# Climate Change Scoping Plan

a amework for change

Prepared by


### the California Air Resources Board

for the State of California

Arnold Schwarzenegger

Governor

Linda S. Adams Secretary, California Environmental Protection Agency

Mary D. Nichols
Chairman, Air Resources Board

James N. Goldstene Executive Ocer, Air Resources Board 

## DECEMBER 2008

Pursuant to AB 32 e California Global Warming Solutions Act of 2006i 

## Table of Contents Table of Contents

EXECUTIVE SUMMARY EXECUTIVE SUMMARY ................................

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I. INTRODUCTION: A FRA INTRODUCTION: A FRAMEWORK FOR CHANGE MEWORK FOR CHANGE MEWORK FOR CHANGE...............................

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A. Summary of Changes from the Draft Scoping Plan Summary of Changes from the Draft Scoping Plan.....

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1. General 1. General................................

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2. Proposed Measures 2. Proposed Measures ..............................

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B. Background Background ................................

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1. Climate Change Policy in California 1. Climate Change Policy in California............

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2. Assembly Bill 2. Assembly Bill

32: The Gl 32: The Gl 32: The Global Warming Solutions Act

obal Warming Solutions Act obal Warming Solutions Act.........................

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3. Climate Action Team 3. Climate Action Team............................

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4. Development of the Greenhouse Gas Emission Redu ction Strategy ction Strategy................................

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5. Implementation of the Scoping Plan 5. Implementation of the Scoping Plan.............

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6. Climate Change in California 6. Climate Change in California...................

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C. California’s Greenhouse Gas Emissions and the 2020 Target Target....................

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### II. RECOMMENDED ACTIONS RECOMMENDED ACTIONS................................

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A. The Role of State Governme The Role of State Government: Setting an Example nt: Setting an Example nt: Setting an Example ............................

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B. The Role of Local Government: Essential Partners The Role of Local Government: Essential Partners...

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C. Emissions Reduction Measures Emissions Reduction Measures .......................

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1. California Cap 1. California Cap-

- and - Trade Program Linked to Western Climate Initiativ Partner Trade Program Linked to Western Climate Initiative Partner

Jurisdictions Jurisdictions ................................

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2. California Light 2. California Light-

- Duty Vehicle Green Duty Vehicle Green Duty Vehicle Greenhouse Gas Standards

house Gas Standards house Gas Standards ................................

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3. Energy Efficiency 3. Energy Efficiency ..............................

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4. Renewables Portfolio Standard 4. Renewables Portfolio Standard ..................

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5. Low Carbon Fuel Standard 5. Low Carbon Fuel Standard .......................

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6. Regional Transportation 6. Regional Transportation-

- Related Greenhouse Gas Targets Related Greenhouse Gas Targets Related Greenhouse Gas Targets .....................

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7. Vehicle E 7. Vehicle Efficiency Measures

fficiency Measures fficiency Measures ................................

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8. Goods Movement 8. Goods Movement ................................

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9. Million Solar Roofs Program 9. Million Solar Roofs Program ....................

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10. Medium/Heavy 10. Medium/Heavy-

- Duty Vehicles Duty Vehicles Duty Vehicles................................

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11. Industrial Emissions 11. Industrial Emissions..........................

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12. High Speed Rail 12. High Speed Rail...............................

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13. Green Building Strategy 13. Green Building Strategy.......................

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14. High Global Warming Potential Gases 14. High Global Warming Potential Gases...........

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15. Recyclin 15. Recycling and Waste

g and Waste g and Waste ................................

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16. Sustainable Forests 16. Sustainable Forests ...........................

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17. Water 17. Water ................................

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18. Ag 18. Agriculture riculture riculture ................................

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D. Voluntary Early Actions and Reductions Voluntary Early Actions and Reductions .............

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1. Voluntary Early Action 1. Voluntary Early Action .........................

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2. Voluntary Reductions 2. Voluntary Reductions ...........................

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E. Use of Allowances and Revenues Use of Allowances and Revenues.....................

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### III. EVALUATIONS EVALUATIONS ................................

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A. Economic Modeling Economic Modeling................................

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1. Macro 1. Macro-

- economic Modeling Results economic Modeling Results economic Modeling Results..........................

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2. Impact on Specif 2. Impact on Specific Business Sectors

ic Business Sectors ic Business Sectors................................

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3. Household Impacts 3. Household Impacts ..............................

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4. WCI Economic Analysis 4. WCI Economic Analysis..........................

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B. Green Technology Green Technology................................

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C. Cost- Effectiveness Effectiveness Effectiveness ................................

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D. Small Business Impact Small Business Impact..............................

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E. Public Health/Environmental Benefits Analyses Public Health/Environmental Benefits Analyses ......

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1. Key Air Quality 1. Key Air Quality-

- Related Public Health Benefits Related Public Health Benefits Related Public Health Benefits.....................

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2. Approach 2. Approach ................................

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3. Existing Programs for Air Quality Improvement i n California n California ................................

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4. Statewide Analysis 4. Statewide Analysis .............................

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5. Regional Assessment: South Coast Air Basin Exam ple ple ................................

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6. Community Level Assessment: Wilmington Example

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F. Summary of Societal Benefits Summary of Societal Benefits.......................

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1. Energy Diversification 1. Energy Diversification.........................

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2. Mobility and Shifts in Lan 2. Mobility and Shifts in Land Use Patterns d Use Patterns d Use Patterns................................

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G. California Environmental Quality Act Functional Equ ivalent Document ivalent Document ....

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H. Administrative Burden Administrative Burden ..............................

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I. De Minimis Emission Threshold De Minimis Emission Threshold ......................

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### IV. IMPLEMENTATION: PUT IMPLEMENTATION: PUTTING THE PLAN INTO A TING THE PLAN INTO A TING THE PLAN INTO ACTION

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A. Personal Action Personal Action ................................

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B. Public Outreach and Education Public Outreach and Education ......................

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1. Involving the Public and Stakeholders in Measur e e Development Development Development................................

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2. Education and Workforce Development 2. Education and Workforce Development............

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3. Small Businesses 3. Small Businesses ...............................

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C. Implementation of the Plan Implementation of the Plan .........................

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D. Tracking and Measuring Progress Tracking and Measuring Progress ....................

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1. Report Card 1. Report Card................................

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2. Tracking Progress by Implementing Agencies 2. Tracking Progress by Implementing Agencies.....

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3. Progress Toward the State Government Target 3. Progress Toward the State Government Target....

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4. Mandatory Reporting Regulation 4. Mandatory Reporting Regulation .................

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E. Enforcement Enforcement................................

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F. State and Local Permitting Considerations State and Local Permitting Considerations..........

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G. Role of Local Air Districts Role of Local Air Districts ........................

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H. Program Funding Program Funding................................

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### V . A VISION FOR THE FUT A VISION FOR THE FUTURE

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A. Collaboration Collaboration ................................

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1. Working Closely with Key Partners 1. Working Closely with Key Partners ..............

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2. International 2. International ................................

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B. Research Research................................

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1. Unleash the Potential of California’s Universit ies and Pr ies and Private Sector

ivate Sector ivate Sector ..............................

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2. Public 2. Public-

- Private Partnerships Private Partnerships Private Partnerships ...............................

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C. Reducing California’s Emissions Further Reducing California’s Emissions Further –

– A Look Forward to 2030 A Look Forward to 2030 A Look Forward to 2030 ...... 117

D. Conclusion Conclusion ................................

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### ACKNOWLEDGMENTS ACKNOWLEDGMENTS ................................

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BOARD RESOLUTION BOARD RESOLUTION ................................

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APPENDICES APPENDICES

Appendix A: Appendix A:

Assembly Bill Assembly Bill Assembly Bill

32: The Global Warming Solutions Act of 2006 32: The Global Warming Solutions Act of 2006 32: The Global Warming Solutions Act of 2006

Appendix B: Appendix B:

List of Acronyms and Glossary List of Acronyms and Glossary List of Acronyms and Glossary

Appendix C: Appendix C:

Sector Overviews and Emission Reduction Strategies Sector Overviews and Emission Reduction Strategies Sector Overviews and Emission Reduction Strategies

Appendix D: Appendix D:

Western Climate Initi Western Climate Initi Western Climate Initiative Documentation

ative Documentation ative Documentation

Appendix E: Appendix E:

List of Measures List of Measures List of Measures

Appendix F: Appendix F:

California’s Greenhouse Gas Emissions Inventory California’s Greenhouse Gas Emissions Inventory California’s Greenhouse Gas Emissions Inventory

Appendix G: Appendix G:

Economic Analysis Economic Analysis Economic Analysis

Appendix H: Appendix H:

Public Health Benefits Analyses Public Health Benefits Analyses Public Health Benefits Analyses

Appendix I: Appendix I:

Measure Documentation Measure Documentation Measure Documentation

Appendix J: Appendix J:

California Environmental Q California Environmental Q California Environmental Quality Act Functional Equ ivalent Document uality Act Functional Equivalent DocumentThis page intentionally blankScoping Plan Executive Summary

ES-1 

## EXECUTIVE SUMMARY EXECUTIVE SUMMARY

On September 27, 2006, Governor Schwarzenegger sign ed Assembly Bill 32, the Global Warming Solutions Act of 2006 (Núñez, Chapter 488, Statutes of 2006). The event marked a watershed moment in California’s history. By requi ring in law a reduction of greenhouse gas (GHG) emissions to 1990 levels by 2020, California set the stage for its transition to a sustainable, clean energy future. This historic st ep also helped put climate change on the national agenda, and has spurred action by many oth er states.

The California Air Resources Board (ARB or Board) i s the lead agency for implementing AB 32, which set the major milestones for establish ing the program. ARB met the first milestones in 2007: developing a list of discrete e arly actions to begin reducing greenhouse gas emissions, assembling an inventory of historic emissions, establishing greenhouse gas emission reporting requirements, and setting the 20 20 emissions limit.

ARB must develop a Scoping Plan outlining the State ’s strategy to achieve the 2020 greenhouse gas emissions limit. This Scoping Plan, developed by ARB in coordination with the Climate Action Team (CAT), proposes a comprehen sive set of actions designed to reduce overall greenhouse gas emissions in California, imp rove our environment, reduce our dependence on oil, diversify our energy sources, sa ve energy, create new jobs, and enhance public health.

This “Approved Scoping Plan” was adopted by the Boa rd at its December 11, 2008 meeting. The measures in this Scoping Plan will be developed over the next two years and be in place by 2012.



## Reduction Goals Reduction Goals

This plan calls for an ambitious but achievable red uction in California’s carbon footprint. Reducing greenhouse gas emissions to 1990 levels me ans cutting approximately 30 percent from business-as-usual emission levels projected fo r 2020, or about 15 percent from today’s levels. On a per-capita basis, that means reducing our annual emissions of 14 tons of carbon dioxide equivalent for every man, woman and child i n California down to about 10 tons per person by 2020. This challenge also presents a mag nificent opportunity to transform California’s economy into one that runs on clean an d sustainable technologies, so that all Californians are able to enjoy their rights in the future to clean air, clean water, and a healthy

and safe environment.

Significant progress can be made toward the 2020 go al relying on existing technologies and improving the efficiency of energy use. A number o f solutions are “off the shelf,” and many – especially investments in energy conservatio n and efficiency – have proven economic benefits. Other solutions involve improvi ng our state’s infrastructure, transitioningExecutive Summary Scoping Plan

ES-2 to cleaner and more secure sources of energy, and a dopting 21 st century land use planning and development practices.



## A Clean Energy Future A Clean Energy Future

Getting to the 2020 goal is not the end of the Stat e’s effort. According to climate scientists, California and the rest of the developed world will have to cut emissions by 80 percent from today’s levels to stabilize the amount of carbon di oxide in the atmosphere and prevent the most severe effects of global climate change. This long range goal is reflected in California Executive Order S-3-05 that requires an 80 percent reduction of greenhouse gases from 1990 levels by 2050.

Reducing our greenhouse gas emissions by 80 percent will require California to develop new technologies that dramatically reduce dependence on fossil fuels, and shift into a landscape of new ideas, clean energy, and green technology. The measures and approaches in this plan are designed to accelerate this necessary transitio n, promote the rapid development of a cleaner, low carbon economy, create vibrant livable communities, and improve the ways we travel and move goods throughout the state. This t ransition will require close coordination of California’s climate change and energy policies, an d represents a concerted and deliberate shift away from fossil fuels toward a more secure a nd sustainable future. This is the firm commitment that California is making to the world, to its children and to future generations.

Making the transition to a clean energy future brin gs with it great opportunities. With these opportunities, however, also come challenges. As th e State moves ahead with the development and implementation of policies to spur this transition, it will be necessary to ensure that they are crafted to not just cut greenh ouse gas emissions and move toward cleaner energy sources, but also to ensure that the economi c and employment benefits that will accompany the transition are realized in California . This means that particular attention must be paid to fostering an economic environment that p romotes and rewards California-based investment and development of new technologies and that adequate resources are devoted to building and maintaining a California-based workfor ce equipped to help make the transition.



## A Public Process A Public Process

Addressing climate change presents California with a challenge of unprecedented scale and scope. Success will require the support of Califor nians up and down the state. At every step of the way, we have endeavored to engage the public in the development of this plan and our efforts to turn the tide in the fight against globa l warming.

In preparing the Draft Scoping Plan, ARB and CAT su bgroups held dozens of workshops, workgroups, and meetings on specific technical issu es and policy measures. Since the release of the draft plan in late June, we have con tinued our extensive outreach with workshops and webcasts throughout the state. Hundr eds of Californians showed up to share their thoughts about the draft plan, and gave us th eir suggestions for improving it. We’ve received thousands of postcards, form letters, emai ls, and over 1,000 unique commentsScoping Plan Executive Summary

ES-3 posted to our website or sent by mail. All told, m ore than 42,000 people commented on the

draft Plan.

ARB catalogued and publicly posted all the comments we received. In many instances, we engaged experts and staff at our partner agencies f or additional evaluation of comments and suggestions.

This plan reflects the input of Californians at eve ry level. Our partners at other State agencies, in the legislature, and at the local gove rnment level have provided key input. We’ve met with members of community groups to addre ss environmental justice issues, with representatives of California’s labor force to ensu re that good jobs accompany our transition to a clean energy future, and with representatives of California’s small businesses to ensure that this vital part of our state’s economic engine flourishes under this plan. We’ve heeded the advice of public health and environmental exper ts throughout the state to design the plan so that it provides valuable co-benefits in additio n to cutting greenhouse gases. We’ve also worked with representatives from many of California ’s leading businesses and industries to craft a plan that works in tandem with the State’s efforts to continue strong economic growth.

In short, we’ve heard from virtually every sector o f California’s society and economy, reflecting the fact that the plan will touch the li fe of almost every Californian in some way.



## Scoping Plan Recommendations Scoping Plan Recommendations

The recommendations in this plan were shaped by inp ut and advice from ARB’s partners on the Climate Action Team, as well as the Environment al Justice Advisory Committee (EJAC), the Economic and Technology Advancement Advisory Co mmittee (ETAAC), and the Market Advisory Committee (MAC). Like the Draft Sc oping Plan, the strength of this plan lies in the comprehensive array of emission reducti on approaches and tools that it

recommends.

Key elements of California’s recommendations for re ducing its greenhouse gas emissions to 1990 levels by 2020 include:

• Expanding and strengthening existing energy efficie ncy programs as well as building and appliance standards;

• Achieving a statewide renewables energy mix of 33 p ercent;

• Developing a California cap-and-trade program that links with other Western Climate Initiative partner programs to crea te a regional market system;

• Establishing targets for transportation-related gre enhouse gas emissions for regions throughout California, and pu rsuing policies and incentives to achieve those targets;Executive Summary Scoping Plan

ES-4 • Adopting and implementing measures pursuant to exis ting State laws and policies, including California’s clean car stan dards, goods movement measures, and the Low Carbon Fuel Standard ; and

• Creating targeted fees, including a public goods ch arge on water use, fees on high global warming potential gases, and a fee to fund the administrative costs of the State’s long term commi tment to AB 32 implementation.

After Board approval of this plan, the measures in it will be developed and adopted through the normal rulemaking process, with public input.



## Key Changes Key Changes

This plan is built upon the same comprehensive appr oach to achieving reductions as the draft plan. However, as a result of the extensive public comment we received, this plan includes a number of general and measure-specific changes. Th e key changes and additions follow.



### Additional Reports and Supplements Additional Reports and Supplements

1. Economic and Public Health Evaluations: This plan i ncorporates an evaluation of the economic and public health benefits of the reco mmended measures. These analyses follow the same methodology used to evalua te the Draft Scoping Plan. 1

2. CEQA Evaluation: This plan includes an evaluation o f the potential environmental impacts of the Scoping Plan under the California Environmental Quality Act (CEQA). 2



### Pro Pro grammatic Changes grammatic Changes grammatic Changes

1. Margin of Safety for Uncapped Sectors: The plan pr ovides a ‘margin of safety,’ that is, additional reductions beyond those in the draft plan to account for measures in uncapped sectors that do not, or may no t, achieve the estimated reduction of greenhouse gas emissions in this plan. Along with the certainty provided by the cap, this will ensure that the 2020 target is met.

2. Focus on Labor: The plan includes a discussion of issues directly related to California’s labor interests and working families, including workforce development and career technical education. This a dditional element reflects ARB’s existing activities and expanded efforts by S tate agencies, such as the Employment Development Department, to ensure that C alifornia will have a green technology workforce to address the challenge s and opportunities presented by the transition to a clean energy future.

1 Staff will provide an update to the Board to respo nd to comments received on these analyses.

2 This evaluation is contained in Appendix J.Scoping Plan Executive Summary

ES-5 3. Long Term Trajectory: The plan includes an assessm ent of how well the recommended measures put California on the long-ter m reduction trajectory needed to do our part to stabilize the global clima te.

4. Carbon Sequestration: The plan describes Californi a’s role in the West Coast Regional Carbon Sequestration Partnership (WESTCARB ), a public-private collaboration to characterize regional carbon captu re and sequestration opportunities. In addition, the plan expresses sup port for near-term development of sequestration technology. This plan also acknow ledges the important role of terrestrial sequestration in our forests, rangeland s, wetlands, and other land

resources.

5. Cap-and-Trade Program: The plan provides additiona l detail on the proposed cap-and-trade program including a discussion regard ing auction of allowances, a discussion of the proposed role for offsets, the ro le of voluntary renewable power purchases, and additional detail on the mechanisms to be developed to encourage voluntary early action.

6. Implementation: The plan provides additional detai l on implementation, tracking and enforcement of the recommended actions, includi ng the important role of

local air districts.



### Changes to Specific Measures and Programs Changes to Specific Measures and Programs

1. Regional Targets: ARB re-evaluated the potential b enefits from regional targets for transportation-related greenhouse gases in cons ultation with regional planning organizations and researchers at U.C. Berkeley. Ba sed on this information, ARB increased the anticipated reduction of greenhouse g as emissions for Regional Transportation-Related Greenhouse Gas Targets from 2 to 5 million metric tons

of CO 2 equivalent (MMTCO 2 E).

2. Local Government Targets: In recognition of the cr itical role local governments will play in the successful implementation of AB 32 , ARB added a section describing this role. In addition, ARB recommended a greenhouse gas reduction goal for local governments of 15 percent below toda y’s levels by 2020 to ensure that their municipal and community-wide emissions m atch the State’s reduction

target.

3. Additional Industrial Source Measures: ARB added f our additional measures to address emissions from industrial sources. These p roposed measures would regulate fugitive emissions from oil and gas recove ry and transmission activities, reduce refinery flaring, and require control of met hane leaks at refineries. WeExecutive Summary Scoping Plan

ES-6 anticipate that these measures will provide 1.5 MMT CO 2 E of greenhouse gas

reductions.

4. Recycling and Waste Re-Assessment: In consultation with the California Integrated Waste Management Board, ARB re-assessed potential measures in the Recycling and Waste sector. As a result of this re view, ARB increased the anticipated reduction of greenhouse gas emissions f rom the Recycling and Waste

Sector from 1 to 10 MMTCO 2 E, incorporating measures to move toward high recycling and zero-waste. 3

5. Green Building Sector: This plan includes addition al technical evaluations demonstrating that green building systems have the potential to reduce approximately 26 MMTCO 2 E of greenhouse gases. These tools will be helpful in reducing the carbon footprint for new and existing buildings. However, most of these greenhouse gas emissions reductions will alre ady be counted in the Electricity, Commercial/Residential Energy, Water o r Waste sectors and are not separately counted toward the AB 32 goal in this pl an.

6. High Global Warming Potential (GWP) Mitigation Fee: Currently many of the chemicals with very high Global Warming Potential ( GWP)—typically older refrigerants and constituents of some foam insulati on products—are relatively inexpensive to purchase. ARB includes in this plan a Mitigation Fee measure to better reflect their impact on the climate. The fe e is anticipated to promote the development of alternatives to these chemicals, and improve recycling and

removal of these substances when older units contai ning them are dismantled.

7. Modified Vehicle Reductions: Based on current regu latory development, ARB modified the expected emissions reduction of greenh ouse gases from the HeavyDuty Vehicle Greenhouse Gas Emission Reduction (Aer odynamic Efficiency)

measure and the Tire Inflation measure. The former measure is now expected to

achieve 0.9 MMTCO 2 E while the latter is now expected to achieve

0.4 MMTCO 2 E.

8. Discounting Low Carbon Fuel Standard Reductions: A RB modified the expected

emission reductions from the Low Carbon Fuel Standa rd to reflect overlap in claimed benefits with California’s clean car law (t he Pavley greenhouse gas vehicle standards). This has the result of discoun ting expected reduction of greenhouse gas emissions from the Low Carbon Fuel S tandard by approximately 10 percent.

3 Research to help quantify these greenhouse gas emi ssions reductions is continuing, so only 1 MMTCO 2 E of these reductions are currently counted toward the A B 32 goal in this plan. Additional tons will be co nsidered part of the safety margin.Scoping Plan Executive Summary

ES-7 

## A Balanced and Comprehen A Balanced and Comprehensive Approach sive Approach sive Approach

Meeting the goals of AB 32 will require a coordinat ed set of strategies to reduce emissions throughout the economy. These strategies will fit within the comprehensive tracking, reporting, and enforcement framework that is alread y being developed and implemented. By 2020, a hard and declining cap will cover 85 percen t of California’s greenhouse gas emissions, helping to ensure that we meet our reduc tion targets on time.

AB 32 lays out a number of important factors that h ave helped to guide the development of this plan and will continue to be considered as reg ulations are developed over the next few years. Some of the key criteria that have and will be further considered are: costeffectiveness; overall societal benefits like energ y diversification and public health improvements; minimization of leakage; and impacts on specific sectors like small business and disproportionately impacted communities. The co mprehensive approach in the plan reflects a balance among these and other important factors and will help to ensure that California meets its greenhouse gas reduction targe ts in a way that promotes and rewards innovation, is consistent with and helps to foster economic growth, and delivers improvements to the environment and public health.

Many of the measures in this plan complement and re inforce one another. For instance, the Low Carbon Fuel Standard, which reduces the carbon intensity of transportation fuels sold in California, will work in tandem with technology-for cing regulations designed to reduce greenhouse gas emissions from cars and trucks. Imp rovements in land use and the ways we grow and build our communities will further reduce emissions from the transportation sector.

Many of the measures also build on highly successfu l long-standing practices in California— such as energy efficiency and the use of renewable energy resources—that can be accelerated and expanded. Increasing the amount of energy we g et from renewable energy sources, including placing solar arrays and solar water heat ers on houses throughout California, will be supported by an increase in building standards f or energy efficiency. Other measures address the transport and treatment of water throug hout the state, reduce greenhouse gas emissions that come from ships in California’s port s, and promote changes to agricultural and forestry practices. There are also measures design ed to safely reduce or recover a range of very potent greenhouse gases – refrigerants and oth er industrial gases – that contribute to global warming at a level many times greater per to n emitted than carbon dioxide.

Many of the measures in this plan are designed to t ake advantage of the economic and innovation-related benefits that market-based compl iance strategies can provide. Particularly in light of current economic uncertainty, it is imp ortant to ensure that California’s climate policies be designed to promote and take advantage of economic opportunities while also cutting greenhouse gas emissions. For instance, the cap-and-trade program creates an opportunity for firms to seek out cost-effective em ission reduction strategies and provides an incentive for technological innovation. California ’s clean car standards, which require manufacturers to meet annual average levels of gree nhouse gas emissions for all cars they sell in California, also offer flexibility to help ensure compliance. Under California’s cleanExecutive Summary Scoping Plan

ES-8 car standards, manufacturers who exceed compliance standards are permitted to bank credits

for future use or sell them to other manufacturers. These types of compliance options will be key in ensuring that we are able to meet our reduct ion targets in a cost-effective manner.



## Working with the Western Climate Initiative Working with the Western Climate Initiative

California is working closely with six other states and four Canadian provinces in the Western Climate Initiative (WCI) to design a region al greenhouse gas emissions reduction program that includes a cap-and-trade approach. Ca lifornia’s participation in WCI creates an opportunity to provide substantially greater reduct ions in greenhouse gas emissions from throughout the region than could be achieved by Cal ifornia alone. The larger scope of the program also expands the market for clean technolog ies and helps avoid leakage, that is, the shifting of emissions from sources within Californi a to sources outside the state.

The WCI partners released the recommended design fo r a regional cap-and-trade program in September 2008. 4 ARB embraces the WCI effort, and will continue to work with WCI partners. The creation of a robust regional tradin g system can complement the other policies and measures included in this plan, and provide the means to achieve the reduction of greenhouse gas emissions needed from a wide range o f sectors as cost-effectively as possible.



## California’s Econom California’s Economy, Environment, and Public Healt

y, Environment, and Public Health y, Environment, and Public Health

The approaches in this plan are designed to maximiz e the benefits that can accompany the transition to a clean energy economy. California h as a long and successful track record of implementing environmental policies that also deliv er economic benefits. This plan

continues in that tradition.



### AB 32: Evaluating the Economic Effects 32: Evaluating the Economic Effects 32: Evaluating the Economic Effects

The economic analysis of this plan indicates that i mplementation of the recommended strategies to address global warming will create jo bs and save individual households

money. 5 The analysis also indicates that measures in the plan will position California to move toward a more secure, sustainable future wh ere we invest heavily in energy efficiency and clean technologies. The economic an alysis indicates that implementation of that forward-looking approach als o creates more jobs and saves individual households more money than if California stood by and pursued an unacceptable course of doing nothing at all to addr ess our unbridled reliance on fossil

fuels.

Specifically, analysis of the Scoping Plan indicate s that projected economic benefits in 2020 compared to the business-as-usual scenario include:

• Increased economic production of $33 billion

4 Details of the WCI recommendation are provided in Appendix D.

5 See Appendix G.Scoping Plan Executive Summary

ES-9 • Increased overall gross state product of $7 billion

• Increased overall personal income by $16 billion

• Increased per capita income of $200

• Increased jobs by more than 100,000

Furthermore, the results of the economic analysis m ay underestimate the economic benefits of the plan since the models that were use d do not account for savings that result from the flexibility provided under market-b ased programs.



