On January 20, 2017, the California Air Resources Board ("CARB") published the 2017 Climate Change Scoping Plan Update. The updated plan outlines proposed strategies for reducing statewide greenhouse gas ("GHG") emissions to 40 percent below 1990 levels by 2030, as required by the California legislature in last year's Senate Bill 32 ("SB 32"). As required by Assembly Bill 197 ("AB 197"), the companion to SB 32, the Scoping Plan also seeks to prioritize direct emission reductions at large stationary sources and to consider "social costs" such as health impacts of GHG emissions. CARB's proposals—many building on programs already in place—have the potential to affect every sector of California's economy. In this article, we summarize a few of these notable proposals.
Significant Changes to Cap and Trade Program. Under cap and trade, operators of large stationary sources (those that emit more than 25,000 metric tons of carbon dioxide equivalent ("CO2e") per year) must surrender GHG emission allowances or offset credits for each metric ton of CO2e emissions. Allowances may be purchased and also are allocated for free by CARB to participants in certain industries deemed to have the greatest risk of relocating their operations outside California. Offset credits may be purchased from operators of qualifying projects, such as forest management and forest conservation projects, which have beneficial effects on atmospheric GHG levels.
CARB is developing new regulations to extend cap and trade to 2030, 10 years beyond its current expiration date of 2020. In addition to lowering the statewide emission limits as required by SB 32, CARB is considering reducing the free allocations of allowances and reducing the extent to which offset credits may be used to achieve compliance. CARB is evaluating these measures in order to prioritize direct emission reductions at stationary sources, as required by AB 197. CARB also proposes to reduce free allocations of allowances to sources that emit criteria or toxic pollutants above a baseline level.
The potential effects of these proposals—including increased burden on regulated entities, risks of industry flight, and reduced incentive for offset projects—will depend upon the yet-to-be-developed program details. But in any case, a reduction in the amount of available emission allowances and credits will increase compliance costs.
New Efficiency Standards for Refineries. The Scoping Plan Update singles out the refinery sector for new direct regulation. CARB proposes to implement regulations requiring a 20 percent reduction in GHG emissions from California's refineries by 2030. The regulation would use an efficiency benchmark of GHG emissions per unit of product and require each facility to achieve that benchmark. CARB acknowledges that different facilities will have different efficiency starting points, and that different "regulatory paths" likely will be necessary.
Transportation Programs. CARB proposes to reduce emissions associated with transportation fuels, while dramatically expanding the use of zero-emission vehicles ("ZEV") and low-emission vehicles in California. The Low-Carbon Fuel Standard requires manufacturers and importers of transportation fuel to surrender credits based on the carbon intensity of their fuels. CARB proposes to reduce the total carbon intensity of California's transportation fuels by 18 percent by 2030, replacing the current goal of 10 percent by 2020.
The Scoping Plan Update proposes to achieve 100 percent ZEV sales in the light-duty vehicle category by 2030. CARB will develop policies, such as rebates and other incentives, to make ZEVs "clear market winners." CARB also seeks to increase the use of ZEV or low-emission vehicles in the freight and delivery industries and in urban bus fleets, among other programs.
CARB has published a Draft Environmental Assessment evaluating the environmental impacts of the Scoping Plan Update. CARB is accepting public comments on the Scoping Plan Update and the Draft Environmental Assessment. The deadline for submitting comments on either document is March 6, 2017.
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