government facilities, and municipal utilities.
By January 1, 2015: Transportation fuels put under the cap.
SB 107 (Simitian, Chapter 464, Statutes of 2006) Accelerates the RPS targets to 20% by 2010, subject to PUC discretion regarding flexible compliance.
SB 1368 (Perata, Chapter 598, Statutes of 2006) Requires all load-serving entities that build electrical generators or enter into long-term contracts for baseload electricity generation, to meet GHG emissions standards to be set by the California Energy Commission (CEC). This bill limits the available power sources to meet California’s energy demands while substantially increasing the price of electricity in this state.
AB 1925 (Blakeslee, Chapter 471, Statutes of 2006) Requires the CEC to submit a one-time report to the Legislature that contains recommendations for developing parameters to accelerate the adoption of cost-effective geologic sequestration strategies from the long-term management of industrial CO2.
AB 1007 (Pavley, Chapter 371, Statutes of 2005) Required the ARB and the CEC to develop and adopt a state plan to increase the use of alternative fuels by June 30, 2007.
SB 1078 (Sher, Chapter 516, Statutes of 2002) Enacts the Renewable Portfolio Standard and requires RPS-obligated investor-owned utilities (IOU), energy service providers, and community choice aggregators meet annual targets by increasing procurement of non-hydro, renewable energy by at least one percent of annual retail sales per year until renewables make up 20% of their total portfolio, no later than 2017.
AB 1493 (Pavley, Chapter 200, Statutes of 2002) Requires the ARB to adopt regulations to reduce the emissions of greenhouse gases by motor vehicles.