### AB 32: The Environmental and Public Health Costs of I action 32: The Environmental and Public Health Costs of In

A key factor that was not weighed in the overall ec onomic analysis is the potential cost of doing nothing. When these costs are taken into account, the benefits associated with implementing a comprehensive plan t o cut greenhouse gas emissions become even clearer. As a state, California is par ticularly vulnerable to the costs associated with unmitigated climate change.

A summary report from the California Climate Change Center notes that a warming California climate would generate more smoggy days by contributing to ozone formation while also fostering more large brush and forest fires. Continuing increases in global greenhouse gas emissions at bus iness-as-usual rates would result, by late in the century, in California losing 90 per cent of the Sierra snow pack, sea level rising by more than 20 inches, and a three to four times increase in heat wave days. These impacts will translate into real costs for California, including flood damage and flood control costs that could amount to several billion dollars in many regions such as the Central Valley, where urbanizat ion and limited river channel capacity already exacerbate existing flood risks. 6 Water supply costs due to scarcity and increased operating costs would increase as muc h as $689 million per year by

2050. 7 ARB analysis shows that due to snow pack loss, Ca lifornia’s snow sports sector would be reduced by $1.4 billion (2006 dolla rs) annually by 2050 and shed 14,500 jobs; many other sectors of California’s eco nomy would suffer as well.

Failing to address climate change also carries with it the risk of substantial public health costs, primarily as a result of rising tempe ratures. Sustained triple-digit heat waves increase the health risk for several segments of the population, especially the elderly. But higher average temperatures will also increase the interactions of smogcausing chemicals with sunlight and the atmosphere to produce higher volumes of toxic byproducts than would otherwise occur. In th e 2006 report to the Governor

6 A Summary Report from: California Climate Change C enter. Our Changing Climate: Assessing the Risks to California. Document No. CEC-500-2006-077. July 2006. http://www.energy.ca.gov/2006publications/CEC500-2006-077/CEC-500-2006-077.PDF (accessed October 12, 2008)

7 A Report from: California Climate Change Center. Climate Warming and Water Supply Management in California . Document No. CEC-500-2005-195-SF. March 2006. pp .13-14 http://www.energy.ca.gov/2005publications/CEC-500-2 005-195/CEC-500-2005-195-SF.PDF (accessed October 12, 2008).Executive Summary Scoping Plan

ES-10 from the California Climate Center, it was reported that global increases in temperature will lead to increased concentrations a nd emissions of harmful pollutants

in California. 8 Some cities in California are disproportionately susceptible to temperature increases since they already have eleva ted pollution levels and are subject to the heat-island effect that reduces nigh ttime cooling, allowing heat to build up and magnify the creation of additional harmful p ollution. Low-income communities are disproportionately impacted by clim ate change, lacking the resources to avoid or adapt to these impacts. For example, low-income residents are less likely to have access to air conditioning to p revent heat stroke and death in heat waves. For California, then, taking action with ot her regions and nations to help mitigate the impacts of climate change will help sl ow temperature rise. This in turn will likely result in fewer premature deaths from r espiratory and heat-related causes, and many thousands fewer hospital visits and days o f illness.

California cannot avert the impacts of global clima te change by acting alone. We can, however, take a national and international lea dership role in this effort by demonstrating that taking firm and reasoned steps t o address global warming can actually help spur economic growth.



### AB 32: Providing Savings for Households and Businesse 32: Providing Savings for Households and Businesses

This plan builds upon California’s thirty-year trac k record of pioneering energy efficiency programs. Many of the measures in the p lan will deliver significant gains in energy efficiency throughout the economy. These gains, even after increases in per unit energy costs are taken into account, will help deliver annual savings of between $400 and $500 on average by 2020 for households, in cluding low-income

households.

Businesses, both large and small, will benefit too. By 2020, the efficiency measures in the plan will decrease overall energy expenditur es for businesses even after taking into account projected rises in per unit energy cos ts. Since small businesses spend a greater proportional share of revenue on energy-rel ated costs, they are likely to benefit the most. Furthermore, businesses througho ut the state will benefit from the overall economic growth that is projected to accomp any implementation of AB 32

between now and 2020.

Similar savings are projected in the transportation sector. By reducing greenhouse gas pollution from more efficient and alternatively -fueled cars and trucks under California’s Clean Car law (the Pavley greenhouse g as standards), consumers save on operating costs through reduced fuel use. Although cars will be marginally more expensive, owners will be paid back with savings ov er the lifetime of the car, and the average new car buyer will have an extra $30 each m onth for other expenditures. Current estimates indicate that consumer savings in 2020 for California’s existing

8 A Report from: California Climate Change Center. Scenarios of Climate Change in California: An Overv iew

. Document No. CEC-500-2005-186-SF. February 2006. http://www.energy.ca.gov/2005publications/CEC-500-

2005-186/CEC-500-2005-186-SF.PDF (accessed October 12, 2008)Scoping Plan Executive Summary

ES-11 clean car standards will be over $12 billion. Thes e savings give Californians the ability to invest their dollars in other sectors of the state’s economy.



### AB 32: Driving Investment and Job Growth 32: Driving Investment and Job Growth 32: Driving Investment and Job Growth

Addressing climate change also provides a strong in centive for investment in California. Our leadership in environmental and en ergy efficiency policy has already helped attract a large and growing share of the nat ion’s venture capital investment in green technologies. Since AB 32 was signed into la w, venture capital investment in California has skyrocketed. In the second quarter of 2008 alone, California dominated world investment in clean technology vent ure capital, receiving $800 million of the global total of $2 billion. 9

These investments in building a new clean tech sect or also translate directly into job growth. A study by U.C. Berkeley’s Energy and Reso urces Group and Goldman School of Public Policy found that investments in g reen technologies produce jobs at a higher rate than investments in comparable conven tional technologies. 10 And the National Venture Capital Association estimates that each $100 million in venture capital funding helps create 2,700 jobs, $500 milli on in annual revenues for two decades and many indirect jobs. 11



### AB 32: Improving Public Health 32: Improving Public Health 32: Improving Public Health

The public health analysis conducted for this Plan indicates that cutting greenhouse gases will also provide a wide range of additional public health and environmental benefits. By 2020, the economic value alone of the additional air-quality related benefits is projected to be on the order of $4.4 bi llion. Our analysis indicates that implementing the Scoping Plan will result in a redu ction of 15 tons per day of combustion-generated soot (PM 2.5) and 61 tons per day of oxides of nitrogen (precursors to smog). These reductions in harmful air pollution would provide the following estimated health benefits in 2020, above and beyond those projected to be achieved as a result of California’s other existing public health protection and improvement efforts:

• An estimated 780 premature deaths statewide will be avoided

• Almost 12,000 incidences of asthma and lower respir atory symptoms will be

avoided

9 Press Release from Cleantech Network LLC, Cleantech Venture Investment Reaches Record of $2 B illion in

2008 . July 08, 2008. http://cleantech.com/about/pressreleases/011008.cfm (accessed October 12, 2008)

10 Report of the Renewable and Appropriate Energy Lab oratory. Putting Renewables to Work: How Many Jobs Can the Clean Energy Industry Generate? Energy and Resources Group/Goldman School of Publ ic Policy at University of California, Berkeley. April 13, 2004

. http://rael.berkeley.edu/old-site/renewables.jobs.2 006.pdf (accessed October 12, 2008)

11 Report prepared for the National Venture Capital A ssociation. Venture Impact 2004: Venture Capital Benefits to the U.S. Economy . Prepared by: Global Insight. June 2004. http://www.globalinsight.com/publicDownload/generic Content/07-20-04_fullstudy.pdf (accessed October 12, 2008)Executive Summary Scoping Plan

ES-12 • 77,000 work loss days will be avoided

In addition to the quantified health benefits, our analysis also indicates that implementation of the measures in the plan will del iver a range of other public health

benefits. These include health benefits associated with local and regional transportation-related greenhouse gas targets that will facilitate greater use of alternative modes of transportation such as walking and bicycling. These types of moderate physical activities reduce many serious he alth risks including coronary heart disease, diabetes, hypertension and obesity. 12 Furthermore, as specific measures are developed, ARB and public health experts will w ork together to ensure that they are designed with an eye toward capturing a broad r ange of public health co-benefits.

The results of both the economic and public health analyses are clear: guiding California toward a clean energy future with reduce d dependence on fossil fuels will grow our economy, improve public health, protect th e environment and create a more

secure future built on clean and sustainable techno logies.



## State Leadership State Leadership

California is committed to once again lead and supp ort a pioneering effort to protect the environment and improve public health while maintai ning a vibrant economy. Every agency, department and division will bring climate change c onsiderations into its policies, planning and analysis, building and expanding current effort s to green its fleet and buildings, and managing its water, natural resources, and infrastr ucture to reduce greenhouse gas emissions.

In all these efforts, California is exercising a le adership role in global action to address climate change. It is also exemplifying the essent ial role states play as the laboratories of

innovation for the nation. As California has done in the past in addressing emissions that caused smog, the State will continue to develop inn ovative programs that benefit public health and improve our environment and quality of l ife.



## Moving Beyond 2020 Moving Beyond 2020

AB 32 requires a return to 1990 emission levels by 2020. The Scoping Plan is designed to achieve that goal. However, 2020 is by no means th e end of California’s journey to a clean energy future. In fact, that is when many of the s trategies laid out in this plan will just be kicking into high gear.

Take, for example, the regional transportation-rela ted greenhouse gas emissions targets. In order to achieve the deep cuts in greenhouse gas em issions we will need beyond 2020 it will be necessary to significantly change California’s c urrent land use and transportation planning policies. Although these changes will take time, g etting started now will help put California

12 Appendix H contains a reference list of studies do cumenting the public health benefits of alternative transportation.Scoping Plan Executive Summary

ES-13 on course to cut statewide greenhouse gas emissions by 80 percent in 2050 as called for by Governor Schwarzenegger.

Similarly, measures like the cap-and-trade program, energy efficiency programs, the California clean car standards, and the renewables portfolio standard will all play central roles in helping California meet its 2020 reduction requirements. Yet, these strategies will also figure prominently in California’s efforts bey ond 2020. Some of these measures, like energy efficiency programs and the renewables portf olio standard, have already delivered greenhouse gas emissions reduction benefits that wi ll expand over time. Others, like the capand-trade program, will put in place a foundation o n which to build well into the future. All of these measures, and many others in the plan, wil l ensure that California meets its 2020 target and is positioned to continue its internatio nal role as leader in the fight against global warming to 2050 and beyond.



## A Shared Challenge A Shared Challenge

Californians are already responding to the challeng e of reducing greenhouse gas emissions. Over 120 California cities and counties have signed on to the U.S. Conference of Mayors Climate Protection Agreement 13 and many have established offices of climate chang e and are developing comprehensive plans to reduce their carb on footprint. Well over 300 companies, municipalities, organizations and corporations are members of the California Climate Action Registry, reporting their greenhouse gas emissions on an annual basis. Many other businesses and corporations are making climate chan ge part of their fiscal and strategic planning. ARB encourages these initial efforts and has set in place a policy to support and encourage other voluntary early reductions.

Successful implementation of AB 32 will depend on a growing commitment by a majority of companies to include climate change as an integral part of their planning and operations. Individuals and households throughout the state wil l also have to take steps to consider climate change at home, at work and in their recrea tional activities. To support this effort, this plan includes a comprehensive statewide outrea ch program to provide businesses and individuals with the widest range of information so they can make informed decisions about reducing their carbon footprints.

Californians will not have to wait for decades to s ee the benefits of a low carbon economy. New homes can achieve a near zero-carbon footprint with better building techniques and existing technologies, such as solar arrays and sol ar water heaters. Many older homes can be retrofitted to use far less energy than at present. A new generation of vehicles, including plug-in hybrids, is poised to appear in dealers’ sh owrooms, and the development of the infrastructure to support hydrogen fuel cell cars c ontinues. Cities and new developments will be more walkable, public transport will improve, an d high-speed rail will give travelers a new clean transportation option.

13 Mayors Climate Protection Center. List of Participating Mayors. http://www.usmayors.org/climateprotection/list.asp (accessed October 12, 2008)Executive Summary Scoping Plan

ES-14 That world is just around the corner. What lies be yond is even more exciting. Where will California be in 2050? By harnessing the ingenuity and creativity of our society and sparking the imagination of the next generation of Californians, California will make the transition to a clean-energy, low-carbon society an d become a healthier, cleaner and more sustainable place to live. This plan charts a cour se toward that future.

ARB invites comment and input from the broadest arr ay of the public and stakeholders as we move forward over the next two years to develop the individual measures, and develop the policies that will move us toward sustainable clean energy and away from fossil fuels. Your participation will help craft the mechanisms and me asures to make this plan a reality. This is California’s plan and together, we need to make the necessary changes to address the greatest environmental challenge we face. As Governor Schwa rzenegger stated when he signed AB 32 into law two years ago, “We owe our children and we owe our grandchildren. We simply must do everything in our power to fight glo bal warming before it is too late.”Scoping Plan I. Introduction

1 

## I. INTRODUCTION: A Framework for Change INTRODUCTION: A Framework for Change INTRODUCTION: A Framework for Change

California strengthened its commitment to address c limate change when Governor Schwarzenegger signed Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006 (Núñez, Chapter 488, Statutes of 2006). This groundbreaking legislation represents a turning point for California and makes it clear tha t a business-as-usual approach toward greenhouse gas emissions is no longer acceptable. In light of the need for strong and immediate action to counter the growing threat of g lobal warming, AB 32 sets forth an aggressive timetable for achieving results.

AB 32 embodies the idea that California can continu e to grow and flourish while reducing its greenhouse gas emissions and continuing its long-st anding efforts to achieve healthy air, and protect and enhance public health. Achieving these goals will involve every sector of the state’s $1.7 trillion economy and touch the life of every Californian.

As the lead agency for implementing AB 32, the Cali fornia Air Resources Board (ARB or the Board) released a Draft Scoping Plan on June 26 , 2008, which laid out a comprehensive statewide plan to reduce California’s greenhouse ga s emissions to 1990 levels by 2020. This draft plan set forth a comprehensive reduction strategy that combines market-based regulatory approaches, other regulations, voluntary measures, fees, policies, and programs that will significantly reduce emissions of greenho use gases and help make our state cleaner,

more efficient and more secure.

Based upon the numerous comments received on the dr aft, as well as additional staff analysis, ARB released a Proposed Scoping Plan on October 15, 2008. At its November 20 and 21, 2008 meeting, the Board heard staff present ations on the Proposed Scoping Plan and

directed staff to make a number of modifications. This Approved Scoping Plan incorporates these modifications, as well as corrections from th e November 14, 2008 errata sheet, but otherwise reflects the same measures of the Propose d Scoping Plan.

The Board approved this Scoping Plan at its Decembe r 11, 2008 meeting, providing specific direction for the State’s greenhouse gas emissions reduction program. The recommended measures will be developed into regulations over th e next two years, to go into effect by January 1, 2012. As specific measures in the plan are developed, we will update and adjust our regulatory proposals as necessary to ensure tha t they reflect any new information, additional analyses, new technologies or other fact ors that emerge during the process.

ARB has conducted a transparent, wide-ranging publi c process to develop the Scoping Plan, including numerous meetings, workshops, and seminar s with stakeholders. Substantial input on the development of the Scoping Plan came from fo rmal advisory committees, meetings with industrial and business groups, non-profit org anizations and members of the public, asI. Introduction Scoping Plan

2 well as written comments on the Draft Scoping Plan. ARB will continue its outreach activities to seek ongoing public input and will en courage early and continued involvement in the implementation of the plan from all Californ ians.



## A. Summary of Changes from the Draft Scoping Plan Summary of Changes from the Draft Scoping Plan Summary of Changes from the Draft Scoping Plan

ARB released the June Draft Scoping Plan and reques ted public comment and input, while continuing to analyze the measures and their impact on California. Since the Draft Scoping Plan release, ARB received almost 1,000 unique writ ten comments as well as hundreds of verbal comments at workshops and in meetings. Taki ng into account that some written comments were submitted by multiple individuals, al l told more than 42,000 people have commented on the draft plan. ARB has also complete d detailed economic and public health

evaluations of its recommendations.

The key changes between the Draft Scoping Plan and the Scoping Plan are summarized below. The Scoping Plan includes the following mod ifications:



### 1. General 1. General

• Incorporates economic and public health analyses of the Scoping Plan. These analyses show that the recommendations in the Scopi ng Plan will have a net positive impact on both the economy and public heal th. These analyses follow the same methodology used to evaluate the Draft Sco ping Plan.

• Provides a “margin of safety” by recommending addit ional greenhouse gas emissions reduction strategies to account for measu res in uncapped sectors that do not achieve the greenhouse gas emissions reductions estimated in the Scoping Plan. Along with the certainty provided by the cap , this will ensure that the 2020 target is met.

• Expands the discussion of workforce development, ed ucation, and labor to more fully reflect existing activities and the role of o ther state agencies in ensuring an adequate green technology workforce.

• Assesses how well the recommended measures put Cali fornia on the long-term reduction trajectory needed to do our part to stabi lize the global climate.

• Describes California’s role in the West Coast Regio nal Carbon Sequestration Partnership (WESTCARB), a public-private collaborat ion to characterize regional carbon capture and sequestration opportunities, and expresses support for nearterm advancement of the technology and monitoring o f its development. Acknowledges the important role of terrestrial sequ estration.

• Provides greater detail on the mechanisms to be dev eloped to encourage voluntary early action.

• Provides additional detail on implementation, track ing and enforcement of the recommended actions, including the important role o f local air districts.Scoping Plan I. Introduction

3 • Evaluates the potential environmental impacts of th e Scoping Plan under the California Environmental Quality Act (CEQA). This evaluation is contained in Appendix J.



### 2. Proposed Measures 2. Proposed Measures

• Provides greater detail on the proposed cap-and-tra de program including more detail on the allocation and auction of allowances, and clarification of the proposed role of offsets.

• Re-evaluates the potential benefits from regional t argets for transportation-related greenhouse gases in consultation with regional plan ning organizations and researchers at U.C. Berkeley. Based on this inform ation, ARB increased the anticipated greenhouse gas emissions reductions forRegional TransportationRelated Greenhouse Gas Targets from 2 to 5 million metric tons of CO 2 equivalent (MMTCO 2 E).

• In recognition of the importance of local governmen ts in the successful implementation of AB 32, adds a section describing this role and recommends a greenhouse gas emissions reduction target for local government municipal and community-wide emissions of a 15 percent reduction from current levels by 2020 to parallel the State’s target.

• Adds four measures to address emissions from indust rial sources. These proposed measures would regulate fugitive emissions from oil and gas recovery and gas transmission activities, reduce refinery flaring, a nd remove the methane exemption for refineries. These proposed measures are anticipated to provide

1.5 MMTCO 2 E of greenhouse gas reductions in 2020.

• In consultation with the California Integrated Wast e Management Board, reassesses potential measures in the Recycling and Wa ste sector. As a result of this assessment, ARB increased the reduction of greenhou se gas emissions that can ultimately be anticipated from the Recycling and Wa ste Sector from 1 to

10 MMTCO 2 E, recommending measures to move toward high recycl ing and zerowaste. Research to help quantify these greenhouse gas emissions is continuing, so only 1 MMTCO 2 E of these reductions is currently counted towards the AB 32 goal in this plan.

• Estimates the potential reduction of greenhouse gas emissions from the Green Building sector. Green building systems have the p otential to reduce approximately 26 MMTCO 2 E of greenhouse gas emissions. Since most of these emissions reductions are counted in the Electricity , Commercial/Residential Energy, Water or Waste sectors, emission reductions in the Green Building sector are not separately counted toward the AB 32 goal.

• Adds a High Global Warming Potential (GWP) Mitigati on Fee measure to ensure that the climate impact of these gases is reflected in their price to encourage reduced use and end-of-life losses, as well as the development of alternatives.

• Reduces the expected greenhouse gas emissions reduc tion from the Heavy-Duty Vehicle Greenhouse Gas Emissions Reduction (Aerodyn amic Efficiency) measure and the Tire Inflation measure based on ong oing regulatoryI. Introduction Scoping Plan

4 development. The Heavy-Duty Vehicle Greenhouse Gas Emissions Reduction (Aerodynamic Efficiency) measure is now expected to achieve 0.9 MMTCO 2 E and the Tire Inflation measure is now expected to a chieve 0.4 MMTCO 2 E.

• Modifies the expected reduction of greenhouse gas e missions from the Low Carbon Fuel Standard to account for potential overl ap of benefits with the Pavley greenhouse gas vehicle standards. ARB discounted t he expected emission reductions from the Low Carbon Fuel Standard by 10 percent.

• After further evaluation, moves the Heavy-Duty Truc k Efficiency measure to the Goods Movement measure. ARB expects that market dy namics will provide an inducement to improve heavy-duty truck efficiency, and reductions in greenhouse gases in the future. ARB would consider pursuing d irect requirements to reduce greenhouse gases if truck efficiency does not impro ve in the future.



## B. Background Background Background

1. Climate Change Policy in California 1. Climate Change Policy in California

California first addressed climate change in 1988 w ith the passage of AB 4420 (Sher, Chapter 1506, Statutes of 1988). This bill directe d the California Energy Commission (CEC) to study global warming impacts to the state and develop an inventory of greenhouse gas emissions sources. In 2000, SB 1771 (Sher, Chapter 1018, Statutes of 2000) established the California Climate Action Registry to allow companies, cities and government agencies to volunt arily record their greenhouse gas emissions in anticipation of a possible program tha t would allow them to be credited for early reductions.

In 2001, the United Nations’ Intergovernmental Pane l on Climate Change (IPCC) reported that “there is new and stronger evidence t hat most of the warming observed over the last 50 years is attributable to human act ivities.” The following year, AB 1493 (Pavley, Chapter 200, Statutes of 2002) was signed into law, requiring ARB to develop regulations to reduce greenhouse gas emi ssions from passenger vehicles, light-duty trucks and non-commercial vehicles sold in California.

Recognizing the value of regional partners in addre ssing climate change, the governors of California, Washington, and Oregon cre ated the West Coast Global Warming Initiative in 2003 with provisions for the states to work together on climate change-related programs.

Two years later Governor Schwarzenegger signed Exec utive Order S-3-05, calling for the State to reduce greenhouse gas emissions to 199 0 levels by 2020 and to reduce greenhouse gas emissions to 80 percent below 1990 l evels by 2050. The 2020 goal was established to be an aggressive, but achievable , mid-term target, and the 2050 greenhouse gas emissions reduction goal represents the level scientists believe is necessary to reach levels that will stabilize clima te.Scoping Plan I. Introduction

5 In 2006, SB 1368 (Perata, Chapter 598, Statutes of 2006) created greenhouse gas performance standards for new long-term financial i nvestments in base-load electricity generation serving California customers . This law is designed to help spur the transition toward cleaner energy in California by placing restrictions on the ability of utilities to build new carbon-intensive plants o r enter into new contracts with high carbon sources of electricity. Expiration of exist ing utility long-term contracts with coal plants will reduce greenhouse gas emissions wh en such generation is replaced by lower greenhouse gas-emitting resources. These red uctions will reduce the need for utilities to submit allowances to comply with the c ap-and-trade program.



### 2. Assembly Bill 2. Assembly Bill

3 2: The Global Warming Solutions Act 2: The Global Warming Solutions Act 2: The Global Warming Solutions Act

In 2006, the Legislature passed and Governor Schwar zenegger signed AB 32, the Global Warming Solutions Act of 2006, which set the 2020 greenhouse gas emissions reduction goal into law. It directed ARB to begin developing discrete early actions to reduce greenhouse gases while also preparing a Scop ing Plan to identify how best to

reach the 2020 limit. The reduction measures to me et the 2020 target are to become operative by 2012.

AB 32 includes a number of specific requirements fo r ARB:

• Identify the statewide level of greenhouse gas emis sions in 1990 to serve as the emissions limit to be achieved by 2020 (Health and Safety Code (HSC) §38550). In December 2007, the Board approved the 2020 emiss ion limit of 427 million metric tons of carbon dioxide equivalent (MMTCO 2 E) of greenhouse gases.

• Adopt a regulation requiring the mandatory reportin g of greenhouse gas emissions (HSC §38530). In December 2007, the Board adopted a regulation requiring the largest industrial sources to report and verify their greenhouse gas emissions. The reporting regulation serves as a so lid foundation to determine greenhouse gas emissions and track future changes i n emission levels.

• Identify and adopt regulations for Discrete Early A ctions that could be enforceable on or before January 1, 2010 (HSC §3856 0.5). The Board identified nine Discrete Early Action measures including poten tial regulations affecting landfills, motor vehicle fuels, refrigerants in car s, port operations and other sources in 2007. The Board has already approved tw o Discrete Early Action measures (ship electrification at ports and reducti on of high GWP gases in consumer products). Regulatory development for the remaining measures is ongoing.

• Ensure early voluntary reductions receive appropria te credit in the implementation of AB 32 (HSC §38562(b)(3)). In February 2008, the Board approved a policy statement encouraging voluntary e arly actions and establishing a procedure for project proponents to submit quanti fication methods to be evaluated by ARB. ARB, along with California’s loc al air districts and the California Climate Action Registry, is working to i mplement this program. Voluntary programs are discussed further in Chapter II and in Chapter IV.I. Introduction Scoping Plan

6 • Convene an Environmental Justice Advisory Committee (EJAC) to advise the Board in developing the Scoping Plan and any other pertinent matter in implementing AB 32 (HSC §38591). The EJAC has met 12 times since early 2007, providing comments on the proposed Early Acti on measures and the development of the Scoping Plan, and submitted its comments and recommendations on the draft Scoping Plan in Octobe r 2008. ARB will continue to work with The EJAC as AB 32 is implemented.

• Appoint an Economic and Technology Advancement Advi sory Committee (ETAAC) to provide recommendations for technologies , research and greenhouse gas emission reduction measures (HSC §38591). After a year-long public process, The ETAAC submitted a report of their reco mmendations to the Board in February 2008. The ETAAC also reviewed and provide d comments on the Draft Scoping Plan.



### 3. Climate Action Team 3. Climate Action Team

In addition to establishing greenhouse gas emission s reduction targets for California,

Executive Order S-3-05 established the Climate Acti on Team (CAT) for State agencies in 2005. Chaired by the Secretary of the California Environmental Protection Agency (CalEPA), the CAT has helped to d irect State efforts on the reduction of greenhouse gas emissions and engage key State agencies including ARB. The

Health and Human Services Agency, represented by the Department of Public Health, is

the newest member of the

CAT. Based on numerous public meetings and the review

of thousands of submitted comments, the CAT released its first report in March 2006, identifying key carbon

reduction recommendations for the Governor and Legislature.

In April 2007, the CAT released a second report, “Proposed Early Actions to Mitigate Climate Change in California,” which details numerous strategies that should be initiated prior to the 2012 deadline for other climate action regulations and efforts.

