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
          
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          |Version: February 27, 2015      |Policy Vote: E.Q. 5 - 2         |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 17, 2015   |Consultant: Marie Liu           |
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          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) 








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          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  








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          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. 




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