BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1288 (Atkins) - California Global Warming Solutions Act of 2006: regulations ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 27, 2015 |Policy Vote: E.Q. 5 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1288 would explicitly allow the Air Resources Board (ARB) to continue using market-based regulations to reduce greenhouse gas (GHG) emissions beyond 2020. Fiscal Impact: Potential ongoing costs of $6.5 million annually beginning in 2020 from the Cost of Implementation Account (special) for the ARB to continue to administer the Cap-and-Trade program beyond 2020. Potential ongoing costs in the low millions of dollars to the Cost of Implementation Account (special) for the contract with the Western Climate Initiative, Inc. to support the cap-and-trade auctions. Potential ongoing auction revenues in the billions of dollars to the GHG Reduction Fund (special) AB 1288 (Atkins) Page 1 of ? Background: The California Global Warming Solutions Act of 2006 (referred to as AB 32, HSC §38500 et seq.) requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is also authorized to adopt a system of market-based declining annual aggregate emission limits for sources or categories of sources that emit GHGs, applicable from January 1, 2012, to December 31, 2020, inclusive. This program is known as the cap-and-trade program (HSC §38562). AB 32 specifies that the statewide GHG emissions limit remains in effect unless otherwise amended or repealed and that it is the Legislature's intent that the emissions limit be used to maintain and continue in GHG emissions reductions beyond 2020. Proposed Law: This bill would delete the specification that the cap-and-trade program regulations are to be applicable from January 1, 2012 to December 31, 2020. Related Legislation: SB 32 (Pavley) would require the ARB to approve a GHG emission limit that is equivalent to 80% below the 1990 level to be achieved by 2050. SB 32 is awaiting consideration by the Assembly Appropriations Committee. Staff Comments: While existing law clearly allows the AB 32 GHG emissions limits to remain in effect beyond 2020, the language in HSC §38562 is unclear on whether the cap-and-trade program can exist past 2020. This bill would explicitly give ARB the authority to continue the cap-and-trade program. Staff notes that ARB in 2014-15 had approximately $6.5 million in personnel and operations costs to run the cap-and-trade program. Additionally, the state contracts with the Western Climate Initiative, Inc. (WCI) to administer the compliance tracking system, the auction platform, financial services necessary to support the auction, and market monitoring. The WCI contract was $4 million total for 2014 and 2015. By clarifying AB 1288 (Atkins) Page 2 of ? ARB's authority to run the cap-and-trade program past 2020, this bill would make these costs permanent. The assured continuance of the cap-and-trade program also will lead to future revenues to the GGRF. There is a high degree of uncertainty regarding future revenues; however, as a reference point, in this year's May Revision, the administration assumed $1.35 billion in auction revenues in FY 2014-15 and $2 billion in FY 2015-16. These revenues are deposited into the Greenhouse Gas Reduction Fund and must be spent in to reduce GHG emissions consistent with AB 32. -- END --