AB 32 recognizes the essential role of the CAT in c oordinating overall climate policy. AB 32 does not affect the existing authority of oth er state agencies, and in addition to Climate Action Team
California Environmental Protection Agency Business, Transportation, and Housing Agency Health and Human Services Agency Resources Agency State and Consumer Services Agency Governor’s Office of Planning and Research

Air Resources Board California Energy Commission

California Public Utilities Commission Department of Food and Agriculture Department of Forestry and Fire Protection Department of General Services Department of Parks and Recreation Department of Transportation Department of Water Resources Integrated Waste Management Board

State Water Resources Control BoardScoping Plan I. Introduction

7 ARB, many state agencies will be responsible for im plementing the measures and strategies in this plan. The CAT is central to the success of AB 32, which requires an unprecedented level of cooperation and coordination across State government. The CAT provides the leadership for these efforts and h elps ARB work closely with our state partners on the development and implementatio n of the strategies in the Scoping

Plan.

There are currently 12 subgroups within the CAT – n ine that address specific economic sectors, and three that were formed to ana lyze broad issues related to implementing a multi-sector approach to greenhouse gas emissions reduction efforts. The CAT sector-based subgroups include: Agriculture , Cement, Energy, Forest, Green Buildings, Land Use, Recycling and Waste Mana gement, State Fleet, and Water-Energy. The members of these subgroups are d rawn from departments that work with or regulate industries in the sector. AR B participated in each of the subgroups. All of the subgroups held public meetin gs and solicited public input, and many had multiple public workshops.

In March 2008, the subgroups collectively submitted more than 100 greenhouse gas

emissions reduction measures to ARB for considerati on in the Draft Scoping Plan. Many of those recommendations are reflected in this plan, and a number of them focus on reducing greenhouse gas emissions from ene rgy production and use.

Through the Energy Subgroup the California Energy C ommission (CEC) and the California Public Utilities Commission (CPUC) are c onducting a joint proceeding to provide recommendations on how best to address elec tricity and natural gas in the implementation of AB 32, including evaluation of ho w the Electricity sector might best participate in a cap-and-trade program. The t wo Commissions forwarded interim recommendations to ARB in March 2008 that supported inclusion of the Electricity sector in a multi-sector cap-and-trade program, and measures to increase the penetration of energy efficiency programs in both b uildings and appliances and to increase renewable energy sources. The two Commiss ions have developed a second proposed decision that was released in September 20 08. This proposed decision provides more detailed recommendations that relate to the electricity and natural gas sectors. Because implementation of the Scoping Pla n will require careful coordination with the State’s energy policy, ARB wi ll continue working closely with the two Commissions on this important area during t he implementation of the recommendations in the Scoping Plan.

There are also three subgroups which are not sector -specific. The Economic Subgroup reviewed cost information associated with potential measures that were included in the 2006 CAT report with updates reflec ted in the report, “Updated Macroeconomic Analysis of Climate Strategies,” in O ctober 2007. This report provided an update of the macroeconomic analysis pr esented in the March 2006 CAT report to Governor Schwarzenegger and the Legislatu re. The Research Subgroup coordinates climate change research and identifies opportunities for collaboration, and is presently working on a report to the Governo r. The State Operations SubgroupI. Introduction Scoping Plan

8 has been created to work with State agencies to cre ate a statewide plan to reduce State government’s greenhouse gas emissions by a minimum of 30 percent by 2020.

In the first quarter of 2009, the Climate Action Te am will release a report on its

activities outside of its involvement in the develo pment of the Scoping Plan. The CAT report will focus on several cross-cutting topi cs with which members of the CAT have been involved since the publication of the 2006 CAT report. The topics to be covered include research on the physical and con sequent economic impacts of climate change as well as climate change research c oordination efforts among the CAT members. There will also be an update on the i mportant climate change adaptation efforts led by the Resources Agency and a discussion of cross-cutting issues related to environmental justice concerns. The CAT report will be released in draft form and will be available for public review in December 2008.



### 4. Development of the Greenhouse Gas Emission Redu ction Strategy Strategy

In developing the Scoping Plan, ARB considered the State’s existing climate change policy initiatives and the Early Action measures id entified by the Board. Several advisory groups were formed to assist ARB in develo ping the Scoping Plan, including the Environmental Justice Advisory Commit tee (EJAC), the Economic and Technology Advancement Committee (ETAAC), and the M arket Advisory Committee (MAC).

The Environmental Justice Advisory Committee (HSC § 38591(a) et seq) advises ARB on development of the Scoping Plan and any othe r pertinent matter in implementing AB 32. The Board appoints its members , based on nominations received from environmental justice organizations a nd community groups.

The Economic and Technology Advancement Advisory Co mmittee (HSC §38591(d)) includes members who are appointed by the Board bas ed on expertise in fields of business, technology research and development, clim ate change, and economics. The

ETAAC advises ARB on activities that will facilitat e investment in, and implementation of, technological research and devel opment opportunities, funding opportunities, partnership development, technology transfer opportunities, and related areas that lead to reductions of greenhouse gas emi ssions.

Members of the Market Advisory Committee (created u nder Executive Order S-20-06) were appointed by the Secretary of CalEPA based on their expertise in economics and climate change. The MAC advised ARB on the design of a cap-andtrade program for reducing greenhouse gas emissions

.

Along with input from the advisory groups, ARB rece ived submittals to a public solicitation for ideas, and numerous comments durin g public workshops, workgroup meetings, community meetings, and meetings with sta keholder groups. ARB held numerous workshops on the Draft Scoping Plan and co nvened workgroup meetings focused on program design and economic analysis. A RB and other involved StateScoping Plan I. Introduction

9 agencies also held sector-specific technical worksh ops to look in greater detail at potential emissions reduction measures.

ARB also looked outward to examine programs at the regional, national and

international levels. ARB met with and learned fro m experts from the European Union, the United Kingdom, Japan, Australia, the Un ited Nations, the Regional Greenhouse Gas Initiative, the RECLAIM program, and the U.S. Environmental Protection Agency (U.S. EPA).

After the release of the Draft Scoping Plan, ARB co nducted workshops and community meetings around the state to solicit publ ic input. The Environmental Justice Advisory Committee and the Economic and Tec hnology Advancement Advisory Committee held meetings to review and prov ide additional comments on the Draft Scoping Plan. In addition, ARB held meet ings with numerous stakeholder groups to discuss specific greenhouse gas emissions reduction measures.

As described before, ARB has reviewed and considere d both the written comments and the verbal comments received at the public work shops and meetings with stakeholders. This input, along with additional an alysis, has ultimately shaped this Scoping Plan.



### 5. Implementation of the Scoping Plan 5. Implementation of the Scoping Plan

The foundation of the Scoping Plan’s strategy is a set of measures that will cut greenhouse gas emissions by nearly 30 percent by th e year 2020 as compared to business as usual and put California on a course fo r much deeper reductions in the long term. In addition to pursuing the reduction o f greenhouse gas emissions, other strategies to mitigate climate change, such as carb on capture and storage (underground geologic storage of carbon dioxide), s hould also be further explored. And, as greenhouse gas reduction measures are imple mented, we will continually evaluate how these measures can be optimized to als o help deliver a broad range of public health benefits.

Most of the measures in this Scoping Plan will be i mplemented through the full rulemaking processes at ARB or other agencies. The se processes will provide opportunity for public input as the measures are de veloped and analyzed in more detail. This additional analysis and public input will likely provide greater certainty about the estimates of costs and expected greenhous e gas emission reductions, as well as the design details that are described in this Sc oping Plan. With the exception of Discrete Early Actions, which will be in place by J anuary 1, 2010, other regulations are expected to be adopted by January 1, 2011 and t ake effect at the beginning of

2012.

Some of the measures in the plan may deliver more e mission reductions than we expect; others less. It is also very likely that we will figure out new and better ways to cut greenhouse gas emissions as we move forward. Ne w technologies will no doubt be developed, and new ideas and strategies will eme rge. The Scoping Plan putsI. Introduction Scoping Plan

10 California squarely on the path to a clean energy f uture but it also recognizes that adjustments will probably need to occur along the w ay and that as additional tools become available they will augment, and in some cas es perhaps even replace, existing approaches.

California will not be implementing the measures in this Plan in a vacuum. Significant new action on climate policy is likely at the federal level and California and its partners in the Western Climate Initiative are working together to create a regional effort for achieving significant reduction s of greenhouse gas emissions throughout the western United States and Canada. C alifornia is also developing a state Climate Adaptation Strategy to reduce Califor nia’s vulnerability to known and projected climate change impacts.

ARB and other State agencies will continue to monit or, lead and participate in these broader activities. ARB will adjust the measures d escribed here as necessary to ensure that California’s program is designed to fac ilitate the development of integrated and cost-effective regional, national, a nd international greenhouse gas emissions reduction programs. (HSC §38564)



### 6. Climate Change in California 6. Climate Change in California

The impacts of climate change on California and its residents are occurring now. Of greater concern are the expected future impacts to the state’s environment, public health and economy, justifying the need to sharply cut greenhouse gas emissions.

In the Findings and Declarations for AB 32, the Leg islature found that:

“The potential adverse impacts of global warming in clude the exacerbation of air quality problems, a reduction in quality and su pply of water to the state from the Sierra snowpack, a rise in sea levels resu lting in the displacement of thousands of coastal businesses and residences, dam age to the marine ecosystems and the natural environment, and an incr ease in the incidences of infectious diseases, asthma, and other health-relat ed problems.”

The Legislature further found that global warming w ould cause detrimental effects to some of the state’s largest industries, including a griculture, winemaking, tourism, skiing, commercial and recreational fishing, forest ry, and the adequacy of electrical

power.

The impacts of global warming are already being fel t in California. The Sierra snowpack, an important source of water supply for t he state, has shrunk 10 percent in the last 100 years. It is expected to continue to decrease by as much as 25 percent by 2050. World-wide changes are causing sea levels to rise – about 8 inches of increase has been recorded at the Golden Gate Bridge over th e past 100 years – threatening low coastal areas with inundation and serious damag e from storms.Scoping Plan I. Introduction

11 

## C. California’s Greenhouse California’s Greenhouse California’s Greenhouse Gas Emissions and the 2020 Gas Emissions and the 2020 Target Gas Emissions and the 2020 Target

California is the fifteenth largest emitter of gree nhouse gases on the planet, representing about two percent of the worldwide emissions. Alth ough carbon dioxide is the largest contributor to climate change, AB 32 also reference s five other greenhouse gases: methane (CH 4 ), nitrous oxide (N 2 O), sulfur hexafluoride (SF 6 ), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs). Many other gases contribu te to climate change and would also be addressed by measures in this Scoping Plan.

Figure 1 and Table 1 show 2002 to 2004 average emis sions and estimates for projected emissions in 2020 without any greenhouse gas reduct ion measures (business-as-usual case).

The 2020 business-as-usual forecast does not take a ny credit for reductions from measures included in this Plan, including the Pavley greenho use gas emissions standards for vehicles, full implementation of the Renewables Portfolio Sta ndard beyond current levels of renewable energy, or the solar measures. Additional informat ion about the assumptions in the 2020 forecast is provided in Appendix F.



### Figure 1: California’s Greenhouse Gas Emissions

(2002-2004 Average) 14

Transportation, 38%

Electricity, 23% Industry, 20% Recycling and Waste, 1%

High GWP, 3% Agriculture, 6%

Commercial and
Residential, 9%

As seen in Figure 1, the Transportation sector – la rgely the cars and trucks that move goods and people – is the largest contributor with 38 per cent of the state’s total greenhouse gas

emissions. Table 1 shows that if we take no action , greenhouse gas emissions in the

14 Air Resources Board. Greenhouse Gas Inventory. http://www.arb.ca.gov/cc/inventory/inventory.htm (accessed October 12, 2008)I. Introduction Scoping Plan

12 Transportation sector are expected to grow by appro ximately 25 percent by 2020 (an increase

of 46 MMTCO 2 E).

The Electricity and Commercial/Residential Energy s ector is the next largest contributor with over 30 percent of the statewide greenhouse gas emi ssions. Although electricity imported into California accounts for only about a quarter o f our electricity, imports contribute more than half of the greenhouse gas emissions from elec tricity because much of the imported electricity is generated at coal-fired power plants . AB 32 specifically requires ARB to address emissions from electricity sources both ins ide and outside of the state.

California’s Industrial sector includes refineries, cement plants, oil and gas production, food processors, and other large industrial sources. Th is sector contributes almost 20 percent of California’s greenhouse gas emissions, but the sect or’s emissions are not projected to grow significantly in the future. The sector termed rec ycling and waste management is a unique system, encompassing not just emissions from waste facilities but also the emissions associated with the production, distribution and di sposal of products throughout the

economy.

Although high global warming potential (GWP) gases are a small contributor to historic greenhouse gas emissions, levels of these gases are projected to increase sharply over the next several decades, making them a significant sou rce by 2020.

The Forest sector is unique in that forests both em it greenhouse gases and uptake carbon dioxide (CO 2 ). While the current inventory shows forests as a sink of 4.7 MMTCO 2 E, carbon sequestration has declined since 1990. For this reason, the 2020 projection assumes

no net emissions from forests.

The agricultural greenhouse gas emissions shown are largely methane emissions from livestock, both from the animals and their waste. Emissions of greenhouse gases from fertilizer application are also important contribut ors from the Agricultural sector. ARB has begun a research program to better understand the v ariables affecting these emissions. Opportunities to sequester CO 2 in the Agricultural sector may also exist; however , additional research is needed to identify and quantify potenti al sequestration benefits.

In December 2007, ARB approved a greenhouse gas emi ssions target for 2020 equivalent to the state’s calculated greenhouse gas emissions lev el in 1990. ARB developed the 2020 target after extensive technical work and a series of stakeholder meetings. The 2020 target of

427 MMTCO 2 E requires the reduction of 169 MMTCO 2 E, or approximately 30 percent, from the state’s projected 2020 emissions of 596 MMTCO 2 E (business-as-usual) and the reduction

of 42 MMTCO 2 E, or almost 10 percent, from 2002-2004 average emi ssions.Scoping Plan I. Introduction

13 

### Table 1: 2002-2004 Average Emissions and 2020 Projected Emissions (Business-as-Usual) 15

(MMTCO 2 E)

Sector 2002-2004 Average Emissions Projected 2020 Emissions [BAU]

Transportation 179.3 225.4

Electricity 109.0 139.2

Commercial and Residential 41.0 46.7

Industry 95.9 100.5

Recycling and Waste 5.6 7.7

High GWP 14.8 46.9

Agriculture 27.7 29.8

Forest Net Emissions -4.7 0.0

Emissions Total 469 596

Figure 2 presents California’s historic greenhouse gas emissions in a different way – based not on the source of the emissions, but on the end use. This chart highlights the importance of addressing on-road transportation sources of gre enhouse gas emissions, as well as the significant contribution from the heating, cooling, and lighting of buildings.



### Figure 2: California’s Greenhouse Gas Emissions

– A Demand-Side View –

On-Road Vehicles

36%

Oil and Gas Extraction and Refining

14% Residential Buildings

14% Commercial Buildings

8% Industrial Manufacturing, Construction and Mining

12% Agriculture/Food Processing

9% Cement Plants

2% High GWP Gases

3% Other Transportation

2%

15 Ibid.I. Introduction Scoping Plan

14 The data shown in this section provide two ways to look at California’s greenhouse gas profile – emissions-based and end use (demand side) -based. While it is possible to illustrate the inventory many different ways, no chart or grap h can fully display how diverse economic sectors fit together. California’s economy is a we b of activity where seemingly independent sectors and subsectors operate interdependently and often synergistically. For example, reductions in water use reduce the need to pump wat er, directly lowering electricity use and associated greenhouse gas emissions. Similarly, re ducing the generation of waste reduces the need to transport the waste to landfills – lowering transportation emissions and, possibly, landfill methane emissions. Increased recycling or re-use reduces the carbon emissions embedded in products – it takes less energy to make a soda can made from recycled aluminum than from virgin feedstock.

The measures included in this Scoping Plan are iden tified discretely, but many impact each other, and changes in one measure can directly over lap and have a ripple effect on the efficacy and success of other measures. The measur es and policies outlined in this Plan reflect these interconnections, and highlight the n eed for all agencies to work collaboratively to implement the Scoping Plan.Scoping Plan II. Recommended Actions

15 

## II. RECOMMENDED ACTIONS RECOMMENDED ACTIONS RECOMMENDED ACTIONS

Achieving the goals of AB 32 in a cost-effective ma nner will require a wide range of approaches. Every part of California’s economy nee ds to play a role in reducing greenhouse gas emissions. ARB’s comprehensive greenhouse gas emissions inventory lists emission sources ranging from the largest refineries and pow er plants to small industrial processes and

farm livestock. The recommended measures were deve loped to reduce greenhouse gas emissions from key sources and activities while imp roving public health, promoting a cleaner environment, preserving our natural resources, and ensuring that the impacts of the reductions are equitable and do not disproportionat ely impact low-income and minority communities. These measures also put the state on a path to meet the long-term 2050 goal of reducing California’s greenhouse gas emissions to 8 0 percent below 1990 levels. This trajectory is consistent with the reductions that a re needed globally to help stabilize the

climate. While the scale of this effort is conside rable, our experience with cultural and technological changes makes California well-equippe d to handle this challenge.

ARB evaluated a comprehensive array of approaches a nd tools to achieve these emission reductions. Reducing greenhouse gas emissions from the wide variety of sources can best be accomplished though a cap-and-trade program along w ith a mix of complementary strategies that combine market-based regulatory approaches, ot her regulations, voluntary measures, fees, policies, and programs. ARB will monitor imp lementation of these measures to ensure that the State meets the 2020 limit on greenhouse g as emissions.

An overall limit on greenhouse gas emissions from m ost of the California economy – the “capped sectors” – will be established by the cap-a nd-trade program. (The basic elements of the cap-and-trade program are described later in th is chapter.) Within the capped sectors, some of the reductions will be accomplished through direct regulations such as improved building efficiency standards and vehicle efficienc y measures. Whatever additional reductions are needed to bring emissions within the cap are accomplished through price incentives posed by emissions allowance prices. To gether, direct regulation and price incentives assure that emissions are brought down c ost-effectively to the level of the overall cap. ARB also recommends specific measures for the remainder of the economy – the “uncapped sectors.”II. Recommended Actions Scoping Plan

16 Key elements of California’s recommendations for re ducing its greenhouse gas emissions to 1990 levels by 2020 include:

• Expanding and strengthening existing energy efficie ncy programs as well as building and appliance standards;

• Achieving a statewide renewables energy mix of 33 p ercent;

• Developing a California cap-and-trade program that links with other Western Climate Initiative partner programs to crea te a regional market system;

• Establishing targets for transportation-related gre enhouse gas emissions for regions throughout California and pur suing policies and incentives to achieve those targets;

• Adopting and implementing measures pursuant to exis ting State laws and policies, including California’s clean car stan dards, goods movement measures, and the Low Carbon Fuel Standard ; and

• Creating targeted fees, including a public goods ch arge on water use, fees on high global warming potential gases, and a fee to fund the administrative costs of the State’s long-term commi tment to AB 32 implementation.

The recommended greenhouse gas emissions reduction measures are listed in Table 2 and are

summarized in Section C below. The total reduction for the recommended measures slightly

exceeds the 169 MMTCO 2 E of reductions estimated in the Draft Scoping Plan . This is the net effect of adding several measures and adjusting the emission reduction estimates for some other measures. The 2020 emissions cap in the cap-and-trade program is preserved at the same level as in the Draft Scoping Plan (365 MM TCO 2 E).

The measures listed in Table 2 lead to emissions re ductions from sources within the capped sectors (146.7 MMTOCO 2 E) and from sources or sectors not covered by cap-a nd-trade (27.3

MMTCO 2 E). As mentioned, within the capped sectors the re ductions derive both from direct regulation and from the incentives posed by allowan ce prices. Further discussion of how the cap-and-trade program and the complementary measure s work together to achieve the overall target is provided below.

Table 2 also lists several other recommended measur es which will contribute toward achieving the 2020 statewide goal, but whose reduct ions are not (for various reasons including the potential for double counting) additi ve with the other measures. Those measures and the basis for not including their redu ctions are further discussed in Section C.Scoping Plan II. Recommended Actions

17 

### Table 2: Recommended Greenhouse Gas Reduction Meas ures

Recommended Reduction Measures Reductions Counted Towards 2020 Target (MMTCO 2 E)

ESTIMATED REDUCTIONS RESULTING FROM THE COMBINATION OF CAPAND-TRADE PROGRAM AND COMPLEMENTARY MEASURES 146.7

California Light-Duty Vehicle Greenhouse Gas Standa rds

• Implement Pavley standards

• Develop Pavley II light-duty vehicle standards 31.7

Energy Efficiency

• Building/appliance efficiency, new programs, etc.

• Increase CHP generation by 30,000 GWh

• Solar Water Heating (AB 1470 goal) 26.3

Renewables Portfolio Standard (33% by 2020) 21.3

Low Carbon Fuel Standard 15
Regional Transportation-Related GHG Targets 16 5
Vehicle Efficiency Measures 4.5

Goods Movement

• Ship Electrification at Ports

• System-Wide Efficiency Improvements 3.7

Million Solar Roofs 2.1
Medium/Heavy Duty Vehicles

• Heavy-Duty Vehicle Greenhouse Gas Emission Reductio n (Aerodynamic Efficiency)

• Medium- and Heavy-Duty Vehicle Hybridization 1.4

High Speed Rail 1.0
Industrial Measures (for sources covered under cap- and-trade program)

• Refinery Measures

• Energy Efficiency & Co-Benefits Audits 0.3

Additional Reductions Necessary to Achieve the Cap 34.4

ESTIMATED REDUCTIONS FROM UNCAPPED SOURCES/SECTORS 27.3
High Global Warming Potential Gas Measures 20.2

Sustainable Forests 5.0
Industrial Measures (for sources not covered under cap and trade program)

• Oil and Gas Extraction and Transmission 1.1

Recycling and Waste (landfill methane capture) 1.0

TOTAL REDUCTIONS COUNTED TOWARDS 2020 TARGET 174

Other Recommended Measures Estimated 2020 Reductions (MMTCO 2 E) State Government Operations 1-2
Local Government Operations TBD
Green Buildings 26
Recycling and Waste

• Mandatory Commercial Recycling

• Other measures 9

Water Sector Measures 4.8
Methane Capture at Large Dairies 1.0

16 This number represents an estimate of what may be a chieved from local land use changes. It is not the SB 375 regional target. ARB will establish regiona l targets for each Metropolitan Planning Organizati on (MPO) region following the input of the Regional Ta rgets Advisory Committee and a public consultation process with MPOs and other stakeholders per SB 375

.II. Recommended Actions Scoping Plan

18 The development of a California cap-and-trade progr am that links with other Western Climate Initiative partner programs to create a reg ional market system is a central feature of the overall recommendation. This program will lead to prices on greenhouse gas emissions, prices that will spur reductions in greenhouse gas emissions throughout the California economy, through application of existing technologi es and through the creation of new technological and organizational options. The rati onale for combining a cap-and-trade program with complementary measures was outlined by the Market Advisory Committee, which noted the following in its recommendations to the ARB:

Before setting out the key design elements of a cap -and-trade program it is important to explain how the proposed emissions trading appro ach relates to other policy measures. The following considerations seem especi ally relevant:

• The emissions trading program puts a cap on the tot al emissions generated by facilities covered under the system. Because a cer tain number of emissions allowances are put in circulation in each complianc e period, this approach provides a measure of certainty about the total qua ntity of emissions that will be released from entities covered under the program

.

• The market price of emissions allowances yields an enduring price signal for GHG emissions across the economy. This price signal provides incentives for the market to find new ways to reduce emissions.

• By itself, a cap-and-trade program alone will not d eliver the most efficient mitigation outcome for the state. There is a strong economic and public policy basis for other policies that can accompany an emis sions trading system. 17

The Economic and Technology Advancement Advisory Co mmittee (ETAAC) also addressed the benefits associated with a combined policy of c ap and trade and complementary

measures.

A declining cap can send the right price signals to shape the behavior of consumers when purchasing products and services. It would als o shape business decisions on what products to manufacture and how to manufacture them. Establishing a price for carbon and other GHG emissions can efficiently tilt decision-making toward cleaner alternatives. This cap and trade approach (compleme nted by technology-forcing performance standards) avoids the danger of having government or other centralized decision-makers choose specific technologies, there by limiting the flexibility to allow other options to emerge on a level playing field.

17 Recommendations of the Market Advisory Committee t o the California Air Resources Board. Recommendations for Designing a Greenhouse Gas Cap- and-Trade System for California . June 30, 2007. p. 19. http://www.climatechange.ca.gov/publications/market _advisory_committee/2007-06-
29_MAC_FINAL_REPORT.PDF (accessed October 12, 2008)Scoping Plan II. Recommended Actions

19 If markets were perfect, such a cap and trade syste m would bring enough new technologies into the market and stimulate the nece ssary industrial RD&D to solve the climate change challenge in a cost effective ma nner. As the Market Advisory Committee notes, however, placing a price on GHG em issions addresses only one of many market failures that impede solutions to clima te change. Additional market

barriers and co-benefits would not be addressed if a cap and trade system were the only state policy employed to implement AB 32. Comp lementary policies will be needed to spur innovation, overcome traditional mar ket barriers (e.g., lack of information available to energy consumers, differen t incentives for landlords and tenants to conserve energy, different costs of inve stment financing between individuals, corporations and the state government, etc.) and address distributional impacts from possible higher prices for goods and s ervices in a carbon-constrained

world. 18

The Environmental Justice Advisory Committee (EJAC) also supports an approach that includes a price on carbon along with complementary measures. Although the EJAC recommends that the carbon price be established thr ough a carbon fee rather than through a cap-and-trade program, they recognize the importanc e of mutually supportive policies:

California should establish a three-pronged approac h for addressing greenhouse gases: (1) adopting standards and regulations; (2) providing incentives; and (3) putting a price on carbon via a carbon fee. Th e three pieces support one another and no single prong can work without equally robust support from the others. 19

In keeping with the rationale outlined above, ARB f inds that it is critically important to include complementary measures directed at emission sources that are included in the capand-trade program. These measures are designed to achieve cost-effective emissions reductions while accelerating the necessary transit ion to the low-carbon economy required to meet the 2050 target:

• The already adopted Light-Duty Vehicle Greenhouse G as Standards are designed to accelerate the introduction of low-greenhouse gas e mitting vehicles, reduce emissions and save consumers money at the pump.

• The Low Carbon Fuel Standard (LCFS) is a flexible p erformance standard designed to accelerate the availability and diversity of low -carbon fuels by taking into consideration the full life-cycle of greenhouse gas emissions. The LCFS will reduce emissions and make our economy more resilient to fu ture petroleum price volatility.

• The Regional Transportation-Related Greenhouse Gas Targets provide incentives for channeling investment into integrated development p atterns and transportation

18 Recommendations of the Economic and Technical Adva ncement Advisory Committee (ETAAC), Final Report. Technologies and Policies to Consider for Reducing Greenhouse Gas Emissions in California

. February 14, 2008. pp. 1-4 http://www.arb.ca.gov/cc/etaac/ETAACFinalReport2-11 -08.pdf (accessed October 12, 2008)

19 Recommendations and Comments of the Environmental Justice Advisory Committee on the Implementation of the Global Warming Solutions Act of 2006 (AB32) on the Draft Scoping Plan. October 2008. p. 10. http://www.arb.ca.gov/cc/ejac/ejac_comments_final.p df (accessed October 12, 2008)II. Recommended Actions Scoping Plan

20 infrastructure, through improved planning. Improve d planning and the resulting development are essential for meeting the 2050 emis sions target.

• In the Energy sector, measures will provide better information and overcome institutional barriers that slow the adoption of co st-effective energy efficiency technologies. Enhanced energy efficiency programs will provide incentives for customers to purchase and install more efficient pr oducts and processes, and building and appliance standards will ensure that manufactur ers and builders bring improved products to market.

• The Renewables Portfolio Standard (RPS) promotes mu ltiple objectives, including diversifying the electricity supply. Increasing th e RPS to 33 percent is designed to accelerate the transformation of the Electricity se ctor, including investment in the transmission infrastructure and system changes to a llow integration of large quantities of intermittent wind and solar generation.

• The Million Solar Roofs Initiative uses incentives to transform the rooftop solar market by driving down costs over time.

• The Goods Movement program is primarily intended to achieve criteria and toxic air pollutant reductions but will provide important gre enhouse gas benefits as well.

• Similar to the light duty vehicle greenhouse gas st andards, the heavy duty and medium duty vehicle measures and the additional lig ht duty vehicle efficiency

measures aim to achieve cost-effective reductions o f GHG emissions and save fuel.

Each of these complementary measures helps to posit ion the California economy for the future by reducing the greenhouse gas intensity of products, processes, and activities. When combined with the absolute and declining emissions limit of the cap-and-trade program, these policies ensure that we cost-effectively achi eve our greenhouse gas emissions goals and set ourselves on a path towards a clean low carbon future.

Figure 3 illustrates how the recommended emission r eduction measures together put California on a path toward achieving the 2020 goal . The left hand column in Figure 3 shows total projected business as usual emissions i n 2020, by sector (596 MMTCO 2 E). The right hand column shows 2020 emissions after applyi ng the Scoping Plan recommended reduction measures (422 MMTCO 2 E). The measures that accomplish the needed reduct ions are listed in between the columns. As Figure 3 sho ws, there are a total of 27.3 MMTCO 2 E in reductions from uncapped sectors, and 146.7 MMTCO 2 E in reductions from capped sectors.Scoping Plan II. Recommended Actions

21 

### Figure 3: California Greenhouse Gas Emissions in 2 020 and

Recommended Reduction Measures

0 100 200 300 400 500 600 700

Business-as-Usual Scoping Plan

Transportation Recycling & waste

Industry

Natural gas

Electricity Agriculture

High GWP

Recycling & waste

Capped sectors Agriculture

High GWP Reductions from capped sectors:

Total reductions of 146.7 MMT (including 112.3 MMT from specified measures): Pavley standards: 31.7 MMT Energy efficiency: 26.3 MMT

33% RPS: 21.3 MMT

LCFS: 15.0 MMT Regional targets: 5.0 MMT Vehicle efficiency: 4.5 MMT

Goods movement: 3.7 MMT

Million solar roofs: 2.1 MMT Heavy/medium veh: 1.4 MMT

Industrial measures: 0.3 MMT High speed rail: 1.0 MMT Reductions from uncapped sectors:

Total reductions of 27.3 MMT

Industrial measures: 1.1 MMT High GWP measures: 20.2 MMT Recycling & waste: 1.0 MMT

Sustainable forests: 5.0 MMT Reduction Measures

Total Emissions

422 MMTCO2E

Cap is set at 365 MMT Total Emissions:

596 MMTCO2E MMTCO 2 E

The recommended cap-and-trade program provides cove red sources with the flexibility to pursue low cost reductions. It is important to rec ognize, however, that other recommended measures also provide compliance flexibility. As i s often the case with ARB regulations, many of the measures establish performance standard s and allow regulated entities to determine how best to achieve the required emission level. This approach rewards innovation and allows facilities to take advantage of the best way to meet the overarching environmental objective.

Table 3 lists the proposed measures that include co mpliance flexibility or market mechanisms. This flexibility ranges from the pote ntial for tradable renewable energy credits

in the Renewables Portfolio Standard to the incenti ves to encourage emission reductions in electricity and natural gas efficiency programs to the averaging, banking and trading mechanisms in the Pavley and Low Carbon Fuel Standa rd programs to a multi-sector capand-trade program.II. Recommended Actions Scoping Plan

22 

### Table 3: Measures With Flexible Market Compliance Features

Measure Estimated Reductions

Additional Reductions from Capped Sectors 34.4

California Light-Duty Vehicle Greenhouse Gas Standa rds (Pavley I & II) 31.7

Renewables Portfolio Standard 21.3

Electricity Efficiency 15.2

Low Carbon Fuel Standard 15.0

Mitigation Fee on High GWP Gases 5.0

Natural Gas Efficiency 4.3

Goods Movement Systemwide Efficiency 3.5

Medium/Heavy Duty Vehicle Hybridization 0.5

Total 130.9

The recommended mix of measures builds on a strong foundation of previous action in California to address climate change and broader en vironmental issues. The program recommended here relies on implementing existing la ws and regulations that were adopted to reduce greenhouse gas emissions and other policy go als; strengthening and expanding existing programs; implementing the discrete early actions adopted by the Board in 2007; and new measures developed during the Scoping Plan process itself.

The mix of measures recommended in this Plan provid es a comprehensive approach to reduce emissions to achieve the 2020 target, and to initiate the transformations required to achieve the 2050 target. The cap-and-trade program and complementary measures will cover about 85 percent of greenhouse gas emissions throug hout California’s economy. ARB recognizes that due to several factors, including i nformation discovered during regulatory development, technology maturity, and implementatio n challenges, actual reductions from individual measures aimed at achieving the 2020 tar get may be higher or lower than current estimates. The inclusion of many of these emission s within the cap-and-trade program, along with a margin of safety in the uncapped sectors, wi ll help ensure that the 2020 target is met. The combination of approaches provides certainty th at the overall program will meet the target despite some degree of uncertainty in the es timates for any individual measure. Additionally, by internalizing the cost of CO 2 E emissions throughout the economy, the capand-trade program supports the complementary measur es and provides further incentives for innovation and continuing emissions reductions from energy producers and consumers setting us on a path toward our 2050 goals.

Some emissions sources are not currently suitable f or inclusion in the cap-and-trade program due to challenges associated with precise measureme nt, tracking or sector structure. For these emissions sources, ARB is including measures designed to focus on waste management, agriculture, forestry, and certain emis sions of high GWP gases, a rapidly growing component of California’s greenhouse gas em issions inventory.Scoping Plan II. Recommended Actions

23 California’s economy is expected to continue to exp erience robust growth through 2020. Economic modeling, including evaluation of the effe cts on low-income Californians, shows that the measures included within this Scoping Plan can be implemented with a net positive effect on California’s long-term economic growth. The evaluation of related public health

and environmental benefits of the various measures also shows that implementation will result in not only reduced greenhouse gas emissions and improved public health, but also in a

beneficial effect on California’s environment. The results of these evaluations are presented in Chapter III.

AB 32 includes specific criteria that ARB must cons ider before adopting regulations for market-based compliance mechanisms to implement a g reenhouse gas reduction program, and directs the Board, to the extent feasible, to d esign market-based compliance mechanisms to prevent any increase in the emissions of toxic a ir contaminants or criteria air pollutants. In the development of regulations that contain market mechanisms, ARB will consider the economic, environmental and public health effects, and the evaluation of potential localized impacts. These results will be used to institute a ppropriate economic, environmental and public health safeguards.

ARB has also designed the recommendation to ensure that reductions will come from throughout the California economy. Transportation accounts for the largest share of California’s greenhouse gas emissions. Accordingly , a large share of the reduction of greenhouse gas emissions from the recommended measu res comes from this sector. Measures include the inclusion of transportation fu els in the cap-and-trade program, the Low Carbon Fuel Standard to reduce the carbon intensity of transportation fuels, enforcement of regulations that reduce greenhouse gas emissions fr om vehicles, and policies to reduce transportation emissions by changes in future land use patterns and community design as well as improvements in public transportation.

In the Energy sector, the recommended measures incr ease the amount of electricity from renewable energy sources, and improve the energy ef ficiency of industries, homes and buildings. The inclusion of these sectors and the Industrial sector in the cap-and-trade program provides further assurance that significant cost-effective reductions will be achieved from the sectors that contribute the greatest emiss ions. Additional energy production from renewable resources may also rely on measures sugge sted in the Agriculture, Water, and the Recycling and Waste Management Sectors.

Other sectors are also called upon to cut emissions . The cap-and-trade program covers industrial sources and natural gas use. The recomm ended measures would require industrial processes to examine how to lower their greenhouse gas emissions and be more energy efficient, and would require goods movement operati ons through California’s ports to be more energy efficient. Other measures address wast e management, agricultural and forestry practices, as well as the transport and treatment o f water throughout the state. Finally, the recommended measures address ways to reduce or elim inate the emissions of high global warming potential gases that, on a per-ton basis, c ontribute to global warming at a level many times greater than carbon dioxide.II. Recommended Actions Scoping Plan

24 As the Scoping Plan is implemented, ARB and other a gencies will coordinate with the Green Chemistry Initiative, particularly in the Green Bui lding and Recycling/Waste sectors. Green Chemistry is a fundamentally new approach to enviro nmental protection that emphasizes environmental protection at the design stage of pro duct and manufacturing processes, rather than focusing on end-of-pipe or end-of-life activit ies, or a single environmental medium, such as air, water or soil. This new approach will reduce the use of harmful chemicals, generate less waste, use less energy, and, accordin gly, will contribute toward California’s greenhouse gas reduction goals.



## A. The Role of State Government: Setting an Example The Role of State Government: Setting an Example The Role of State Government: Setting an Example

For many years California State government has succ essfully incorporated environmental principles in managing its resources and running it s business. The Governor has directed State agencies to sharply reduce their building-rel ated energy use and encouraged our Staterun pensions to invest in energy efficient and clea n technologies. 20 The State also has been active in procuring low-emission, alternative fuel vehicles in its large fleet.

While State government has already accomplished muc h to reduce its greenhouse gas emissions, it can and must do more. State agencies must lead by example by continuing to reduce their greenhouse gas emissions. Therefore, California State government has established a target of reducing its greenhouse gas emissions by a minimum of 30 percent below its estimated business-as-usual emissions by 2020 – approximately a 15 percent

reduction from current levels.

As an owner-operator of key infrastructure, State g overnment has the ability to ensure that the most advanced, cost-effective environmental per formance requirements are used in the design, construction, and operation of State facili ties. As a purchaser with significant market power, State government has the ability to demand t hat the products and services it procures contribute positively toward California’s targets t o reduce greenhouse gas emissions, such as through the efforts of Environmentally Preferable P urchasing. As an investor of more than $400 billion, 21 State government has the ability to prioritize low -carbon investments. With more than 350,000 employees, State government is un iquely situated to adopt and implement policies that give State workers the ability to dec rease their individual carbon impact, including encouraging siting facilities within comm unities to enhance balance in jobs and housing, encouraging carpooling, biking, walking, t elecommuting, the use of public transit,

and the use of alternative work schedules.

20 Governor Schwarzenegger signed Executive Order Exec utive Order S-20-04 on December 14, 2004. This Order contains a number of directives, including a set of aggressive goals for reducing state building energy use and requested the California Public Employees Retir ement System (CalPERS) and the California State Tea chers Retirement System (CalSTRS) to target resource-effi cient buildings for real estate investments and com mit funds toward clean, efficient and sustainable techn ologies.

21 CalPERS and CalSTRS are the two largest pension sy stems in the nation with investments in excess of $400 billion as of August 2008.Scoping Plan II. Recommended Actions

25 Myriad opportunities exist for California State gov ernment to operate more efficiently. These opportunities will not only reduce greenhouse gas emissions but also will produce savings for California taxpayers. Initiatives now underway that will contribute to the State government reduction target include the Governor’s Green Building Initiative and the Department of General Services’ efforts to increase the number of fuel-efficient vehicles in

the State fleet.

Major efforts to expand renewable energy use and di vest from coal-fired power plants are currently underway. Together with energy conservat ion and efficiency strategies on water projects, roadways, parks, and bridges, these effor ts all play major roles in reducing the State’s greenhouse gas emissions. State agencies s hould review their travel practices and make greater use of teleconferencing and videoconfe rencing to reduce the need for business travel, particularly air travel.

State agencies are now examining their policies and operations to determine how they can reduce their greenhouse gas emissions. These findi ngs will be instrumental as each cabinetlevel agency registers with the California Climate Action Registry (CCAR) to record and report their individual carbon footprints. The Cli mate Action Team has created a new State Government Operations sub-group that will work clos ely with the agencies to review the results of their evaluations and the CCAR reports t o determine how best to achieve the maximum reductions possible.

State agencies must take the lead in driving this l ow-carbon economy by reducing their own emissions, and also by serving as a catalyst for lo cal government and private sector activity. New “Best Practices” implemented by State agencies can be transferred to other entities within California, the nation, and internationally. By increasing cooperation and coordination across organizational boundaries, Stat e government will maximize the experience and contributions of each agency involve d to achieve the 30 percent reduction of greenhouse gas emissions while growing the economy and protecting the environment.

State government’s impact on emissions goes far bey ond its own buildings, vehicles, projects, and employees. State government casts a sizable “carbon shadow”– that is, the climate change impact of legislative, executive, an d financial actions of State agencies that

affect Californians now and in the future. For exa mple, the California Energy Commission (CEC) recently initiated a proceeding to consider h ow to align its permitting process with the State’s greenhouse gas and renewable energy policy goals. ARB intends to work closely with the CEC during this proceeding. New power pla nts, both fossil-fuel fired and renewable generation, will be a critical part of the state’s electricity mix in coming decades. The

investments that are made in this new infrastructur e in the next several years will become part of the backbone of the state’s electricity sup ply for decades to come. This timely investigation will be a critical element of Califor nia’s ability to meet the AB 32 emissions reduction target for 2020, the ambitious target set by the Governor for 2050, and also the specific goal of achieving 33 percent renewables in the state’s electricity mix. The Governor’s Office of Planning and Research and the Resources Agency are developing proposed amendments to the California Environmental Quality Act (CEQA) Guidelines toII. Recommended Actions Scoping Plan

26 provide guidance on how to address greenhouse gases in CEQA documents. As required by SB 97 (Chapter 185, Statutes of 2007), the amended CEQA guidelines will be adopted by January 1, 2010.

In addition, agencies such as the California Labor and Workforce Development Agency, the Business, Transportation and Housing Agency and the newly created Green Collar Jobs Council (AB 3018, Chapter 312, Statutes of 2008) ar e dedicated to economic development, training, safety, labor relations, and employment d evelopment throughout the State. ARB

will coordinate with the Council and also with othe r State agencies to address workforce

needs and facilitate a smooth transition to Califor nia’s emerging low-carbon economy that maximizes economic development and employment oppor tunities in California.

The State expends funds to provide services to Cali fornia residents – from preserving our natural resources to building and maintaining infra structure like roads, bridges and dams. California residents should reap all of the benefit s of these projects, including any associated quantifiable and marketable reductions in greenhous e gas emissions. Because of this, California should retain ownership of these greenho use gas emissions reductions and use them to promote the goals of AB 32 and other goals of the state.

California State government can also lead through e xample by aligning its efforts to reduce greenhouse gas emissions with efforts to protect an d improve public health. As a new member of the Climate Action Team, the Department o f Public Health will help ensure that measures to combat global warming also incorporate public health protection and improvement strategies. As discussed below, these and many other State leadership efforts can be built upon at the local level as well.



## B. The Role of Local Government: Essential Partners The Role of Local Government: Essential Partners The Role of Local Government: Essential Partners

Local governments are essential partners in achievi ng California’s goals to reduce greenhouse gas emissions. They have broad influenc e and, in some cases, exclusive authority over activities that contribute to signif icant direct and indirect greenhouse gas emissions through their planning and permitting pro cesses, local ordinances, outreach and education efforts, and municipal operations. Many of the proposed measures to reduce greenhouse gas emissions rely on local government a ctions.

Over 120 California cities have already signed on t o the U.S. Conference of Mayors Climate Protection Agreement. In addition, over 30 Califor nia cities and counties have committed to developing and implementing Climate Action Plans. Many local governments and related organizations have already begun educating Californ ians on the benefits of energy efficiency measures, public transportation, solar homes, and r ecycling. These communities have not only demonstrated courageous leadership in taking i nitiative to reduce greenhouse gas emissions, they are also reaping important co-benef its, including local economic benefits, more sustainable communities, and improved quality of life.Scoping Plan II. Recommended Actions

27 Land use planning and urban growth decisions are al so areas where successful implementation of the Scoping Plan relies on local government. Local governments have primary authority to plan, zone, approve, and permi t how and where land is developed to accommodate population growth and the changing need s of their jurisdictions. Decisions on how land is used will have large impacts on the gre enhouse gas emissions that will result from the transportation, housing, industry, forestr y, water, agriculture, electricity, and natural

gas sectors.

To provide local governments guidance on how to inv entory and report greenhouse gas emissions from government buildings, facilities, ve hicles, wastewater and potable water treatment facilities, landfill and composting facil ities, and other government operations, ARB recently adopted the Local Government Operations Pr otocol. ARB encourages local governments to use this protocol to track their pro gress in achieving reductions from municipal operations. ARB is also developing an ad ditional protocol for community emissions. This protocol will go beyond just munic ipal operations and include emissions from the community as a whole, including residentia l and commercial activity. These local protocols will play a key role in ensuring that str ategies that are developed and implemented at the local level, like urban forestry and greenin g projects, water and energy efficiency projects, and others, can be appropriately quantifi ed and credited toward California’s efforts to reduce greenhouse gas emissions.

In addition to tracking emissions using these proto cols, ARB encourages local governments to adopt a reduction goal for municipal operations emissions and move toward establishing similar goals for community emissions that parallel the State commitment to reduce greenhouse gas emissions by approximately 15 percen t from current levels by 2020. To

consolidate climate action resources and aid local governments in their emission reduction efforts, the ARB is developing various tools and gu idance for use by local governments, including the next generation of best practices, ca se studies, a calculator to help calculate local greenhouse gas emissions, and other decision support tools.

The recent passage of SB 375 (Steinberg, Chapter 72 8, Statutes of 2008) creates a process whereby local governments and other stakeholders wo rk together within their region to achieve reduction of greenhouse gas emissions throu gh integrated development patterns, improved transportation planning, and other transpo rtation measures and policies. The implementation of regional transportation-related g reenhouse gas emissions targets and

SB 375 are discussed in more detail in Section C.



## C. Emissions Reduction Measures Emissions Reduction Measures Emissions Reduction Measures

The Scoping Plan will build on California’s success ful history of balancing effective regulations with economic progress. Several types of measures have been recommended. The plan includes a California cap-and-trade progra m that will be integrated with a broader regional market to maximize cost-effective opportun ities to achieve GHG emissions reductions. The plan also includes transformationa l measures that are designed to help pave the path toward California’s clean energy future. For example, the Low Carbon FuelII. Recommended Actions Scoping Plan

28 Standard (LCFS) is a performance standard with flex ible compliance mechanisms that will incent the development of a diverse set of clean, l ow-carbon transportation fuel options. Similarly, the plan recognizes the importance of lo cal and regional government leadership in ensuring that California’s land use and transportat ion planning processes are designed to be consistent with efforts to achieve a clean energy f uture and to protect and enhance public health and safety.

The Scoping Plan also contains a number of targeted measures that are designed to overcome existing barriers to action such as lack of informa tion, lack of coordination, or other regulatory and institutional factors. Energy effic iency is a classic example where costeffective action often is not taken due to lack of complete information, relatively high initial costs, and mismatches between who pays for and who benefits from efficiency investments. These problems often mean that efficiency measures are not taken that would save money in the long term for small businesses, home owners and renters. While California has a long history of success in implementing regulations and programs to encourage energy efficiency,

innovative methods to overcome these economic and i nformation barriers are needed to provide the benefits of increased efficiency to mor e Californians and to meet our greenhouse gas emissions reduction goals.

Several of the recommended measures complement each other. For example, the LCFS will provide clean transportation fuel options. The Pav ley performance standards help deploy vehicles that can use many of the low-carbon fuels, including advanced biofuels, electricity and hydrogen. The combined operation of both progr ams will make it more likely that more efficient, less polluting vehicles will use the cle anest possible fuels. In addition, both of these programs will benefit from ARB’s zero-emissio n vehicle program, which focuses on deployment of plug-in battery-electric and fuel cel l vehicles. All of these strategies are expandable beyond 2020, and are needed as vital com ponents to reach the State’s 2050 goal.

The cap-and-trade program creates an emissions limi t or “cap” on the sectors responsible for the vast majority of California’s greenhouse gas em issions and provides capped sources significant flexibility in how they collectively ac hieve the reductions necessary to meet the cap. The other measures in these capped sectors pr ovide a clear path toward achieving reductions required by the cap, while simultaneousl y addressing market barriers and creating the low-carbon energy options needed to achieve our long term climate goals. In the design of the cap-and-trade program, ARB will also evaluat e possible ways to include features that complement the other measures, such as consideratio n of allowance set-asides that could be used to help achieve or exceed the aggressive energ y efficiency goals included in this Plan.

Both required measures and other cost-effective act ions by capped sectors will contribute toward achievement of the cap. For example, increa sing energy efficiency will reduce electricity demand, thereby reducing the need for u tilities to submit allowances to comply with the cap-and-trade program. In this way, energ y efficiency contributes to real reductions toward the cap. Expiration of existing utility lon g-term contracts with coal plants will reduce GHG emissions when such generation is replaced by r enewable generation, coal with carbon sequestration, or natural gas generation, which emi ts less CO 2 per megawatt-hour.Scoping Plan II. Recommended Actions

29 Additionally, measures and other actions that resul t in reductions in energy demand ‘downstream’ of capped sectors will help achieve th e cap. For example, the Pavley vehicle standards, building efficiency standards, and land use planning that contributes to reduced transportation fuel demand will all reduce emission s by reducing the demand for upstream energy production. These downstream entities will further benefit from these reductions by avoiding any costs that would be passed through fro m a cap-and-trade system.

Discrete Early Actions Discrete Early Actions

In September 2007, ARB approved a list of nine Disc rete Early Actions to reduce greenhouse gas emissions and is currently in the pr ocess of developing regulations and programs based on these measures. Regulations implementing the Discrete Early Action measures must be adopted and in effect by Ja nuary 1, 2010 (HSC §38560.5 (b)). All the Discrete Early Actions are included in the recommended

measures and are shown below in Table 4.



### Table 4: Anticipated Board Consideration Dates

for Discrete Early Actions

Discrete Early Action Anticipated Board

Consideration
Green Ports – Ship Electrification at Ports Decembe r 2007 – Adopted
Reduction of High GWP Gases in Consumer Products Ju ne 2008 – Adopted
SmartWay – Heavy-Duty Vehicle Greenhouse Gas Emissi on Reduction (Aerodynamic Efficiency) December 2008

Reduction of Perfluorocarbons from Semiconductor Manufacturing February 2009

Improved Landfill Gas Capture January 2009

Reduction of HFC-134a from Do-It-Yourself Motor Veh icle Servicing January 2009

SF 6 Reductions from the Non-Electric Sector January 20 09
Tire Inflation Program March 2009

Low Carbon Fuel Standard March 2009

The following sections describe the recommended mea sures in this Scoping Plan. Additional information about these measures is prov ided in Appendix C.II. Recommended Actions Scoping Plan

30 

### 1. California Cap 1. California Cap-

- and - Trade Program Linked to Trade Program Linked to Trade Program Linked to

Western Climate Initiative Partner Jurisdictions Western Climate Initiative Partner Jurisdictions

Implement a broad-based California cap-and-trade pr ogram to provide a firm limit on emissions. Link the California cap–and-trade pr ogram with other Western Climate Initiative Partner programs to create a reg ional market system to achieve greater environmental and economic benefits for Cal ifornia. Ensure California’s program meets all applicable AB 32 requirements for market-based mechanisms.

California is working closely with other states and provinces in the Western Climate Initiative (WCI) to design a regional cap-and-trade program that can deliver reductions of greenhouse gas emissions throughout t he region. ARB will develop a cap-and-trade program for California that will link with the programs in the other WCI Partner jurisdictions to create a regional cap- and-trade program. The WCI Partner jurisdictions released the program design d ocument on September 23, 2008 (see Appendix D). ARB will continue to work with t he WCI Partner jurisdictions to develop and implement the cap-and-trade program. A RB will also design the California program to meet the requirements of AB 3 2, including the need to consider any potential localized impacts and ensure that red uctions are enforceable by the

Board.

Based on the requirements of AB 32, regulations to implement the cap-and-trade program need to be developed by January 1, 2011, wi th the program beginning in 2012. This rule development schedule will be coord inated with the WCI timeline for developing a regional cap-and-trade program. Preli minary plans for this rulemaking

are described later in this section.

A cap-and-trade program sets the total amount of gr eenhouse gas emissions allowable for facilities under the cap and allows covered sou rces, including producers and consumers of energy, to determine the least expensi ve strategies to comply. The emissions allowed under the cap will be denominated in metric tons of CO 2 E. The currency will be in the form of allowances which th e State will issue based upon the total emissions allowed under the cap during any sp ecific compliance period. Emission allowances can be banked for future use, e ncouraging early reductions and reducing market volatility. The ability to trade a llows facilities to adjust to changing conditions and take advantage of reduction opportun ities when those opportunities are less expensive than buying additional emissions all owances.

Provisions could be made to allow a limited use of surplus reductions of greenhouse gas emissions that occur outside of the cap. These additional reductions are known as

offsets and are discussed further below. In order to be used to meet a source’s compliance obligation, offsets will be subject to s tringent criteria and verification procedures to ensure their enforceability and consi stency with AB 32 requirements.

Appendix C describes the fundamentals of a cap-and- trade program and program design elements. Appendix D contains the WCI Desig n Recommendations and related background documents.Scoping Plan II. Recommended Actions

31 California Cap California Cap-

- and - Trade Program Trade Program Trade Program

By providing a firm cap on 85 percent of the state’ s greenhouse gas emissions, the cap-and-trade regulatory program is an essential co mponent of the overall plan to meet the 2020 target and provides a robust mechanis m to achieve the additional reductions needed by 2050. To meet the emissions r eduction target under AB 32, the limit on emissions allowed under the cap, plus emis sions from uncapped sources, must be no greater than the 2020 emissions goal.

By setting a limit on the quantity of greenhouse ga ses emitted, a well-designed capand-trade program will complement other measures fo r entities within covered sectors. Additionally, starting a cap-and-trade pr ogram now will set us on a course to achieve further emissions cuts well beyond 2020 and ensure that California is primed to take advantage of opportunities for linking with other programs, including future

federal and international efforts.

The proposed cap-and-trade measure phases in the fo llowing sectors:

Starting in the first compliance period (2012):

• In-state electrical generating facilities that emit over 25,000 metric tons CO 2 E

per year, 22 including imports not covered by a WCI Partner jur isdiction.

• Large industrial facilities that emit over 25,000 m etric tons CO 2 E per year, including high global warming potential gases.

Starting in the second compliance period (2015):

• Upstream treatment of industrial fuel combustion at facilities with emissions at or below 25,000 metric tons CO 2 E per year, and all commercial and residential fuel combustion regulated where the fue l enters into commerce

• Transportation fuel combustion regulated where the fuel enters into

commerce.

For some energy-intensive industrial sources such a s cement, stringent requirements in California, either through inclusion in a cap-an d-trade program or through sourcespecific regulation, have the potential to create a disadvantage for California facilities relative to out-of-state competitors unless those l ocations have similar requirements (e.g., through the WCI). If production shifts outsi de of California in order to operate without being subject to these requirements, emissi ons could remain unchanged or even increase. This is referred to as “leakage.” AB 32 requires ARB to design measures to minimize leakage. Minimizing leakage w ill be a key consideration when developing the cap-and-trade regulation and the oth er AB 32 program measures. 23

22 Allowances will not be required for combustion emi ssions from carbon-neutral projects.

23 The cement industry is an example of a sector that may be susceptible to this type of leakage, and th e Draft Scoping Plan included consideration of a measure to institute an intensity standard at concrete batch plants that would consider this type of life-cycle emissions. ARB will evaluate whether this type of intensity st andard could be incorporated into the cap-and-trade progra m or instituted as a complementary measure during t he capand-trade rulemaking.II. Recommended Actions Scoping Plan

32 As shown in Table 5, the preliminary estimate of th e cap on greenhouse gas emissions for sectors covered by the cap-and-trade program is 365 MMTCO 2 E in 2020, which covers about 85 percent of California’s total greenhouse gas emissions. 24
Greenhouse gas emissions from most of the sectors c overed by a cap-and-trade program will also be governed by other measures, in cluding performance standards, efficiency programs, and direct regulations. These other measures will provide real

reductions which will contribute reductions toward the cap.

In addition, ARB will work closely with the CPUC, C EC, and The California Independent System Operator to ensure that the cap- and-trade program works within the context of the State’s energy policy and enable s the reliable provision of electricity.



### Table 5: Sector Responsibilities Under Cap-and-Tra de Program
(MMTCO 2 E in 2020)

Projected 2020

Business-as-Usual

Emissions Sector

By Sector Total Preliminary 2020

Emissions Limitunder Cap-andTrade Program

Transportation 225
Electricity 139

Commercial and Residential 47
Industry 101 512 365

Linkage with the Western Climate Initiative Partner Jurisdictions Jurisdictions

The WCI was formed in 2007. Members are California , Arizona, New Mexico, Oregon, Washington, Utah, and Montana, and the Cana dian provinces of British Columbia, Manitoba, Ontario, and Quebec. The WCI P artner jurisdictions, including California, have adopted goals to reduce greenhouse gas emissions that, in total, reduce regional emissions to 15 percent below 2005 levels by 2020. This regional goal is approximately equal to California’s goal of returning to 1990 levels by 2020. A cap-and-trade program is one element of the effor t by the WCI Partner jurisdictions to identify, evaluate, and implement ways to reduce greenhouse gas emissions and

achieve related co-benefits.

24 The actual cap for the program will be established as part of the rulemaking process. The preliminar y cap of

365 MMTCO 2 E in 2020 assumes that all of California’s electric ity imports would be covered under a California cap. Because a significant portion of California’s imported electricity is from power plants located in other WCI Partner Jurisdictions, emissions from those sou rces could be included in the cap of the states wit hin which the power plants are located. In establishing the California cap, ARB will need to consider the degre e to which emissions from these sources are addressed as part of the WCI regional market.Scoping Plan II. Recommended Actions

33 The WCI Partner jurisdictions released their recomm endation for the design of a regional cap-and-trade program in September 2008. This design document and the background paper that accompanied it are presented in Appendix D. These recommendations were developed collaboratively by t he WCI Partner jurisdictions, including California, with a goal of achieving regi onal targets to reduce greenhouse gas emissions equitably and effectively. The WCI P artner jurisdictions’ recommendations are generally consistent with the r ecommendations provided in June 2007 by the California Market Advisory Committ ee, 25 the recommendations provided to ARB by the California Public Utilities Commission and the California Energy Commission in March 2008, 26 and the proposed opinion released by the two Commissions in September 2008. 27

Participating in a regional system has several adva ntages for California. The reduction of greenhouse gas emissions that can be a chieved collectively by the WCI Partner jurisdictions are approximately double what can be achieved through a California-only program. The broad scope of a WCI- wide market will provide additional opportunities for reduction of emissions , therefore providing greater market liquidity and more stable carbon prices with in the program. The regional system also significantly reduces the potential for leakage, which is a shift in economic and emissions activity out of California t hat could hurt the state’s economy without reducing global greenhouse gas emissions. Harmonizing the approach and timing of California's requirements for reducing gr eenhouse gas emissions with other states and provinces in the region can encourage re tention of local businesses in the state. Further, by creating a cost-effective regio nal market system, California and the other WCI Partner jurisdictions will continue to de monstrate leadership in preparation

for future federal and international climate action

.

To achieve the individual WCI Partner jurisdiction goals and the regional goal, each WCI Partner jurisdiction will have an allowance bud get based on its goal that declines to 2020. For example, California’s allowa nce budget will be based on the level of emissions needed to achieve the AB 32 targ et for 2020, as described above. Once California links with the other WCI Partner ju risdictions, allowances could be

25 Recommendations of the Market Advisory Committee t o the California Air Resources Board. Recommendations for Designing a Greenhouse Gas Cap- and-Trade System for California . June 30, 2007. p. 19. http://www.climatechange.ca.gov/publications/market _advisory_committee/2007-06-
29_MAC_FINAL_REPORT.PDF (accessed October 12, 2008) Cal/EPA The Market Ad visory Committee (MAC) consisted of a consortium of economists, poli cy makers, academics, government representatives, a nd environmental advocates who came together through t he auspices of CalEPA, pursuant to Executive Order S-20-06 from Governor Schwarzenegger.

26 Joint Agency Decision of the CEC and the CPUC. Final Adopted Interim Decision on Basic Greenhouse Gas Regulatory Framework for Electricity and Natural Ga s Sectors , March 13, 2008. Document number CEC-100-

2008-002-F. http://www.energy.ca.gov/2008publications/CEC-100-2 008-002/CEC-100-2008-002-F.PDF (accessed October 12, 2008)

27 Joint Agency proposed final opinion of the CEC and the CPUC. Proposed Final Opinion on Greenhouse Gas Regulatory Strategies . Published September 12, 2008 and to be considered for adoption on October 16, 2008 by

the CEC and the CPUC. Document Number CEC-100-2008- 007-D http://www.energy.ca.gov/ghg_emissions/index.html (accessed October 12, 2008)II. Recommended Actions Scoping Plan

34 traded across state and provincial boundaries. As a result of trading, emissions in a state may vary from its allowance budget, although total regional emissions will not exceed the regional cap.

The overall number of allowances issued in a given year by the WCI Partner jurisdictions will set a limit on emissions from se ctors covered by the program for the region. Details of distribution of allowances will be established by each partner within the general guidelines set forth in the WCI program design framework. The WCI Partner jurisdictions have agreed to consider s tandardizing allowance distribution across specific sectors if necessary t o address competitiveness issues. In addition, the WCI Partner jurisdictions have agreed to phase in regionally coordinated auctions of allowances, with a minimum percentage o f allowances auctioned in each period starting with 10 percent in the first compli ance period and increasing to 25 percent in 2020. WCI partners aspire to reach high er auction percentages over time, possibly to 100 percent. Under the program design, each WCI Partner jurisdiction, including California, can auction a greater portion of its allowance budget in any compliance period. The distribution of California’ s allowances will be determined during the cap-and-trade rulemaking process, as dis cussed below.

The WCI Partner jurisdictions are also proposing th e use of an allowance reserve price for the first 5 percent of the auctioned allo wances in the regional cap. A reserve price will help to ensure that the cap is set at a level that will motivate real emissions reductions and may provide an opportunity for the r egional cap-and-trade program to provide reductions that exceed the regional target.

A regional coordinated cap-and-trade program with s trong reporting and enforcement rules will provide a high degree of certainty that emissions will not exceed targeted levels and that leakage will not occur.

Federal Action Federal Action

A cap-and-trade program is expected to be a signifi cant element in any future federal action taken to reduce greenhouse gas emissions. A RB’s efforts to design a broad cap-and-trade system that works in concert with sec tor- or source-related measures and meets the requirements of AB 32 can serve as a model for a federal program. An effective, enforceable regional cap-and-trade progr am can promote the type of federal legislation needed to meet the pressing challenge o f climate change. In the event that California businesses, organizations, or individual s hold regional allowances when a federal system is implemented, California will work to ensure that those allowances continue to have value, either in a continuing regi onal program or within the federal

program.

Cap- and - Trade Rulemaking Trade Rulemaking Trade Rulemaking

To implement the cap-and-trade program, ARB will em bark on regulatory development that includes extensive and broad-based public participation. Major program design elements will include setting an emi ssions cap in conjunction with theScoping Plan II. Recommended Actions

35 WCI Partner jurisdictions, determining the method o f distributing both allowances and revenues raised through auctions, and establish ing the rules for the use of offsets.

ARB will continue to work with all affected stakeho lders, State and local agencies, and our WCI partners to create a robust regional ma rket system.

After adoption of the Scoping Plan, ARB will establ ish a formal structure to elicit ongoing participation in the rulemaking process fro m a wide range of affected stakeholders. While the process will be open to in volvement by all interested parties, ARB anticipates creation of a series of focused wor king groups that include participation by representatives of the regulated c ommunity, environmental and community advocates and other public interest group s, prominent academics with expertise in cap-and-trade issues and new technolog y development, local air pollution control districts, stakeholders in the WCI, and oth er State agencies with existing authority for regulating capped sectors.

This process will integrate economic and administra tive design considerations and include consideration of environmental and public h ealth issues. ARB will convene a series of technical workshops to examine mechanisms to address the concerns related to the cap-and-trade program raised by the Environm ental Justice Advisory

Committee and other stakeholders. The first worksh op will explore cap-and-trade program design options that could provide incentive s to maximize additional environmental and economic benefits, and to analyze the proposed program to prevent increases in emissions of toxic air contami nants or criteria pollutants through the design and architecture of the program itself. Similar technical workshops will focus on issues related to offsets and the WCI prop osal.

Allowances and Revenues

Emission allowances represent a significant economi c value whether they are freely allocated or sold through auction. Section E inclu des a preliminary discussion of some of the options that have been suggested for us e of allowance value or revenues. ARB will evaluate the possible uses of allowances o r revenues as part of the rulemaking process. One approach would be to dedic ate a portion of the allowances for such purposes as rewarding early actions to red uce emissions, providing incentives for local governments and others to prom ote energy efficiency, better land use planning, and other reduction strategies, and t argeting projects to reduce emissions in low-income or disadvantaged communitie s. This type of dedicated use of allowances is typically referred to as an allowa nce ‘set-aside.’

The California Public Utilities Commission and the California Energy Commission addressed the question of allocation and auction of allowances in their joint proceeding on implementation of AB 32 for the Elect ricity and Natural Gas sectors. They have recently released a proposed opinion that recommends to ARB a transitionII. Recommended Actions Scoping Plan

36 to 100 percent auction for the Electricity sector b y 2016. 28 The CPUC and CEC included in their draft opinion the recommendation that all auction revenues be used for purposes related to AB 32, and all revenue from allowances allocated to the Electricity sector and received by retail providers would be used for the benefit of the Electricity sector to support investments in renewa ble energy, efficiency, new energy technology, infrastructure, customer bill relief, a nd other similar programs.

The Market Advisory Committee also recommended the eventual transition to full auction within the cap-and-trade program, noting th at a system in which California ultimately auctions all of its emission allowances is consistent with fundamental objectives of cost-effectiveness, fairness and simp licity. 29 ARB agrees that the transition to a 100 percent auction, with auction r evenue going to further the policy objectives of California’s climate change program, is a worthwhile goal. ARB expects that California will auction significantly more than the WCI minimum levels and will transition to 100 percent auction. Howeve r a broad set of factors must be considered in evaluating the potential timing of a transition to a full auction including competiveness, potential for emissions leakage, the effect on regulated vs. unregulated industrial sectors, the overall impact on consumers, and the strategic use

of auction revenues.

Allowance allocation and revenue use decisions can greatly affect the equity of a capand-trade system. Addressing both these issues wil l be a major part of the rulemaking process. ARB will seek input from a bro ad range of experts in an open public process regarding the options for allocation and revenue use under consideration by ARB and the WCI Partner jurisdicti ons. This process will evaluate various mechanisms ARB is considering for allowance distribution and potential uses of allowance value, including the recommendations o ffered by CPUC and CEC. Issues to be considered will include the appropriat e timing and structure of a transition to full auction of allowances, the poten tial need to harmonize the allocation process regionally for certain sectors subject to i nter-state competition, and equity

across the various sectors here in California.

Offsets

Individual projects can be developed to achieve the reduction of emissions from activities not otherwise regulated, covered under a n emissions cap, or resulting from government incentives. These projects can generate "offsets,” i.e., verifiable reductions of emissions whose ownership can be tran sferred to others. The cap-andtrade rulemaking will establish appropriate rules f or use of offsets. As required by

28 Op. Cit. The proposed opinion has not yet been vo ted on by either the CPUC or the CEC. The Commissi ons are expected to vote on this proposed opinion befor e the December Board meeting when the Proposed Scop ing Plan will be considered for approval.

29 Recommendations of the Market Advisory Committee to the California Air Resources Board. Recommendations for Designing a Greenhouse Gas Cap- and-Trade System for California . June 30, 2007. p. 55. http://www.climatechange.ca.gov/publications/market _advisory_committee/2007-06-
29_MAC_FINAL_REPORT.PDF (accessed October 12, 2008)Scoping Plan II. Recommended Actions

37 AB 32, any reduction of greenhouse gas emissions us ed for compliance purposes must be real, permanent, quantifiable, verifiable, enforceable, and additional (HSC §38562(d)(1) and (2)). Offsets used to meet regula tory requirements must be quantified according to Board-adopted methodologies , and ARB must adopt a regulation to verify and enforce the reductions (HS C §38571). The criteria developed will ensure that the reductions are quantified accu rately and are not double-counted within the system.

Offsets can provide regulated entities a source of low-cost emissions reductions. Reductions from compliance offset projects must be quantified using rigorous measurement and enforcement protocols that provide a basis to determine whether the reductions are also additional, i.e., beyond what w ould have happened in the absence of the offset project. Establishing that reduction s are additional is one of the major challenges in establishing the validity of particul ar offset projects. Once a project can quantify emissions using an approved methodology, t he reductions of emissions must be verified to ensure that reductions actually occu rred.

While some offsets provide benefits, allowing unlim ited offsets would reduce the amount of reductions of greenhouse gas emissions oc curring within the sectors covered by the cap-and-trade program. This could r educe the local economic, environmental and public health co-benefits and del ay the transition to low-carbon energy systems within the capped sectors that will be necessary to meet our long term climate goals. The limit on the use of offsets and allowances from other systems within the WCI Partner jurisdiction program design assures that a majority of the emissions reductions required from 2012 to 2020 occ ur at entities and facilities covered by the cap and trade program. Consequently , the use of offsets and allowances from other systems are limited to no mor e than 49 percent of the required reduction of emissions. This quantitative limit wi ll help provide balance between the need to achieve meaningful emissions reductions fro m capped sources with the need to provide sources within capped sectors the opport unity for low-cost reduction opportunities that offsets can provide. The WCI of fset program may incorporate flexibility to use offsets and non-WCI allowances a cross the three compliance periods, which each WCI Partner jurisdiction could use at its discretion. ARB will apply the limit on offsets that is within its juris diction, such that the allowable offsets in each compliance period is less than half of the emissions reductions expected from capped sectors in that compliance period. Each WCI Partner jurisdiction may choose to adopt a more stringent limit on the use of offse ts and non-WCI allowances.

Offsets can also encourage the spread of clean, low carbon technologies outside California. High quality offset projects located o utside the state can help lower the compliance costs for regulated entities in Californ ia, while reducing greenhouse gas

emissions in areas that would otherwise lack the re sources needed to do so. International projects may also have significant en vironmental, economic and social benefits. Projects in the Mexican border region ma y be of particular interest, considering the opportunity to realize considerable co-benefits on both sides of the border. The Governor has recently signed a Memoran dum of Understanding with theII. Recommended Actions Scoping Plan

38 six Mexican border states that calls for cooperatio n on the development of project protocols for Mexican greenhouse gas emissions redu ction projects. 30 Additionally, defining project types related to imported commodit ies (such as cement) would enable California to provide incentives to reduce e missions associated with products that are imported into the state for our consumptio n.

California is committed to working at the internati onal level to reduce greenhouse gas emissions globally and finding ways to support the adoption of low-carbon technologies and sustainable development in the dev eloping world. ARB will work with WCI Partner jurisdictions and within the rulem aking process to establish an offsets program without geographic restrictions tha t includes sufficiently stringent criteria for creating offset credits to ensure the overall environmental integrity of the

program.

One concept being evaluated for accepting offsets f rom the developing world is to limit offsets to those jurisdictions that demonstra te performance in reducing emissions and/or achieving greenhouse gas intensity targets in certain carbon intensive sectors (e.g., cement), or in reducing em issions or enhancing sequestration through eligible forest carbon activities in accord ance with appropriate national or sub-national accounting frameworks. This could be achieved through an agreement to work jointly to develop minimum performance stan dards or sectoral benchmarks, backed by appropriate monitoring and accounting fra meworks. Such agreements would encourage early action in developing countrie s toward binding commitments, and could also reduce concerns about competitivenes s and risks associated with carbon leakage.



### 2. California Light 2. California Light-

- Duty Vehicle Duty Vehicle Duty Vehicle Greenhouse Gas Standards

Greenhouse Gas Standards Greenhouse Gas Standards

Implement adopted Pavley standards and planned seco nd phase of the program. Align zero-emission vehicle, alternative and renewa ble fuel and vehicle technology programs with long-term climate change goals.

Passenger vehicles are responsible for almost 30 pe rcent of California’s greenhouse gas emissions. To address these emissions, ARB is proposing a comprehensive threeprong strategy – reducing greenhouse gas emissions from vehicles, reducing the carbon content of the fuel these vehicles burn, and reducing the miles these vehicles travel. Transportation fuels and regional transpor tation-related greenhouse gas targets

are discussed later in the recommendations.

There are a number of efforts intended to reduce gr eenhouse gas emissions from California’s passenger vehicles, including the Pavl ey greenhouse gas vehicle

30 Memorandum of Understanding on Environmental Coope ration between the California Environmental Protection Agency, the California Department of Foo d and Agriculture and the California Resources Agen cy of the State of California, United States of America a nd the Ministry of Environment and Natural Resource s of the United Mexican States. February 13, 2008. http://gov.ca.gov/pdf/press/021308_MOU_English.pdf (accessed October 12, 2008)Scoping Plan II. Recommended Actions

39 standards to achieve near-term emission reductions, the zero-emission vehicle (ZEV) program to transform the future vehicle fleet, and the Alternative and Renewable Fuel and Vehicle Technology Program created by AB 118 (N úñez, Chapter 750, Statutes of 2007).

Pavley Greenhouse Gas Vehicle Standards Pavley Greenhouse Gas Vehicle Standards

AB 1493 (Pavley, Chapter 200, Statutes of 2002) dir ected ARB to adopt vehicle standards that lowered greenhouse gas emissions to the maximum extent technologically feasible, beginning with the 2009 m odel year. ARB adopted regulations in 2004 and applied to the U.S. Environ mental Protection Agency (U.S. EPA) for a waiver under the federal Clean Air Act to implement the regulation. The Pavley regulations incorporate both performance standards and market-based compliance mechanisms. To obtain additional reduct ions from the light duty fleet, ARB plans to adopt a second, more stringent, phase of the Pavley regulations.

Table 6 summarizes the estimated reduction of emiss ions for the Pavley regulations. In addition to delivering greenhouse gas emissions reductions, the standards will save money for Californians who purchase vehicles that c omply with the Pavley standards – an estimated average of $30 each month in avoided fuel costs.

To date, 13 other states have adopted California’s existing greenhouse gas standards for vehicles. Under federal law, California is the only state allowed to adopt its own vehicle standards (though other states are permitte d to adopt California’s more rigorous standards), but California cannot implemen t the regulations until U.S. EPA grants an administrative waiver. In December 2007, U.S. EPA denied California’s waiver request to implement the Pavley regulations. California and others are challenging that denial in Federal court. The regu lations have also been challenged by the automakers in federal courts, although to da te, those challenges have been

unsuccessful.

ARB is evaluating the use of feebates as a measure to achieve additional reductions from the mobile source sector, either as a backstop to the Pavley regulation if the regulation cannot be implemented, or as a supplemen t to Pavley if the waiver is approved and the regulation takes effect. AB 32 sp ecifically states that if the Pavley regulations do not remain in effect, ARB shall impl ement alternative regulations to control mobile sources to achieve equivalent or gre ater reductions of greenhouse gas emissions (HSC §38590). ARB is currently evaluatin g the use of a feebate program

as the mechanism to secure these reductions. A fee bate regulation would combine a rebate program for low-emitting vehicles with a fee program for high-emitting vehicles. This program would be designed in a way to generate equivalent or greater cumulative reductions of greenhouse gas emissions c ompared to what would have been achieved under the Pavley regulations. ARB wo uld also evaluate the potential to expand the program to include additional vehicle classes not currently included in the Pavley program for further greenhouse gas benef its.

If the U.S. EPA grants California’s request for a w aiver to proceed with implementation of the Pavley regulations, we will a nalyze the potential for pursuing aII. Recommended Actions Scoping Plan

40 feebate program that could complement the Pavley re gulations and achieve additional reductions of greenhouse gas emissions.

Zero- Emission Vehicle Program Emission Vehicle Program Emission Vehicle Program

The Zero Emission Vehicle (ZEV) program will play a n important role in helping California meet its 2020 and 2050 greenhouse gas em issions reduction requirements. Through 2012, the program requires placement of hun dreds of ZEVs (including hydrogen fuel cell and battery electric vehicles) a nd thousands of near-zero emission vehicles (plug-in hybrids, conventional hybrids, co mpressed natural gas vehicles). In the mid-term (2012-2015), the program will require placement of increasing numbers

of ZEVs and near-zero emission vehicles in Californ ia. In 2009, the Board will consider a proposal that is currently being develop ed to ensure that the ZEV program is optimally designed to help the State meet its 20 20 target and put us on the path to meeting our 2050 target of an 80 percent reduction in greenhouse gas emissions.

It is important to note that while the use of both battery-powered electric vehicles and plug-in hybrids (which can be plugged in to recharg e batteries) is not expected to increase electricity demand in the near term, over the longer term these technologies could result in meaningful new electricity demand. However, the expected increased electricity demand is likely to be met by off peak vehicle battery charging (i.e., overnight) to provide a means of load leveli ng and other possible benefits. 31

Air Quality Improvement Program/Alternative and Ren ewable Fuel and V ewable Fuel and Vehicle

ehicle Technology Program Technology Program

Under AB 118 (Núñez, Chapter 750, Statutes of 2007) , ARB is administering the Air Quality Improvement Program, which provides approxi mately $50 million per year for grants to fund clean vehicle/equipment projects and research on the air quality impacts of alternative fuels and advanced technolog y vehicles.

AB 118 also created the Alternative and Renewable F uel and Vehicle Technology Program and authorized CEC to spend up to $120 mill ion per year for over seven years (from 2008-2015) to develop, demonstrate, and deploy innovative technologies to transform California’s fuel and vehicle types. This program creates the opportunities for investment in technologies and fu els that will help meet the Low Carbon Fuel Standard, the AB 1007 (Pavley, Chapter 371, Statutes of 2005) goal of increasing alternative fuels, the AB 32 goal of red ucing greenhouse gas emissions to 1990 levels by 2020, and the State’s overall goal o f reducing greenhouse gas emissions 80 percent below 1990 levels by 2050. CE C and ARB are coordinating closely in the implementation of AB 118. In the lo ng-term, programs to reduce greenhouse gas emissions from cars would reduce hig hway funds because less fuel would be sold, reducing tax revenue. In coordinati on with other State agencies, ARB

31 There is also a potential for battery-electric and hybrid vehicles (both plug-in and traditional hybr id-electric) to be used in the future to provide electricity bac k into the electricity grid during times of especia lly high demand (peak periods).Scoping Plan II. Recommended Actions

41 will continue to evaluate the potential impacts of these shifts and identify potential

solutions.



### Table 6: California Light-Duty Vehicle Greenhouse Gas Standards

Recommendation
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-1 Pavley I and II – Light-Duty Vehicle Greenhouse Gas Standards 31.7

Total 31.7



### 3. Energy Efficiency 3. Energy Efficiency

Maximize energy efficiency building and appliance s tandards, and pursue additional efficiency efforts including new technologies, and new policy and implementation mechanisms. Pursue comparable investment in energy efficiency from all retail providers of electricity in California (including b oth investor-owned and publiclyowned utilities).

Energy-efficiency measures for both electricity and natural gas can reduce greenhouse gas emissions significantly. In 2003, t he CPUC and CEC adopted an Energy Action Plan that prioritized resources for m eeting California’s future energy needs, with energy efficiency being first in the “l oading order,” or highest priority. Since then, this policy goal has been codified into statute through legislation that requires electric utilities to meet their resource needs first with energy efficiency. 32

This measure would set new targets for statewide an nual energy demand reductions of 32,000 gigawatt hours and 800 million therms fro m business as usual 33 – enough to power more than 5 million homes, or replace the nee d to build about ten new large power plants (500 megawatts each). These targets r epresent a higher goal than existing efficiency targets established by CPUC for the investor-owned utilities due to the inclusion of innovative strategies above tradit ional utility programs. Achieving the State’s energy efficiency targets will require coordinated efforts from the State, the federal government, energy companies and custom ers. ARB will work with CEC and CPUC to facilitate these partnerships. A numbe r of these measures also have the potential to deliver significant economic benefits to California consumers, including

low-income households and small businesses. Califo rnia’s energy efficiency programs for buildings and appliances have generate d more than $50 billion in

32 SB 1037 (Kehoe, Chapter 366, Statutes of 2005) and AB 2021 (Levine, Chapter 734, Statutes of 2006) directed electricity corporations subject to CPUC’s authority and publicly-owned electricity utilities to first meet their unmet resource needs through all availab le energy efficiency and demand response resources that are cost effective, reliable and feasible.

33 The savings targeted here are additional to saving s currently assumed to be incorporated in CEC’s 200 7 demand forecasts. However, CEC has initiated a publ ic process to better determine the quantity of ener gy savings from standards, utility programs, and marke t effects that are embedded in the baseline demand forecast.II. Recommended Actions Scoping Plan

42 savings over the past three decades. Tables 7 and 8 summarize the reduction of greenhouse gas emissions.

Efficiency Efficiency

Achieving the energy efficiency target will require redoubled efforts to target industrial, agricultural, commercial, and residenti al end-use sectors, comprised of

both innovative new initiatives that have been embr aced by CEC’s energy policy reports and CPUC’s long-term strategic plan, and im provements to California’s traditional approaches of improved building standar ds and utility programs.

High-efficiency distributed generation applications like fuel cell technologies can also play an important role in helping the State meet it s requirements for reduction of greenhouse gas emissions. Key energy efficiency st rategies, grouped by type,

include:

Cross-cutting Strategy for Buildings

• “Zero Net Energy” buildings 34
Codes and Standards Strategies

• More stringent building codes and appliance efficie ncy standards

• Broader standards for new types of appliances and f or water efficiency

• Improved compliance and enforcement of existing sta ndards

• Voluntary efficiency and green building targets bey ond mandatory codes Strategies for Existing Buildings

• Voluntary and mandatory whole-building retrofits fo r existing buildings

• Innovative financing to overcome first-cost and spl it incentives for energy efficiency, on-site, renewables, and high efficienc y distributed generation Existing and Improved Utility Programs

• More aggressive utility programs to achieve long-te rm savings Other Needed Strategies

• Water system and water use efficiency and conservat ion measures

• Local government programs that lead by example and tap into local authority over planning, development, and code comp liance

• Additional industrial and agricultural efficiency i nitiatives

• Providing real time energy information technologies to help consumers conserve and optimize energy performance

With the support of key State agencies, utilities, local governments and others, the CPUC has recently adopted the California Long Term Energy Efficiency Strategic

34 Zero net energy refers to building energy use over the course of a typical year. When the building i s producing more electricity than it needs, it export s its surplus to the grid. When the building requir es more electricity than is being produced on-site, it draw s from the grid. Generally, when constructing a ZNE building, energy efficiency measures can result in up to 70% savings relative to existing building practices, wh ich then allows for renewables to meet the remaining load.Scoping Plan II. Recommended Actions

43 Plan

. 35 Released September 2008, this Plan sets forth a s et of strategies toward maximizing the achievement of cost-effective energy efficiency in California’s Electricity and Natural Gas sectors between 2009 an d 2020, and beyond. Its recommendations are the result of a year-long colla boration by energy experts, utilities, businesses, consumer groups, and governm ental organizations in California, throughout the west, nationally and internationally

.

For many of the above goals and others, the Strateg ic Plan discusses practical implementation strategies, detailing necessary part nerships among the state, its utilities, the private sector, and other market pla yers and timelines for near-term, midterm and long-term success. While the Strategic Pl an is the most current and innovative summary of energy efficiency strategies needed to meet State goals, additional planning and new strategies will likely be needed, both to achieve the 2020 emissions reduction goals and to set the State on a trajectory toward 2050.

Other innovative approaches could also be used to m otivate private investment in efficiency improvements. One example that will be evaluated during the development of the cap-and-trade program is the cre ation of a mechanism to make allowances available within the program to provide incentives for local governments, third party providers, or others to pursue projects to reduce greenhouse gas emissions, including the bundling of energy efficiency improve ments for small businesses or in targeted communities.

Solar Water Heating Solar Water Heating

Solar water heating systems offer a potential for n atural gas savings in California. A solar water heating system offsets the use of natur al gas by using the sun to heat water, typically reducing the need for conventional water heating by about two-thirds. Successful implementation of the zero net energy ta rget for new buildings will require significant growth in California’s solar water heat ing system manufacturing and installation industry. The State has initiated a p rogram to move toward a self sustaining solar water heater industry. The Solar Hot Water and Efficiency Act of 2007 (SHWEA) authorized a ten year, $250-million in centive program for solar water heaters with a goal of promoting the installation o f 200,000 systems in California by

2017. 36

Combined Heat and Power Combined Heat and Power

Combined heat and power (CHP), also referred to as cogeneration, produces electricity and useful thermal energy in an integra ted system. The widespread development of efficient CHP systems would help dis place the need to develop new, or expand existing, power plants. This measure set s a target of an additional

35 California Public Utilities Commission. California Long Term Energy Efficiency Strategic Pl an. September

2008. http://www.californiaenergyefficiency.com/docs/EESt rategicPlan.pdf (accessed October 12, 2008).

36 Established under Assembly Bill 1470 (Huffman, Cha pter 536, Statues of 2007).II. Recommended Actions Scoping Plan

44 4,000 MW of installed CHP capacity by 2020, enough to displace approximately 30,000 GWh of demand from other power generation so urces. 37

California has supported CHP for many years, but ma rket and other barriers continue to keep CHP from reaching its full market potential . Increasing the deployment of efficient CHP will require a multi-pronged approach that includes addressing significant barriers and instituting incentives or mandates where appropriate. These approaches could include such options as utility-pr ovided incentive payments, the creation of a CHP portfolio standard, transmission and distribution support payments,

or the use of feed-in tariffs.



### Table 7: Energy Efficiency Recommendation - Electr icity

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

E-1 Energy Efficiency

(32,000 GWh of Reduced Demand)

• Increased Utility Energy Efficiency Programs

• More Stringent Building & Appliance Standards

• Additional Efficiency and Conservation Programs 15.2

E-2 Increase Combined Heat and Power Use by 30,000 GWh 6.7

Total 21.9



### Table 8: Energy Efficiency Recommendation - Commer cial and Residential
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

CR-1 Energy Efficiency (800 Million Therms Reduced Consu mption)

• Utility Energy Efficiency Programs

• Building and Appliance Standards

• Additional Efficiency and Conservation Programs 4.3

CR-2 Solar Water Heating (AB 1470 goal) 0.1

Total 4.4



### 4. Renewables Portfolio Standard 4. Renewables Portfolio Standard

Achieve 33 percent renewable energy mix statewide.

CEC estimates that about 12 percent of California’s retail electric load is currently met with renewable resources. Renewable energy inc ludes (but is not limited to) wind, solar, geothermal, small hydroelectric, bioma ss, anaerobic digestion, and landfill gas. California’s current Renewables Port folio Standard (RPS) is intended to

37 Accounting for avoided transmission line losses of seven percent, this amount of CHP would actually displace 32,000 GWh from the grid.Scoping Plan II. Recommended Actions

45 increase that share to 20 percent by 2010. Increas ed use of renewables will decrease California’s reliance on fossil fuels, thus reducin g emissions of greenhouse gases from the Electricity sector. Based on Governor Sch warzenegger’s call for a statewide 33 percent RPS, the Plan anticipates that Californi a will have 33 percent of its electricity provided by renewable resources by 2020 , and includes the reduction of greenhouse gas emissions based on this level.

Senate Bill 107 (Simitian, Chapter 464, Statutes of2006) obligates the investorowned utilities (IOUs) to increase the share of ren ewables in their electricity portfolios to 20 percent by 2010. Meanwhile, the p ublicly-owned utilities (POUs) are encouraged but not required to meet the same RPS. The governing boards of the state’s three largest POUs, the Los Angeles Departm ent of Water and Power (LADWP), the Sacramento Municipal Utility District (SMUD), and the Imperial Irrigation District (IID), have adopted policies to achieve 20 percent renewables by 2010 or 2011. LADWP and IID have established targe ts of 35 and 30 percent, respectively, by 2020.

In 2005, CEC and CPUC committed in the Energy Actio n Plan II to “evaluate and develop implementation paths for achieving renewabl e resource goals beyond 2010, including 33 percent renewables by 2020, in light o f cost-benefit and risk analysis, for all load serving entities.” The proposed opinion i n the CPUC/CEC joint proceeding lends strong support for obtaining 33 percent of Ca lifornia’s electricity from renewables, and states the two Commissions’ belief that this target is achievable if the State commits to significant investments in transmi ssion infrastructure and key program augmentation. As with the energy efficienc y target, achieving the 33 percent goal will require broad-based participation from ma ny parties and the removal of barriers. CEC, CPUC, California Independent System Operator (CAISO), and ARB are working with California utilities and other sta keholders to formally establish and meet this goal.

A key prerequisite to reaching a target of 33 perce nt renewables will be to provide

sufficient electric transmission lines to renewable resource zones and system changes to allow integration of large quantities of intermi ttent wind and solar generation. The Renewable Energy Transmission Initiative (RETI) is a broad collaborative of State agencies, utilities, the environmental community, a nd renewable generation developers that are working cooperatively to identi fy and prioritize renewable generation zones and associated transmission projec ts. Although biomass, geothermal, and small-scale hydroelectric generatio n can provide steady baseload power, other renewable generation is intermittent ( wind) or varies over time (solar). Therefore, integration of intermittent generation i nto the electricity system will require grid improvements so that fluctuations in p ower availability can be accommodated. Improved communications technology, automated demand response, electric sub-station improvements and oth er modern technologies must be implemented both to facilitate intermittent renewab les, and to improve grid reliability.II. Recommended Actions Scoping Plan

46 Another key action that may help to achieve the ren ewable energy goals is to reduce the complexity and cost faced by small renewable de velopers in contracting with utilities to supply renewable generation. This is particularly important for projects offering below 20 megawatts of generation capacity. One such option may be a feedin tariff for all RPS-eligible renewable energy fac ilities up to 20 megawatts in size. This mechanism was recommended in CEC’s 2007 Integr ated Energy Policy Report. Such a tariff, set at an appropriate level, could b enefit small-scale facilities by allowing them to be brought into the electricity gr id more rapidly.

For the purposes of calculating the reduction of gr eenhouse gas emissions in this Scoping Plan, ARB is counting emissions avoided by increasing the percentage of renewables in California’s electricity mix from the current level of 12 percent to the 33 percent goal, as shown in Table 9.



### Table 9: Renewables Portfolio Standard Recommendat ion
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

E-3 Achieve a 33% renewables mix by 2020 21.3

Total 21.3



### 5. Low Carbon Fuel Standard 5. Low Carbon Fuel Standard

Develop and adopt the Low Carbon Fuel Standard.

Because transportation is the largest single source of greenhouse gas emissions in California, the State is taking an integrated appro ach to reducing emissions from this sector. Beyond including vehicle efficiency improv ements and lowering vehicle miles traveled, the State is proposing to reduce th e carbon intensity of transportation

fuels consumed in California.

To reduce the carbon intensity of transportation fu els, ARB is developing a Low Carbon Fuel Standard (LCFS), which would reduce the carbon intensity of California's transportation fuels by at least ten p ercent by 2020 as called for by Governor Schwarzenegger in Executive Order S-01-07.

LCFS will incorporate compliance mechanisms that pr ovide flexibility to fuel providers in how they meet the requirements to redu ce greenhouse gas emissions. The LCFS will examine the full fuel cycle impacts o f transportation fuels and ARB will work to design the regulation in a way that mo st effectively addresses the issues raised by the Environmental Justice Advisory Commit tee and other stakeholders. ARB identified the LCFS as a Discrete Early Action item, and is developing a regulation for Board consideration in March 2009. A 10 percent reduction in the intensity of transportation fuels is expected to eq uate to a reduction of

16.5 MMTCO 2 E in 2020. However, in order to account for possib le overlap ofScoping Plan II. Recommended Actions

47 benefits between LCFS and the Pavley greenhouse gas standards, ARB has

discounted the contribution of LCFS to 15 MMTCO 2 E.



### Table 10: Low Carbon Fuel Standard Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-2 Low Carbon Fuel Standard (Discrete Early Action ) 15

Total 15



### 6. 6. Regional Transportation Regional Transportation Regional Transportation- Related Greenhouse Gas Targets Related Greenhouse Gas Targets Related Greenhouse Gas Targets

Develop regional greenhouse gas emissions reduction targets for passenger vehicles.

Establishment of Regional Targets Establishment of Regional Targets

On September 30, 2008, Governor Arnold Schwarzenegg er signed Senate Bill 375 (Steinberg) which establishes mechanisms for the de velopment of regional targets for reducing passenger vehicle greenhouse gas emissions . Through the SB 375 process, regions will work to integrate development patterns and the transportation network in a way that achieves the reduction of greenhouse gas emissions while meeting housing needs and other regional planning objectives. This new law reflects the importance of achieving significant additional reductions of gree nhouse gas emissions from changed land use patterns and improved transportation to he lp achieve the goals of AB 32.

SB 375 requires ARB to develop, in consultation wit h metropolitan planning organizations (MPOs), passenger vehicle greenhouse gas emissions reduction targets for 2020 and 2035 by September 30, 2010. It sets f orth a collaborative process to establish these targets, including the appointment by ARB of a Regional Targets Advisory Committee to recommend factors to be consi dered and methodologies for setting greenhouse gas emissions reduction targets. SB 375 also provides

incentives – relief from certain California Environ mental Quality Act (CEQA) requirements for development projects that are cons istent with regional plans that achieve the targets.

Reaching the Targets Reaching the Targets

Transportation planning is done on a regional level in major urban areas, through the Metropolitan Planning Organizations. These MPOs ar e required by the federal government to prepare regional transportation plans (RTPs) in order to receive federal transportation dollars. These plans must reflect t he land uses called out in city and county general plans. Regional planning efforts pr ovide an opportunity for community residents to help select future growth sc enarios that lead to more sustainable and energy efficient communities. Such plans should be developed through an extensive public process to provide for local accountability.II. Recommended Actions Scoping Plan

48 SB 375 requires MPOs to prepare a sustainable commu nities strategy to reach the regional target provided by ARB. MPOs would use th e sustainable communities strategy for the land use pattern underlying the re gion’s transportation plan. If the strategy does not meet the target, the MPO must doc ument the impediments and show how the target could be met with an alternative pla nning strategy. The CEQA relief would be provided to those projects that are consis tent with either the sustainable communities strategy or alternative planning strate gy, whichever meets the target.

Many regions in California have conducted comprehen sive scenario planning, called Blueprint planning, that engages a broad set of sta keholders at the local level on the impacts of land use and transportation choices. Th e State has allocated resources to initiate or augment existing Blueprint efforts of M POs. These efforts focus on fostering efficient land use patterns that not only reduce vehicle travel but also accommodate an adequate supply of housing, reduce i mpacts on valuable habitat and productive farmland, increase resource use efficien cy, and promote a prosperous regional economy. Blueprint planning can play an i mportant role in the SB 375 process by helping inform target-setting efforts an d building strong sustainable communities strategies.

Local governments will play a significant role in t he regional planning process to reach passenger vehicle greenhouse gas emissions re duction targets. Local governments have the ability to directly influence both the siting and design of new residential and commercial developments in a way th at reduces greenhouse gases associated with vehicle travel, as well as energy, water, and waste. A partnership of local and regional agencies is needed to create a s ustainable vision for the future that accommodates population growth in a carbon efficien t way while meeting housing needs and other planning goals. Integration of the sustainable communities strategies or alternative planning strategies with local gener al plans will be key to the achievement of these goals. State, regional, and l ocal agencies must work together to prioritize and create the supporting policies, prog rams, incentives, guidance, and funding to assist local actions to help ensure regi onal targets are met.

Enhanced public transit service combined with incen tives for land use development that provides a better market for public transit wi ll play an important role in helping to reach regional targets.

SB 375 maintains regions’ flexibility in the develo pment of sustainable communities strategies. There are many different ways regions can plan and work toward reducing the growth in vehicle travel. Increasing low-carbo n travel choices (public transit, carpooling, walking and biking) combined with land use patterns and infrastructure that support these low-carbon modes of travel, can decrease average vehicle trip lengths by bringing more people closer to more dest inations. The need for integrated strategies is supported by the current transportati on and land use modeling literature.

Supporting measures that should be considered in bo th the regional target-setting and sustainable communities strategy processes include the following:Scoping Plan II. Recommended Actions

49 • Congestion pricing strategies can provide a method of efficiently managing traffic demand while raising funds for needed transit, biki ng and pedestrian infrastructure investment. Regional and local agen cies, however, do not have the authority to pursue these strategies on their own, as federal approval and State authorization must be provided for regional impleme ntation of most pricing

measures.

• Indirect source rules for new development have alre ady been implemented by some local air districts and proposed by others for purposes of criteria pollution reduction. Regions should evaluate the need for me asures that would ensure the mitigation of high carbon footprint development out side of the sustainable communities strategies or alternative planning stra tegies that meet the targets

established under SB 375.

• Programs to reduce vehicle trips while preserving p ersonal mobility, such as employee transit incentives, telework programs, car sharing, parking policies, public education programs and other strategies that enhance and complement land use and transit strategies can be implemented and c oordinated by regional and local agencies and stakeholder groups.

Another way to encourage greenhouse gas reductions from vehicle travel is through pay as you drive insurance (PAYD), a structure in w hich drivers realize a direct financial benefit from driving less. The Californi a Insurance Commissioner recently announced support for PAYD and has proposed regulat ions to permit PAYD on a voluntary basis.

Separate emissions reduction estimates for these st rategies are not quantified here. As regional targets are developed in the SB 375 pro cess, ARB will work with regions to quantify the benefits in the context of the targ ets.

Estimating the Benefits of Regional Targets Estimating the Benefits of Regional Targets

The ARB estimate of the statewide benefit of region al transportation-related greenhouse gas emissions reduction targets is based on analysis of research results quantifying the effects of land use and transportat ion strategies. The emissions

reduction number in Table 11 is not the statewide m etric for regional targets that must be developed as SB 375 is implemented. The emissio ns target will ultimately be determined during the SB 375 process.

The possible impacts of land use and transportation policies have been well documented. Most recently, a 2008 U.C. Berkeley st udy 38 reviewed over 20

38 Rodier, Caroline. U.C. Berkeley, Transportation Su stainability Research Center, “A Review of the International Modeling Literature: Transit, Land Us e, and Auto Pricing Strategies to Reduce Vehicle Mi les Traveled and Greenhouse Gas Emissions,” August 2008

. http://www.arb.ca.gov/planning/tsaq/docs/rodier_8-1

- 08_trb_paper.pdf

(accessed October 12, 2008)II. Recommended Actions Scoping Plan

50 modeling studies from California (including the Sta te’s four largest MPOs), other states and Europe. The study found a range of 0.4 to 7.7 percent reduction in vehicle miles traveled (VMT) resulting from a combination o f land use and enhanced transit policies compared to a business-as-usual case over a 10-year horizon, with benefits doubling by 2030, as shown in Figure 4. With the i nclusion of additional measures such as pricing policies, the reduction of greenhou se gas emissions can be greater. These strategies will be considered during the targ et-setting process. Sophisticated land use and transportation models can best assess these effects. As part of the development of regional targets, technical tools wi ll need to be refined to ensure sound quantification techniques are available.



### Figure 4

The potential benefits of this measure that can be realized by 2020 (as shown in Table 11) were estimated after first accounting for the benefits of the vehicle technology and efficiency measures in the plan. It was calculated based on the U.C. Berkeley study’s median value of 4 percent per capi ta VMT reduction over a 10-year time horizon. This value should not be interpreted as the final estimate of the benefits

of this measure. The current academic literature s upports this realistic statewide estimate of potential benefits, but the ultimate be nefit will be determined as an outcome of SB 375 implementation on a regional leve l. The incentives for sustainable planning in SB 375 can set California o n a new path. ARB’s establishment of regional targets in 2010, combined with the Regional Targets Advisory Committee process, required by the legisla tion, provides a clear mechanism for maximizing the benefits of this measure.

Additional Benefits of Regional Targets and Land Us e Strategies e Strategies

Land use and transportation measures that help redu ce vehicle travel will also provide multiple benefits beyond greenhouse gas reductions. Quality of life will be improvedScoping Plan II. Recommended Actions

51 by increasing access to a variety of mobility optio ns such as transit, biking, and walking, and will provide a diversity of housing op tions focused on proximity to jobs, recreation, and services. Other important state an d community goals that could be met through better integrated land use and transpor tation planning include agricultural, open space and habitat preservation, improved water quality, positive health effects, and the reduction of smog forming p ollutants.

Growing more sustainably has the potential to provi de additional greenhouse gas and energy savings by encouraging more compact, mixed-u se developments resulting in reduced demand for electricity and heating and cool ing energy. These land userelated energy savings will contribute toward the P lan’s energy efficiency measures to achieve the goal of reducing electricity and nat ural gas usage. ARB is continuing to evaluate the greenhouse gas emissions reductions that may be additional to the proposed measures in this plan.



### Table 11: Regional Transportation-Related Greenhou se Gas Targets

Recommendation
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-3 Regional Transportation-Related Greenhouse Gas Targets 39 5

Total 5



### 7. Vehicle Efficiency Measures 7. Vehicle Efficiency Measures

Implement light-duty vehicle efficiency measures.

Several additional measures could reduce light-duty vehicle greenhouse gas emissions. The California Integrated Waste Managem ent Board (CIWMB) with various partners continues to conduct a public awar eness campaign to promote sustainable tire practices. ARB is pursuing a regu lation to ensure that tires are properly inflated when vehicles are serviced. In a ddition, CEC in consultation with CIWMB is developing an efficient tire program focus ing first on data gathering and outreach, then on potential adoption of minimum fue l-efficient tire standards, and lastly on the development of consumer information r equirements for replacing tires. ARB is also pursuing ways to reduce engine load via lower friction oil and reducing the need for air conditioner use. ARB is actively engaged in the regulatory development process for the tire inflation componen t of this measure. Current information indicates the reduction of greenhouse g as emissions is likely to be less than estimated in the Draft Scoping Plan. ARB has adjusted the estimated reductions

shown in Table 12 to reflect this.

39 This number represents an estimate of what may be achieved from local land use changes. It is not th e SB 375 regional target. ARB will establish regiona l targets for each MPO region following the input o f the Regional Targets Advisory Committee and a public co nsultation process with MPOs and other stakeholders per SB 375.II. Recommended Actions Scoping Plan

52 

### Table 12: Vehicle Efficiency Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-4 Vehicle Efficiency Measures 4.5

Total 4.5



### 8. Goods Movement 8. Goods Movement

Implement adopted regulations for the use of shore power for ships at berth. Improve efficiency in goods movement activities.

A significant portion of greenhouse gas emissions f rom transportation activities comes from the movement of freight or goods through out the state. Activity at California ports is forecast to increase by 250 per cent between now and 2020. Both the Goods Movement Emission Reduction Plan (GMERP) and the 2007 State Implementation Plan (SIP) contain numerous measures designed to reduce the public health impact of goods movement activities in Calif ornia. ARB has already adopted a regulation to require ship electrification at ports . Proposition 1B funds, as well as clean air plans being implemented by California’s p orts, will also help reduce greenhouse gas emissions while cutting criteria pol lutant and toxic diesel emissions. ARB is proposing to develop and implement additiona l measures to reduce greenhouse gas emissions due to goods movement from trucks, ports and other related facilities. The anticipated reductions wou ld be above and beyond what is already expected in the GMERP and the SIP. This ef fort should provide accompanying reductions in air toxics and smog form ing emissions. The estimated reduction of greenhouse gas emissions is shown in T able 13.

After further evaluation, ARB incorporated the Draf t Scoping Plan’s Heavy-Duty Vehicle-Efficiency measure into the Goods Movement measure. A Heavy-Duty Engine Efficiency measure could reduce emissions as sociated with goods movement through improvements which could involve advanced c ombustion strategies, friction reduction, waste heat recovery, and electrification of accessories. ARB will consider setting requirements and standards for heavy-duty e ngine efficiency in the future if higher levels of efficiency are not being produced either in response to market forces (fuel costs) or federal standards.



### Table 13: Goods Movement Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-5 Ship Electrification at Ports (Discrete Early A ction) 0.2

T-6 Goods Movement Efficiency Measures

• System-Wide Efficiency Improvements 3.5

Total 3.7Scoping Plan II. Recommended Actions

53 

### 9. Million Solar Roof 9. Million Solar Roofs Program

s Program s Program

Install 3,000 MW of solar-electric capacity under C alifornia’s existing solar

programs.

As part of Governor Schwarzenegger’s Million Solar Roofs Program, California has set a goal to install 3,000 megawatts (MW) of new s olar capacity by 2017 – moving the state toward a cleaner energy future and helpin g lower the cost of solar systems

for consumers. The Million Solar Roofs Initiative is a ratepayer-financed incentive program aimed at transforming the market for roofto p solar systems by driving down costs over time. Created under Senate Bill 1 (Murr ay, Chapter 132, Statutes of 2006), the Million Solar Roofs Program includes CPUC’s Cal ifornia Solar Initiative and CEC’s New Solar Homes Partnership, and requires pub licly-owned utilities (POUs) to adopt, implement and finance a solar incentive p rogram. This measure would offset electricity from the grid, thereby reducing greenhouse gas emissions. The

estimated emissions reductions are shown in Table 1 4.

Obtaining the incentives requires the building owne rs or developers to meet certain efficiency requirements: specifically, that new con struction projects meet energy efficiency levels that exceed the State’s Title 24 Building Energy Efficiency Standards, and that existing commercial buildings u ndergo an energy audit. Thus, the program is also a mechanism for achieving the effic iency targets for the Energy sector. By requiring greater energy efficiency for projects that seek solar incentives, the State would be able to reduce both electricity and natural gas needs and their associated greenhouse gas emissions.



### Table 14: Million Solar Roofs Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

E-4 Million Solar Roofs (including California Solar Ini tiative, New

Solar Homes Partnership and solar programs of publi cly owned utilities)

• Target of 3000 MW Total Installation by 2020 2.1

Total 2.1



### 10. Medium/Heavy 10. Medium/Heavy-

- Duty Vehicles Duty Vehicles Duty Vehicles

Adopt medium and heavy-duty vehicle efficiency meas ures.

Medium- and heavy-duty vehicles account for approxi mately 20 percent of the transportation greenhouse gas inventory. Requiring retrofits to improve the fuel efficiency of heavy-duty trucks could include a req uirement for devices that reduce aerodynamic drag and rolling resistance. In additi on, hybridization of medium- andII. Recommended Actions Scoping Plan

54 heavy-duty vehicles would also reduce greenhouse ga s emissions through increased fuel efficiency. Hybrid trucks would likely achiev e the greatest benefits in urban, stop-and-go applications, such as parcel delivery, utility services, transit, and other

vocational work trucks. The recommendation for thi s sector is summarized in

Table 15.



### Table 15: Medium/Heavy-Duty Vehicle Recommendation
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

T-7 Heavy-Duty Vehicle Greenhouse Gas Emissions Reducti on

Measure - Aerodynamic Efficiency (Discrete Early Ac tion) 0.9

T-8 Medium/Heavy-Duty Vehicle Hybridization 0.5

Total 1.4



### 11. Industrial Emissions 11. Industrial Emissions

Require assessment of large industrial sources to d etermine whether individual sources within a facility can cost-effectively redu ce greenhouse gas emissions and provide other pollution reduction co-benefits. Red uce greenhouse gas emissions from fugitive emissions from oil and gas extraction and gas transmission. Adopt and implement regulations to control fugitive methane e missions and reduce flaring at refineries.

Energy Efficiency and Co Energy Efficiency and Co-

- Benefits Audits for Large Industrial Sources Benefits Audits for Large Industrial Sources Benefits Audits for Large Industrial Sources

This measure would apply to the direct greenhouse g as emissions at major industrial facilities emitting more than 0.5 MMTCO 2 E per year. In general, these facilities also have significant emissions of criteria air pollutan ts, toxic air pollutants, or both. Major industrial facilities include power plants, r efineries, cement plants, and miscellaneous other sources. ARB would implement t his measure through a regulation, requiring each facility to conduct an e nergy efficiency audit of individual combustion and other direct sources of greenhouse g ases within the facility to determine the potential reduction opportunities, in cluding criteria air pollutants and

toxic air contaminants. The audit would include an assessment of the impacts of replacing or upgrading older, less efficient units such as boilers and heaters, or replacing the units with combined heat and power (C HP) units. The measure is

summarized in Table 16.

The audit would help ARB to identify potential redu ctions of greenhouse gas emissions reductions, the associated costs and cost -effectiveness, their technical feasibility, and the potential to reduce air pollut ion impacts at the local or regional

level. ARB will use the results to determine if ce rtain emissions sources within a facility can make cost-effective reductions of gree nhouse gas emissions that also provide reductions in other criteria or toxic pollu tants. Where this is the case, rule provisions or permit conditions would be considered to ensure the best combinationScoping Plan II. Recommended Actions

55 of pollution reductions. Nothing in this measure w ould delay known cost-effective strategies that otherwise would be required.

The California Long Term Energy Efficiency Strategi c Plan (CPUC) discusses a number of strategies associated with improving indu strial sector efficiency and greenhouse gas emissions reductions, including the development of certification protocols for industrial efficiency improvements to develop market recognition for efficiency gains.

Oil and Gas Recovery Operations and Transmission/Re fineries fineries

California is a major oil and gas producer. Crude oil, both from in-state and imported sources, is processed at 21 oil refineries in the s tate. In addition to conforming to the requirements of the cap-and-trade program and the a udit measure, ARB has identified four specific measures for development and implemen tation, two for oil and gas recovery operations and gas transmission, and two f or refineries. Other industrial measures that were under consideration affect green house gas emissions sources that are fully regulated under cap and trade, which ARB concluded would provide costeffective reductions of greenhouse gas emissions. All measures would be designed to

secure a combination of cost-effective reductions i n greenhouse gas emissions, criteria air pollutants and air toxics. Two measur es would be developed to reduce methane emissions in the oil and gas production and gas transmission processes from leaks and incomplete combustion of methane (used as fuel). These measures would include improved leak detection, process modificati ons, equipment retrofits, installation of new equipment, and best management practices. The first measure would affect oil and gas producers. The second wou ld impact operators of natural gas pipeline systems. These fugitive emissions are not proposed to be covered by a cap and trade program, although combustion-related emissions from these operations are proposed to be covered. The WCI partner jurisd ictions are currently evaluating the inclusion of fugitive methane emissions to the extent that adequate quantification methods exist. During implementation of this measu re, ARB will determine whether

these emissions will also be covered in California’ s cap-and-trade program. If the emissions are covered under the cap, ARB will evalu ate the need for the measures

described here.

Two measures would be developed for oil refineries. The first would limit the greenhouse gas emissions from refinery flares while preserving flaring as needed for safety reasons. The second would remove the curren t fugitive methane exemption in most refinery Volatile Organic Compounds (VOC) regu lations. This exemption was established because methane does not appreciably co ntribute to urban smog, but is inappropriate given the role that methane plays in global warming. ARB believes these measures would provide cost-effective greenho use gas, criteria pollutants and

air toxics emissions reductions. Most combustion a nd other process emissions at refineries would be governed by the cap-and-trade p rogram. As with the oil and gas production measures above, the need for these measu res would be evaluated if fugitive methane is included in the WCI cap-and-tra de program.II. Recommended Actions Scoping Plan

56 

### Table 16: Industrial Emissions Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

I-1 Energy Efficiency and Co-Benefits Audits for Large Industrial

Sources TBD

I-2 Oil and Gas Extraction GHG Emissions Reduction 0.2

I-3 GHG Leak Reduction from Oil and Gas Transmissio n 0.9
I-4 Refinery Flare Recovery Process Improvements 0. 33

I-5 Removal of Methane Exemption from Existing Refinery

Regulations 0.01

Total 1.4



### 12. 12. High Speed Rail High Speed Rail High Speed Rail

Support implementation of a high speed rail system.

A high speed rail (HSR) system is part of the state wide strategy to provide more mobility choice and reduce greenhouse gas emissions . This measure supports implementation of plans to construct and operate a HSR system between northern and southern California. As planned, the HSR is a 700- mile-long rail system capable of speeds in excess of 200 miles per hour on dedicated , fully-grade separated tracks with state-of-the-art safety, signaling and automated ra il control systems. The system would serve the major metropolitan centers of Calif ornia in 2030 and is projected to displace between 86 and 117 million riders from oth er travel modes in 2030.

For Phase 1 of the HSR, between San Francisco and A naheim, 2020 is projected to be the first year of service, with 26 percent of the p rojected 2030 full system ridership levels. The anticipated reduction of greenhouse ga s emissions are shown in Table 17. HSR system ridership and the benefits associated wi th it are anticipated to increase over time as additional portions of the planned sys tem are completed. Over the long term, the system also has the potential to support the reduction of greenhouse gas emissions in the transportation sector from land us e strategies, by providing opportunities for and encouraging low-impact transi t-oriented development.

HSR implementation was initiated recently when Cali fornia voters approved Proposition 1A, the “Safe, Reliable High-Speed Pass enger Train Bond Act for the 21st Century,” as it appeared on the November 2008 ballot. HSR is anticipated to begin in 2010, with full implementation anticipated in 2030.



### Table 17: High Speed Rail Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
T-9 High Speed Rail 1.0

Total 1.0Scoping Plan II. Recommended Actions

57 

### 13. Green Building Strategy 13. Green Building Strategy

Expand the use of green building practices to reduc e the carbon footprint of California’s new and existing inventory of building s.

Collectively, energy use and related activities by buildings are the second largest contributor to California’s greenhouse gas emission s. Almost one-quarter of California’s greenhouse gas emissions can be attrib uted to buildings. 40 As the Governor recognized in his Green Building Initiativ e (Executive Order S-20-04), significant reductions in greenhouse gas emissions can be achieved through the design and construction of new green buildings as w ell as the sustainable operation, retrofitting, and renovation of existing buildings.

A Green Building strategy offers a comprehensive ap proach to reducing direct and upstream greenhouse gas emissions that cross-cuts m ultiple sectors including Electricity/Natural Gas, Water, Recycling/Waste, an d Transportation. Green buildings are designed, constructed, renovated, ope rated, and maintained using an integrated approach that reduces greenhouse gas emi ssions by maximizing energy and resource efficiency. Employing a whole-building de sign approach can create tremendous synergies that result in multiple benefi ts at little or no net cost, allowing for efficiencies that would never be possible on an incremental basis.

A Green Building strategy will produce greenhouse g as saving through buildings that exceed minimum energy efficiency standards, decreas e consumption of potable water, reduce solid waste during construction and o peration, and incorporate

sustainable materials. Combined these measures can also contribute to healthy indoor air quality, protect human health and minimize impa cts to the environment. A Green Building strategy also includes siting consideratio ns. Buildings that are sited close to public transportation or near mixed-use areas can w ork in tandem with transportationrelated strategies to decrease greenhouse gas emiss ions that result from that sector.

In July 2008, the California Building Standards Com mission (CBSC) adopted the Green Building Standards Code (GBSC) for all new co nstruction in the state. While the current version of the commercial green buildin g code is voluntary, CBSC anticipates adopting a mandatory code in 2011 which will institute minimum environmental performance standards for all occupan cies. The Green Building Strategy includes Zero Net Energy (ZNE) goals for n ew and existing homes and commercial buildings consistent with the recently-a dopted California Long Term Energy Efficiency Strategic Plan. ARB encourages l ocal governments to raise the bar by adopting “beyond-code” green building requiremen ts. To assist this effort, State government would develop and regularly tighten volu ntary standards, written in GBSC language for easy adoption by local jurisdicti ons.

40 Greenhouse gas emission estimates from electricity , natural gas, and water use in homes and commercia l buildings.II. Recommended Actions Scoping Plan

58 As we approach the 2020 and 2030 targets for zero e nergy buildings, these “percent above code” targets must shift to “percent of ZNE” targets. Zero energy new and existing buildings can be an overarching and unifyi ng concept for energy efficiency in buildings, as discussed above (building energy e fficiency measures E-1 and CR-1).

In order to achieve statewide GHG emission reductio ns, these targets should be expanded to address other aspects of environmental performance. For example, these targets could be re-framed as a carbon footprint re duction goal for a 35 percent reduction in both energy and water consumption. F or commercial buildings, a 2011 target should be established such that a quarter of all new buildings reduce energy and water consumption by at least 25 percent beyond cod e.

Furthermore, retrofitting existing residential and commercial buildings would achieve substantial greenhouse gas emissions reduction bene fits. This Scoping Plan recommends the establishment of an environmental pe rformance rating system for homes and commercial buildings and further recommen ds that California adopt mechanisms to encourage and require retrofits for b uildings that do not meet minimum standards of performance.

An effective green building framework can operate t o deliver reductions of greenhouse gas emissions in multiple sectors. The green building strategies provide a vehicle to achieve the statewide electricity and na tural gas efficiency targets and lower greenhouse gas emissions from the waste and w ater transport sectors. Achieving these green building emissions reductions will require coordinated efforts from a broad range of stakeholders, and new financi ng mechanisms to motivate investment in green building strategies.

Achieving significant greenhouse gas emissions redu ctions from new and existing buildings will require a combination of green build ing measures for new construction and retrofits to existing buildings. The State of California will set an example by requiring all new State buildings to exceed existin g Green Building Initiative energy goals and achieve nationally-recognized building su stainability standards such as Leadership in Energy and Environmental Design - New Construction (LEED-NC) “Gold” certification. Existing State buildings wou ld also be retrofitted to achieve higher standards equivalent to LEED-EB for existing buildings (EB) “Silver.” All new schools should be required to meet the Collabor ative for High Performance Schools (CHPS) 2009 criteria. Existing schools app lying for modernization funds should also be required to meet CHPS 2009 criteria.

ARB estimates that the greenhouse gas savings from green building measures as approximately 26 MMTCO 2 E, as shown in Table 18 below. Most of these reduc tions are accounted for in the Electricity, Waste and Wat er sectors. Because of this, ARB has assigned all emissions reductions that occur as a result of green building strategies to other sectors for purposes of meeting AB 32 requirements, but will

continue to evaluate and refine the emissions from this sector. As such, this strategy will require implementation from various entities w ithin California, including CEC,Scoping Plan II. Recommended Actions

59 PUC, State Architect, and others, each taking the l ead in their area of authority and expertise.



### Table 18: Green Buildings Recommendation
(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
GB-1 Green Buildings 41 26

Total 26



### 14. High Global Warming Potential Gases 14. High Global Warming Potential Gases

Adopt measures to reduce high global warming potent ial gases.

High global warming potential (GWP) gases pose a un ique challenge. Just a few pounds of high GWP materials can have the equivalen t effect on global warming as

several tons of carbon dioxide. For example, the average refri gerator has about a half-pound of refrigerant and about one pound of “b lowing agents” used to make the insulating foam. If these gases were released into the atmosphere, they would have a global warming impact equivalent to five metric ton s of CO 2

.

High GWP chemicals are very common and are used in many different applications such as refrigeration, air conditioning systems, fi re suppression systems, and the production of insulating foam. Because these gases have been in use for years, old refrigerators, air conditioners and foam insulation represent a significant “bank” of these materials yet to be released. High GWP gases are released primarily in two ways. The first is through leaking systems, and th e second is during the disposal process. Once high GWP materials are released, the y persist in the atmosphere for tens or even hundreds of years. Recommended measur es to address this growing problem take the form of direct regulations and use of mitigation fees.

ARB identified four Discrete Early Action measures to reduce greenhouse gas emissions from the refrigerants used in car air con ditioners, semiconductor manufacturing, air quality tracer studies, and cons umer products. ARB has identified additional potential reduction opportunities based on specifications for future commercial and industrial refrigeration, changing t he refrigerants used in auto air conditioning systems, and ensuring that existing ca r air conditioning systems as well as stationary refrigeration equipment do not leak. Recovery and destruction of high

GWP materials in the banks described above could al so provide significant

reductions.

41 Although some of these emissions reductions may be additional, most of them are accounted for in the Energy, Waste, Water, and Transportation sectors. I n addition, some of these reductions may occur out of state, making quantification more difficult. Because of th is, these emissions reductions are not currently co unted toward the AB 32 2020 goal.II. Recommended Actions Scoping Plan

60 ARB is also proposing to establish an upstream miti gation fee on the use of high GWP gases. Even with the reductions from the speci fic high GWP measures described above, this sector’s emissions are still projected to more than double from current levels by 2020. This is because of the hig h growth in the sector due, in part, to the replacement of ozone-depleting substances be ing phased out of production.

These emissions would be difficult to address via t raditional approaches since the gases are used in small quantities in very diverse applications. Additionally, there are no proven substitutes or alternatives for some uses , and the relative low price of most high GWP compounds provides little incentive to dev elop alternatives, reduce leakage, or recover the gases at end-of-life.

An upstream fee would ensure that the climate impac t of these substances is reflected in the total cost of the product, encouraging reduc ed use and end-of-life losses, as well as the development of alternatives. The fee w ould be variable and associated with the impact the product makes on public health and the environment. This could encourage product innovation because fees would cor respondingly decrease as the manufacturer or producer redesigned their product o r found lower-cost alternatives. This mitigation fee would complement many of the do wnstream high GWP regulations currently being developed. 42 Fees on high GWP gases would be set to be consistent with the cost of reducing greenhouse gas emissions and could be set to reduce multiple environmental impacts. Revenues co uld be used to mitigate greenhouse gas emissions either from other high GWP compounds or other greenhouse gases.

Table 19 summarizes the recommendations for measure s in the High GWP sector. These measures address both high GWP gases identifi ed in AB 32 and also other high GWP gases, such as ozone-depleting substances that are only partially covered by the

Montreal Protocol. The emissions reductions shown are only for the six greenhouse gases explicitly identified in AB 32.

42 Industrial process emissions of high GWP gases are also expected to be part of the cap-and-trade prog ram. As ARB moves through the rulemaking for both the hi gh GWP fee and the cap-and-trade program, staff wil l evaluate whether these are complementary approaches or if one or the other needs to be adjusted to pre vent duplicative regulation of the industrial process em issions of these gases.Scoping Plan II. Recommended Actions

61 

### Table 19: High GWP Gases Sector Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions

H-1 Motor Vehicle Air Conditioning Systems: Reduction of

Refrigerant Emissions from Non-Professional Servici ng (Discrete Early Action) 0.26

H-2 SF 6 Limits in Non-Utility and Non-Semiconductor Applic ations

(Discrete Early Action) 0.3

H-3 Reduction of Perfluorocarbons in Semiconductor Manu facturing

(Discrete Early Action) 0.15

H-4 Limit High GWP Use in Consumer Products

(Discrete Early Action) (Adopted June 2008) 0.25

H-5 High GWP Reductions from Mobile Sources

• Low GWP Refrigerants for New Motor Vehicle Air Conditioning Systems

• Air Conditioner Refrigerant Leak Test During Vehicl e Smog Check

• Refrigerant Recovery from Decommissioned Refrigerated Shipping Containers

• Enforcement of Federal Ban on Refrigerant Release during Servicing or Dismantling of Motor Vehicle Ai r Conditioning Systems 3.3

H-6 High GWP Reductions from Stationary Sources

• High GWP Stationary Equipment Refrigerant Management Program:

o Refrigerant Tracking/Reporting/Repair Deposit Program

o Specifications for Commercial and Industrial Refrigeration Systems

• Foam Recovery and Destruction Program

• SF 6 Leak Reduction and Recycling in Electrical Applications

• Alternative Suppressants in Fire Protection Systems

• Residential Refrigeration Early Retirement Program 10.9

H-7 Mitigation Fee on High GWP Gases 43 5

Total 20.2

43 The 5 MMTCO 2 E reduction is an estimate of what might occur with a fee in place. Additional emissions reductions from a fee would be expected as resultin g revenues are used in mitigation programs. Using the funds to mitigate greenhouse gas emissions could substant ially increase the emissions reductions from this m easure.II. Recommended Actions Scoping Plan

62 

### 15. Recycling and Waste 15. Recycling and Waste

Reduce methane emissions at landfills. Increase wa ste diversion, composting and other beneficial uses of organic materials, and man date commercial recycling. Move
toward zero-waste.

California has a long track record of reducing gree nhouse gas emissions by turning waste into resources, exemplified by the waste dive rsion rate from landfills of 54 percent (which exceeds the current 50 percent manda te) resulting from recovery of recyclable materials. Re-introducing recyclables w ith intrinsic energy value back into the manufacturing process reduces greenhouse gas em issions from multiple phases of product production including extraction of raw mate rials, preprocessing and manufacturing. Additionally, by recovering organic materials from the waste stream, and having a vibrant composting and organic materia ls industry, there is an opportunity to further reduce greenhouse gas emissi ons through the indirect benefits

associated with the reduced need for water and fert ilizer for California’s Agricultural sector. Incentives may also be an effective way to secure greenhouse gas emissions

reductions in this sector. Table 20 summarizes the emissions reductions from Recycling and Waste sector.

Reduction in Landfill Methane Reduction in Landfill Methane

Methane emissions from landfills, generated when wa stes decompose, account for one percent of California’s greenhouse gas emission s. Greenhouse gas emissions can be substantially reduced by properly managing all m aterials to minimize the generation of waste, maximize the diversion from la ndfills, and manage them to their highest and best use. Capturing landfill methane r esults in greenhouse gas benefits, as well as reductions in other air pollutants such as volatile organic compounds. ARB is working closely with the California Integrated W aste Management Board (CIWMB) to develop a Discrete Early Action measure for landfill methane control that will be presented to ARB in January.

CIWMB is also pursuing efforts to reduce methane em issions by diverting organics from landfills, and to promote best management prac tices at smaller uncontrolled landfills. Landfill gas may also provide a viable source of liquefied natural gas (LNG) vehicle fuel. Reductions from these types of projects would be accounted for in the Transportation sector.

High Recycling / Zero Waste High Recycling / Zero Waste

This measure reduces greenhouse gas emissions prima rily by reducing the substantial energy use associated with the acquisition of raw m aterials in the manufacturing stage of a product’s life-cycle. As virgin raw materials are replaced with recyclables, a large reduction in energy consumption should be rea lized. Implementing programs with a systems approach that focus on consumer dema nd, manufacturing, and movement of products will result in the reduction o f greenhouse gas emissions and other co-benefits. Reducing waste and materials at the source of generation,Scoping Plan II. Recommended Actions

63 increased use of organic materials to produce compo st to benefit soils and to produce biofuels and energy, coupled with increased recycli ng – especially in the commercial sector – and Extended Producer Responsibility (EPR) plus Environmentally Preferable Purchasing (EPP) also have the potential to reduce emissions, both in-state and within the connected global economy. This meas ure could also assist in meeting the 33 percent renewables energy goal through deplo yment of anaerobic digestion for production of fuels/energy.

As noted by ETAAC, recycling in the commercial sect or could be substantially increased. This will be implemented through mandat ory programs and enhanced partnerships with local governments. The provision of appropriate financial

incentives will be critical. ARB will work with CI WMB to develop and implement these types of programs. ARB will also work with C IWMB, the California Department of Food and Agriculture, the Department of Transportation, and others to provide direct incentives for the use of compost in agriculture and landscaping. Further, CIWMB will explore the use of incentives f or all Recycling and Waste Management measures, including for commercial recyc ling and for local jurisdictions to encourage the collection of residentially and co mmercially-generated food scraps for composting and in-vessel anaerobic digestion.



### Table 20: Recycling and Waste Sector Recommendatio n - Landfill Methane Capture and High Recycling/Zero Waste

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
RW-1 Landfill Methane Control (Discrete Early Actio n) 1

RW-2 Additional Reductions in Landfill Methane

• Increase the Efficiency of Landfill Methane Capture TBD

RW-3 High Recycling/Zero Waste

• Mandatory Commercial Recycling

• Increase Production and Markets for Organics Produc ts

• Anaerobic Digestion

• Extended Producer Responsibility

• Environmentally Preferable Purchasing 5

2

2

TBD

TBD

Total 10 (44)

44 Reductions from RW-2 and RW-3 are not counted towa rd the AB 32 goal. ARB is continuing to work with CIWMB to quantify these emissions and determine wha t portion of the reductions can be credited to meet ing the AB 32 2020 goal. These measures may provide gr eater emissions reductions than estimated.II. Recommended Actions Scoping Plan

64 

### 16. Sustainable Forests 16. Sustainable Forests

Preserve forest sequestration and encourage the use of forest biomass for sustainable energy generation.

The 2020 Scoping Plan target for California’s fores t sector is to maintain the current 5

MMTCO 2 E of sequestration through sustainable management p ractices, potentially including reducing the risk of catastrophic wildfir e, and the avoidance or mitigation of land-use changes that reduce carbon storage. Ca lifornia’s Board of Forestry and Fire Protection has the existing authority to provi de for sustainable management practices, and will, at a minimum, work to maintain current carbon sequestration levels. The Resources Agency and its departments w ill also have an important role to play in implementing this measure.

In addition, the Resources Agency is supporting vol untary actions, including expenditure of public funds for projects focused la rgely on conserving biodiversity, providing recreation, promoting sustainable forest management and other projects that also provide carbon sequestration benefits. T he federal government must also use its regulatory authority to, at a minimum, main tain current carbon sequestration levels for land under its jurisdiction in Californi a.

Forests in California are now a carbon sink. This means that atmospheric removal of carbon through sequestration is greater than atmosp heric emissions from processes like fire and decomposition of wood. However, seve ral factors, such as wildfires and forest land conversion, may cause a decline in the carbon sink. The 2020 target would provide a mechanism to help ensure that curre nt carbon stocks are, at a minimum, maintained and do not diminish over time. The 5 MMTCO 2 E emission reduction target is set equal to the magnitude of t he current estimate of net emissions

from California’s forest sector. As technical data improve, the target can be

recalibrated to reflect new information.

California’s forests will play an even greater role in reducing carbon emissions for the 2050 greenhouse gas emissions reduction goals. For ests are unique in that planting trees today will maximize their sequestration capac ity in 20 to 50 years. As a result, near-term investments in activities such as plantin g trees will help us reach our 2020 target, but will also play a greater role in reachi ng our 2050 goals.

Monitoring carbon sequestered on forest lands will be necessary to implement the target. The Board of Forestry and Fire Protection, working with the Resources Agency, the Department of Forestry and Fire Protect ion and ARB would be tasked with developing a monitoring program, improving gre enhouse gas inventories, and determining what actions are needed to meet the 202 0 target for the Forest sector. Future climate impacts will exacerbate existing wil dfire and insect disturbances in the

Forest sector. These disturbances will create new uncertainties in reducing emissions and maintaining sequestration levels over the long- term, requiring more creative strategies for adapting to these changes. In the s hort term, focusing on sustainable management practices and land-use issues is a pract ical approach for moving forward.Scoping Plan II. Recommended Actions

65 Future land use decisions will play a role in reach ing our greenhouse gas emissions reduction goals for all sectors. Loss of forest la nd to development increases greenhouse gas emissions levels because less carbon is sequestered. Avoiding or mitigating such conversions will support efforts to meet the 2020 goal. When significant changes occur, the California Environme ntal Quality Act is a mechanism providing for assessment and mitigation of greenhou se gas emissions.

Going forward there are a number of forestry-relate d strategies that can play an important role in California’s greenhouse gas emiss ions reduction efforts. Biomass

resources from forest residue will factor into the expansion of renewable energy sources (this is currently accounted for in the Ene rgy sector). Similarly, fuels management strategies have the potential to reduce the risk of catastrophic fires. However, fuels management needs to be evaluated to determine whether, and if so under what circumstances, quantifiable greenhouse g as emission reductions are achieved. Additionally, public investments to purc hase and preserve forests and woodlands would also provide greenhouse gas emissio n reductions that will be accounted for as projects are funded. Urban fores t projects can also provide the dual benefit of carbon sequestration and shading to redu ce air conditioning load.

Furthermore, the Forest sector currently functions as a source of voluntary reductions

that would not otherwise occur and this role could expand even further in the future. ARB has already adopted a methodology to quantify r eductions from forest projects, and recently adopted additional quantification meth odologies. Table 21 summarizes

the emission reductions from the forest measure.



### Table 21: Sustainable Forests Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
F-1 Sustainable Forest Target 5

Total 5



### 17. Water 17. Water

Continue efficiency programs and use cleaner energy sources to move and treat

water.

Water use requires significant amounts of energy. Approximately one-fifth of the electricity and one-third of the non-power plant na tural gas consumed in the state are associated with water delivery, treatment and use. Although State, federal, and local water projects have allowed the state to grow and m eet its water demands, greenhouse gas emissions can be reduced if we can move, treat, and use water more efficiently. As is the case with energy efficiency, California h as a long history of advancing water efficiency and conservation programs. Withou t this ongoing, critical work,II. Recommended Actions Scoping Plan

66 baseline or business-as-usual greenhouse gas emissi ons associated with water use would be much higher than is currently the case.

Six greenhouse gas emissions reduction strategies m easures are proposed for the Water sector, and are shown in Table 22. Three of the measures target reducing energy requirements associated with providing relia ble water supplies and two measures are aimed at reducing the amount of non-re newable electricity associated with conveying and treating water. The final measu re focuses on providing sustainable funding for implementing these actions. The greenhouse gas emissions reductions from these measures are indirectly reali zed through reduced energy requirements and are accounted for in the Electrici ty and Natural Gas sector.

In addition, a mechanism to make allowances availab le in a cap-and-trade program could be used to provide additional incentives for local governments, water suppliers, and third party providers to bundle water and energ y efficiency improvements. This type of allowance set-aside will be evaluated durin g the rulemaking for the cap-andtrade program.

ARB recommends a public goods charge for funding in vestments in water management actions that improve water and energy ef ficiency and reduce GHG emissions. As noted by the Economic and Technology Advancement Advisory Committee, a public goods charge on water can be co llected on water bills and then used to fund end-use water efficiency improvements, system-wide efficiency projects, water recycling, and other actions that improve wat er and energy efficiency and reduce GHG emissions. Depending on how the fee sch edule is developed in a subsequent rulemaking process, a public goods charg e could generate $100 million to $500 million. These actions would also have the co -benefit of improving water quality and water supply reliability for customers.



### Table 22: Water Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
W-1 Water Use Efficiency 1.4

W-2 Water Recycling 0.3

W-3 Water System Energy Efficiency 2.0

W-4 Reuse Urban Runoff 0.2

W-5 Increase Renewable Energy Production 0.9
W-6 Public Goods Charge TBD

Total 4.8 (45)

45 Greenhouse gas emission reductions from the water sector are not currently counted toward the 2020 go al. ARB anticipates that a portion of these reductions will be additional to identified reductions in the Electricity sector and is working with the appropriate agencies to refine the electricity/water emissions inventor y.Scoping Plan II. Recommended Actions

67 

### 18. Agriculture 18. Agriculture

In the near-term, encourage investment in manure di gesters and at the five-year Scoping Plan update determine if the program should be made mandatory by 2020.

Encouraging the capture of methane through use of m anure digester systems at dairies can provide emission reductions on a voluntary basi s. This measure is also a renewable energy strategy to promote the use of cap tured gas for fuels or power production. Initially, economic incentives such as marketable emission reduction credits, favorable utility contracts, or renewable energy incentives will be needed. Quantified reductions for this measure (shown in Ta ble 23) are not included in the

sum of statewide reductions shown in Table 2 since the initial approach is voluntary. ARB and the California Climate Action Registry work ed together on a manure digester protocol to establish methods for quantify ing greenhouse gas emissions reductions from individual projects; the Board adop ted this protocol in September 2008. The voluntary approach will be re-assessed a t the five-year update of the Scoping Plan to determine if the program should bec ome mandatory for large dairies by 2020.

Nitrogen fertilizer, which produces N 2 O emissions, is the other significant source of greenhouse gases in the Agricultural sector. ARB h as begun a research program to better understand the variables affecting fertilize r N 2 O emissions (Phase 1), and based on the findings, will explore opportunities for emi ssion reductions (Phase 2).

There may be significant potential for additional v oluntary reductions in the agricultural sector through strategies, such as tho se recommended by ETAAC. These opportunities include increases in fuel efficiency of on-farm equipment, water use efficiency, and biomass utilization for fuels and p ower production.

Increasing carbon sequestration, including on worki ng rangelands, hardwood and riparian woodland reforestation, also hold potentia l as a greenhouse gas strategies. As we evaluate the role that this sector can play i n California’s emissions reduction efforts, we will explore the feasibility of develop ing sound quantification protocols so that these and other related strategies may be empl oyed in the future.



### Table 23: Agriculture Recommendation

(MMTCO 2 E in 2020)

Measure No. Measure Description Reductions
A-1 Methane Capture at Large Dairies 46 1.0

Total 1.0

46 Because the emission reductions from this measure are not required, they are not counted in the total

.II. Recommended Actions Scoping Plan

68 

## D. Voluntary Early Actions and Reductions Voluntary Early Actions and Reductions

Many individual activities that are not currently a ddressed under regulatory approaches can nevertheless result in cost-effective, real, additi onal, and verifiable greenhouse gas emissions reductions that will help California meet its 2020 target. Ensuring that appropriate credit is available to these types of emissions reduction pro jects will also help jump-start a new wave of technologies that will feature prominently in Ca lifornia and the world’s long-term efforts to combat climate change. ARB will pursue several approaches that will recognize and reward these types of projects.



### 1. 1. Volunt Volunt ary Early Action ary Early Action ary Early Action

ARB is required to design regulations to encourage early action to reduce greenhouse gas emissions, and to provide appropriate recogniti on or credit for that action. (HSC §38562(b)(1) and (3)) Recognizing and rewardi ng greenhouse gas emissions reductions that occur prior to the full implementat ion of the AB 32 program can set the stage for innovation by incentivizing the devel opment and employment of new clean technologies and by generating economic and e nvironmental benefits for

California.

In February 2008, ARB adopted a policy statement en couraging the early reductions of greenhouse gas emissions. 47 The policy statement describes a process for interested parties to submit proposed emission quan tification methodologies for voluntary greenhouse gas emissions reductions to AR B for review. The intent is to provide a rapid assessment of methodologies for eva luating potential greenhouse gas emissions reduction projects to encourage early act ions. Where appropriate, ARB

will issue Executive Orders to confirm the technica l soundness of the methodologies, and the methodology would be available for use by o ther parties to demonstrate the creation of voluntary early reductions. ARB is cur rently in the process of evaluating a number of submitted project methodologies.

ARB will provide appropriate credit for voluntary e arly reductions that can be adequately quantified and verified through three pr imary means. First, within the cap-and-trade program, ARB would set aside a certai n number of allowances from the first compliance period to use to reward volunt ary reductions that occur before 2012. In addition, ARB will assure that the alloca tion process in the first compliance period does not disadvantage facilities that have m ade reductions after AB 32 went

into effect at the start of 2007 and before 2012. 48 The third approach will be to design

47 Board Meeting Agenda. California Air Resources Boa rd. February 28, 2008. http://www.arb.ca.gov/board/ma/2008/ma022808.htm (accessed October 12, 2008)

48 ARB will evaluate whether some reductions that occ urred prior to AB 32 going into effect on January 1, 2007, should also receive credit under t hese rules. For example, many facilities in Califo rnia registered with the California Climate Action Regis try after its creation in 2002 to document early ac tions to reduce emissions by having a record of entities pro files and baselines. ARB will evaluate what reducti ons made prior to 2007 should be eligible for credit from th e allowance set-aside as part of the cap-and-trade program rulemaking.Scoping Plan II. Recommended Actions

69 other regulations, to the extent feasible, to recog nize and reward early action. These approaches are discussed in more detail in Appendix C.



### 2. Voluntary 2. Voluntary Reductions

Reductions Reductions

Emissions reduction projects that are not otherwise regulated, covered under an emissions cap, or undertaken as a result of governm ent incentive programs can generate “offsets.” These are verifiable reduction s whose ownership can be transferred to others. Voluntary offset markets ha ve recently flourished as a way for companies and individuals to offset their own emiss ions by purchasing reductions outside of their own operations. These sorts of vo luntary efforts to reduce greenhouse gas emissions can play an important role in helping the State meet its overall greenhouse gas reduction goals.

ARB will adopt methodologies for quantifying volunt ary reductions. (HSC §38571) The Board adopted a methodology for forest projects in October 2007 and for urban forestry and manure digesters in September 2008. T he recognition of voluntary reduction or offset methodologies does not in any w ay guarantee that these offsets can be used for other compliance purposes. The Boa rd would need to adopt regulations to verify and enforce reductions achiev ed under these or other approved methodologies before they could be used for complia nce purposes. (HSC §38571)

Allowance set-asides, in addition to being used to potentially reward voluntary early actions by facilities that will be included in the cap-and-trade program, could also be used to reward voluntary early action at other faci lities not covered by the cap and to ensure that voluntary actions, such as voluntary re newable power purchases by individuals, businesses, and others, serve to reduc e greenhouse gas emissions under the cap. An early action allowance set-aside could be utilized both by entities that are covered by the cap, and by those who develop emissi ons reducing projects outside of the cap, or purchase the reductions associated with those projects, and have not sold or used them. Additional discussion of voluntary o ffsets is included in Appendix C.



## E. Use of Allowances and Revenues Use of Allowances and Revenues Use of Allowances and Revenues

Revenues may be generated from the implementation o f various proposed components of the Scoping Plan, including by the use of auctions with in a cap-and-trade system or through the imposition of more targeted measures, such as a pub lic goods charge on water. These revenues could be used to support AB 32 requirement s for greenhouse gas emissions

reductions and associated socio-economic considerat ions. This section summarizes some of

the recommendations and ideas that ARB has received to date. As discussed in the description of the cap-and-trade measure above, ARB will seek input from a broad range of experts in an open public process regarding the opt ions for allocation and revenue use under

consideration.

The Economic and Technology Advancement Advisory Co mmittee (ETAAC) recommended the creation of a California Carbon Trust as a poss ible mechanism for using revenuesII. Recommended Actions Scoping Plan

70 generated by the program, leveraged with private fu nds, to further the overall program goals. ETAAC’s recommendation is roughly based on the Unit ed Kingdom Carbon Trust. The United Kingdom program was established with public funds, but now functions as a standalone corporation, providing management and consult ing services to corporations and small and medium businesses on reducing greenhouse gas em issions. It also funds innovations in carbon reduction technologies. ETAAC recommended t he creation of a similar organization

that would use revenue from the sale of carbon allo wances or from carbon fees to:

• Fund research, development and demonstration projec ts,

• Help bring promising and high potential technologie s through the often challenging early stages of development and get them to market,

• Manage the early carbon market and mitigate price v olatility, purchasing credits and selling them or retiring them as needed,

• Dedicate resources to fund projects to achieve AB 3 2 Environmental Justice goals, or

• Support a green technology workforce training progr am.

The most appropriate use for some of the allowances and revenue generated under AB 32 may be to retain it within or return it to the sect or from which it was generated. For example, CEC and CPUC specifically recommended that signific ant portions of the revenue generated from the electricity sector under a cap-and-trade p rogram be used for the benefit of that sector to support investments in renewable energy, efficiency, new energy technology, infrastructure, customer utility bill relief, and o ther similar programs. In the case of more targeted revenues from a public goods charge, the i ntent would be to use the funds for program purposes within the sector in which it was raised, for example in the water sector. ARB will seek input from a broad range of experts i n an open public process, and will work with other agencies, the WCI partner jurisdictions, and stakeholders to consider the options for use of revenues from the AB 32 program.

Possible uses of allowances and of the revenue gene rated under the program include:

• Reducing costs of emissions reductions or achieving additional reductions – Funding energy efficiency and renewable resource de velopment could lower overall costs to consumers and companies, and provide the o pportunity to achieve greater emissions reductions than would otherwise be possib le. Program revenues could be used to fund programs directly, or create financial incentives for others. Allowance set-asides could also be used to provide incentives for voluntary renewable power purchases by individuals and businesses, and for in creased energy efficiency.

• Achieving environmental co-benefits – Criteria and toxic air pollutants create health risks, and some communities bear a disproportionate burden from air pollution. Revenues could be used to enhance greenhouse gas em ission reductions that also provide reductions in air and other pollutants that affect public health.Scoping Plan II. Recommended Actions

71 • Incentives to local governments – Funding or other incentives to local governments for well-designed land-use planning and infrastruct ure projects could lead to shorter commutes and encourage walking, bicycling and the u se of public transit. Funding of other incentives for local governments could also b e used to increase recycling, composting, and to generating renewable energy from anaerobic digestion.

• Consumer rebates – Utilities and other businesses could use revenues t o support and increase rebate programs to customers to offset som e of the cost associated with

increased investments in renewable resources and to encourage increased energy efficiency.

• Direct refund to consumers – Revenue from the program could be recycled directly back to consumers in a variety of forms including p er capita dividends, earned income tax credits, or other mechanisms.

• Climate change adaptation programs – Climate change will impact natural and human environments. Program revenues could be used to help the state adapt to the effects of climate change which will be detailed in the State’s Climate Adaptation Strategy being prepared by the Resources Agency to be completed in early 2009.

• Subsidies – Revenues could be used to reduce immediate cost imp acts to covered industries required to make substantial upfront cap ital investments to reduce greenhouse gas emissions.

• RD&D funding – Revenues could be used to support research, develop ment, and deployment of green technologies.

• Worker transition assistance – Regulating greenhouse gas emissions will probably shift economic growth to some sectors and green tec hnologies and away from higher carbon intensity industries. Worker training progr ams could help the California labor force be competitive in these new industries.

• Administration of a greenhouse gas program – A portion of revenues could be used to underwrite the State’s AB 32 programs and o perating costs.

• Direct emission reductions – Revenues could be used to purchase greenhouse gas reductions for the sole purpose of retirement, prov iding direct additional greenhouse gas emission reductions. Potential projects, such as afforestation and reforestation, would both sequester CO 2 and provide other environmental benefits.

Many of the potential uses of revenue would help AR B implement the community benefit section of the AB 32 (HSC §38565) which directs the Board, where applicable and to the extent feasible, to ensure that the greenhouse gas emissions reduction program directs public and private investment toward the most disadvantage d communities in California.72 This page intentionally blankScoping Plan III. Evaluations

73 

## III. EVALUATIONS EVALUATIONS EVALUATIONS

The primary purpose of the Scoping Plan is to devel op a set of measures that will provide the maximum technologically feasible and cost-effective greenhouse gas emission reductions. In developing this Plan, ARB evaluated the effect of t hese measures on California’s economy, environment, and public health. This Chapter outli nes these analyses.

ARB conducted broad evaluations of the potential im pacts of the Scoping Plan, and will conduct more specific evaluations during regulatory development (HSC §38561(d), and HSC §38562(b)). Prior to inclusion of market-based compliance mechanisms in a regulation, to the extent feasible, the Board will consider dir ect, indirect and cumulative emission impacts, and localized impacts in communities that are already adversely impacted by air pollution (HSC §38570(b)).

Based on the evaluation of the recommendations incl uded in this Plan, implementing AB 32 is expected to have an overall positive effect on t he economy. In addition, implementation of the measures in the Recommended Actions section (Ch apter II) will reduce statewide oxides of nitrogen (NOx), volatile organic compounds (VOC) and atmospheric particulate matter (PM) emissions primarily due to reduced fuel consum ption, with resulting public health benefits. ARB will also work at the measure-specif ic level to further maximize the public health benefits that can accompany implementation o f greenhouse gas emissions reduction strategies. The following sections provide a summa ry of the ARB evaluations of the recommended measures included in this Scoping Plan. More detailed information on the evaluations and their results are provided in Appen dices G and H.



## A. Economic Modeling Economic Modeling Economic Modeling

To evaluate the economic impacts of the Scoping Pla n, ARB compared estimated economic activity under a business-as usual (BAU) case to th e results obtained when actions recommended in this Plan are implemented. The BAU case is briefly described below. The estimated costs and savings used as model inputs fo r individual measures are outlined in Appendix G, and additional documentation on the cal culation of those costs and savings is provided in Appendix I. All dollar estimates are i n 2007 dollars.

Under the BAU case, Gross State Product (GSP) in Ca lifornia is projected to increase from $1.8 trillion in 2007 to almost $2.6 trillion in 20 20. The results of our economic analysis indicate that implementation of the Scoping Plan wi ll have an overall positive net economic benefit for the state. Positive impacts are antici pated primarily because the investments motivated by several measures result in substantial energy savings that more than pay back the cost of the investments at expected future ener gy prices.III. Evaluations Scoping Plan

74 The business-as-usual case is a representation of w hat the State of the California economy will be in the year 2020 assuming that none of the measures recommended in the Scoping Plan are implemented. While a number of the measur es in the plan will be implemented as the result of existing federal or State policies an d do not require additional regulatory action resulting from the implementation of AB 32, they ar e not included in the BAU case to ensure that the economic impacts of all of the measures in the Scoping Plan are fully assessed.

The BAU case is constructed using forecasts from th e California Department of Finance, the California Energy Commission, and other sources, an d is described in more detail in Appendix G. ARB used a conservative estimate of fu ture petroleum price in this analysis, $89 per barrel of oil in 2020. Aspects of the BAU case are subject to uncertainty, for example, the possibility that future energy prices could deviate from those that are included

in the BAU case.



### 1. Macro 1. Macro-

- economic Modeling Res economic Modeling Res economic Modeling Results

Table 24 summarizes the key findings from the econo mic modeling. Gross State Product, personal income and employment are shown f or 2007 and for two cases for 2020, the BAU case and for implementation of the Sc oping Plan. For both the BAU case and the Scoping Plan case, Gross State Product increases by almost $800 billion between 2007 and 2020, personal income grows by 2.8 percent per year from $1.5 trillion in 2007 to $2.1 trillion in 2020, and empl oyment grows by 0.9 percent per year from 16.4 million jobs in 2007 to 18.4 million (BAU) or 18.5 million (Scoping Plan) in 2020. The results consistently show that implementing the Scoping Plan will not only significantly reduce California’s greenhou se gas emissions, but will also have a net positive effect on California’s economic growth through 2020.



### Table 24: Summary of Key Economic Findings from Modeling the Scoping Plan Using E-DRAM

Business-as-Usual * Scoping Plan

Economic Indicator 2007
2020 Average

Annual

Growth 2020 Change

from BAU Average

Annual

Growth

Gross State Product ($Billion) 1,811 2,586 2.8% 2,593 0.3% 2.8%

Personal Income ($Billion) 1,464 2,093 2.8% 2,109 0.8% 2.8%

Employment (Million Jobs) 16.41 18.41 0.9% 18.53 0.7% 0.9%

Emissions (MMTCO 2 E) 500 ** 596 1.4% ** 422 -28% -1.2% **

Carbon Prices (Dollars) - - - 10.00 NA -

* Business-as-usual is a forecast of the California economy in 2020 without implementation of any of the measures identified in the Scoping Plan

.

** Approximate value. ARB is in currently estimating greenhouse gas emissions for 2007.Scoping Plan III. Evaluations

75 The macroeconomic modeling results presented here u nderstate the benefits of market-based policies, including the cap-and-trade program. Consequently, our estimate of the economic impact of implementing the Scoping Plan understates the positive impact on the California economy. Nonethe less, using the current best estimates of the costs and savings of the measures, which are documented in Appendix I, the models demonstrate that implementin g the Plan will have a positive effect on California’s economy.

The modeling results reflect a carbon price for the cap-and-trade program of $10 perton. It is important to note that the $10 per-ton figure does not reflect the average cost of reductions; rather it is the maximum price at which reductions to achieve the cap are pursued based on the marketing program.

The positive impacts are largely attributable to sa vings that result from reductions in expenditures on energy. These savings translate in to increased consumer spending on goods and services other than energy. Many of the measures entail more efficient use of energy in the economy, with savings that exceed their costs. In this way, investment in energy efficiency results in money pu mped back into local economies. Table 25 summarizes the energy savings that are pro jected from implementation of the Scoping Plan. These savings are estimated to e xceed $20 billion annually by

2020.



### Table 25: Fuels and Electricity Saved in 2020 from

Implementation of the Scoping Plan

Gasoline Diesel Electricity Natural Gas *

Use Avoided ** 4,600 million gallons 670 million

gallons 74,000 GWh 3,400 million

therms

Value of Avoided Fuel Use (Million $2007) $17,000 $2,500 $6,400 *** $2,700

Percent Reduction from

BAU 25% 17% 22% **** 24%

* Not including natural gas for electric generation.

** These estimates are based on reduced use of these f uels due to increased efficiencies, reduced vehicle miles travelled, etc. Changes to t he fuel mix, such as those called for under the RPS or the LCFS, are not included here. These estimates are not the same as the estimates of reduced fuel consumption used in t he public health analysis.

*** Based on estimated avoided cost based on average b ase-load electricity, including generation, transmission and distribution.

**** This is as a percentage of BAU total California el ectricity consumption in 2020.



### 2. Impact on Specific Business Sectors 2. Impact on Specific Business Sectors

As indicated in Table 26 and Table 27, the effects of the Plan are not uniform across sectors. Implementation of the Scoping Plan would have the strongest positive impact on output and employment for the agriculture , forestry and fishing sector, theIII. Evaluations Scoping Plan

76 finance, insurance and real estate sector, and the mining sector. Similar to the statewide economic impacts projected by the model, however, these results also

indicate that relative to the business-as-usual cas e, the impacts due to implementation of the Plan change current growth projections for m ost sectors by only very small

amounts.

Table 26 and Table 27 also show that a decrease in output is projected for the utility and retail trade sectors as compared to the busines s-as-usual case, and a decrease in employment is projected for the utility sector. In the utility sector, the modeling indicates that implementation of the Scoping Plan w ould significantly reduce the need for additional power generation and natural gas con sumption, which subsequently reduces the growth in output for this sector. This results in a reduction from businessas-usual for economic output and employment of appr oximately 17 and 15 percent respectively in 2020. The primary reason for these projections is the implementation of efficiency measures and programs for both consum ers and producers. While increasing spending on efficiency and renewable ene rgy is expected to increase employment, many of the resulting jobs will not app ear in the utility sector.

The retail trade sector, which is projected to grow by nearly 50 percent in both the business-as-usual and the Scoping Plan case, is als o projected to experience a slight net decline in output relative to business-as-usual . Since gasoline is considered a consumer retail purchase under this model, the redu ced growth is mostly due to the decrease of approximately $19 billion in retail tra nsportation fuel purchases, which is largely offset by the positive $14 billion increase in spending at other retail enterprises.Scoping Plan III. Evaluations

77 

### Table 26: Summary of Economic Output by Sector fro m Modeling the Scoping Plan Using E-DRAM

Output ($Billions)

Sector 2007 Business-asUsual Scoping Plan Percent Change

from BAU

Agriculture, Forestry and Fishing 76 109 113 3.9%

Mining 27 29 31 7.2%

Utilities 51 72 60 -16.7%

Construction 114 164 166 1.7%
Manufacturing 673 943 948 0.5%

Wholesale Trade 120 171 173 1.0%

Retail Trade 207 296 291 -1.6%
Transportation and Warehousing 76 109 111 1.9%

Information 164 235 238 1.1%

Finance, Insurance and

Real Estate 391 559 572 2.3%

Services 636 910 927 1.9%

Government -
- - - Total 2,535 3,597 3,630 0.8%



### Table 27: Summary of Employment Changes by Sector from

Modeling the Scoping Plan Using E-DRAM

Employment (thousands)

Sector 2007 Business-asUsual Scoping Plan Percent Change

from BAU

Agriculture, Forestry and Fishing 398 449 464 3.5%

Mining 26 26 26 1.3%

Utilities 60 67 57 -14.7%

Construction 825 929 934 0.5%
Manufacturing 1,821 2,046 2,057 0.5%

Wholesale Trade 703 791 793 0.1%

Retail Trade 1,688 1,901 1,916 0.8%
Transportation and Warehousing 447 503 510 1.2%

Information 398 448 450 0.4%

Finance, Insurance and

Real Estate 911 1,026 1,046 2.0%

Services 5,975 6,729 6,773 0.7%

Government 3,100 3,491 3,502 0.3%

Total 16,352 18,405 18,528 0.6%III. Evaluations Scoping Plan

78 

### 3. Household Impacts 3. Household Impacts

Implementation of the Scoping Plan will provide low - and middle-income households savings on the order of a few hundred dollars per y ear in 2020 compared to the business-as-usual case, primarily as a result of in creased energy efficiencies.

Low-Income Households: Based on current U.S. Department of Health and Huma n Services poverty guidelines, we evaluated the proje cted impacts of the plan on households with earnings at or below both 100 and 2 00 percent of the poverty guidelines. For all households, including those wi th incomes at 100 percent and 200 percent of the poverty level, implementation of the Scoping Plan produces a slight increase in per-capita income relative to th e business-as-usual case.

At the same time, the analysis projects an increase of approximately 50,000 jobs

available for lower-income workers 49 relative to business-as-usual as a result of implementing the Plan. The largest employment gain s come in the retail, food service, agriculture, and health care fields. A de cline in such jobs is projected in the retail gasoline sector due to the overall projected decrease in output from this sector. This decline, however, is more than offset by the i ncreases experienced in other areas.

Another important factor to consider when analyzing the impact of the Scoping Plan on households is how it will affect household expen ditures. As indicated in Table 28, analysis based on the modeling projections estimate s a savings (i.e., reduced expenditures) of around $400 per household in 2020 for low-income households under both federal poverty guideline definitions. These savings are driven primarily by the implementation of the clean car standards an d energy efficiency measures in the Scoping Plan that over time are projected to ou tweigh potential increases in electricity and natural gas prices that may occur. As the measures in the Scoping Plan are implemented, ARB will work to ensure that the p rogram is structured so that low income households can fully participate in and bene fit from the full range of energy efficiency measures. Many of California’s energy e fficiency efforts are targeted specifically at low income populations, and the CPU C’s Long Term Strategic Plan for energy efficiency has redoubled its objective for t he delivery of energy efficiency measures to low income populations. Additional inf ormation regarding the data in Table 28 can be found in Appendix G.

49 Low-income jobs are defined as those with a median hourly wage below $15 per hour (2007 dollars) base d on wage data and staffing pattern projections from the California Employment Development Department. The shares of low-wage occupations for each industry ar e then applied to the corresponding E-DRAM sector employment projections.Scoping Plan III. Evaluations

79 

### Table 28: Impact of Implementation of the Scoping Plan on Total Estimated Household Savings in 2020 (2007 $)

Income at 100% of Poverty

Guideline Income at 200%

of Poverty

Guideline Middle

Income * High

Income ** All

Households ***

$400 $400 $500 $500 $500

* All households between 200% and 400% of the poverty guidelines.

** All households above 400% of the poverty guidelines

.

*** Average of households of all income levels.

The analysis indicates that implementation of the S coping Plan is likely to result in small savings for most Californians, with little di fference across income levels. Largely due to increased efficiencies, low-income h ouseholds are projected to be slightly better off from an economic perspective in 2020 as a result of implementing

AB 32.

Middle-Income Households: Implementation of the plan produces a small incre ase in household income across all income levels, inclu ding middle-income households,

relative to the business-as-usual case. 50 In terms of how jobs for middle-income

households 51 would be impacted, the modeling indicates a slight overall increase of almost 40,000 in 2020.

As shown in Table 28, the analysis projects a net-s avings in annual household expenditures of about $500 in 2020 for middle-incom e households. These savings are driven by the emergence of greater energy effic iencies that will be implemented as a result of the plan.



### 4. WCI Economic Analysis 4. WCI Economic Analysis

The Scoping Plan recommends that California develop a cap-and-trade program that links to the broader regional market being develope d by the Western Climate Initiative (WCI). In order to examine the economic impacts of WCI program design options, WCI Partner jurisdictions contracted with ICF International and Systematic Solutions, Inc. (SSI) to perform economic analyses using ENERGY 2020, a multiregion, multi-sector energy model. The WCI economi c modeling results are reported in full in Appendix D and are discussed in the Back ground Report on the Design Recommendations for the WCI Regional Cap-and-Trade Program, also included in Appendix D.

To help inform the program design process, the WCI analysis examined the implications of key design decisions, including: p rogram scope, allowance banking,

50 For purposes of our analysis we define "middle-inc ome" households as those earning between 200% and 400% of the federal poverty guidelines.

51 Hourly wage between $15 and $30 per hour.III. Evaluations Scoping Plan

80 and the use of offsets. Due to time and resource c onstraints, the modeling was limited to the eight WCI Partner jurisdictions in t he Western Electric Coordinating Council (WECC) area, thereby excluding from the ana lysis three Canadian provinces, Manitoba, Quebec, and Ontario. Future analyses are planned that will integrate these provinces so that a full assessment of the WCI Part ner jurisdictions can be performed.

The WCI modeling work is not directly comparable to the ARB results reported here. The WCI analysis relies on a more aggregated set of greenhouse gas emissions reduction measures rather than the specific individ ual policies recommended in the Scoping Plan; it uses somewhat different assumption s regarding what measures are included in the “business-as-usual” case, and it mo dels the entire WECC rather than California. Nevertheless, the results of the WCI m odeling provide useful insight into the economic impact of greenhouse gas emissions red uction policies.

Consistent with the conclusions of the ARB evaluati on, overall the WCI analysis found that the WCI Partner jurisdictions can meet t he regional goal of reducing emissions to 15 percent below 2005 levels by 2020 ( equivalent to the AB 32 2020 target) with small overall savings due to reduced e nergy expenditures exceeding the direct costs of greenhouse gas emissions reductions . The savings are focused primarily in the residential and commercial sectors , where energy efficiency programs and vehicle standards are expected to have their most significant impacts. Energy-intensive industrial sectors are estimated t o have small net costs overall (less than 0.5 percent of output).

The WCI analysis does not examine the potential mac roeconomic impacts of the costs and savings estimated with ENERGY 2020. The WCI Pa rtner jurisdictions are planning to continue the analysis so that macroecon omic impacts, such as income, employment, and output, can be assessed. Once comp leted, the macroeconomic impacts can be compared to previous studies of cap- and-trade programs considered in

the United States and Canada.



## B. Green Technology Green Technology Green Technology

The development of green technologies and a trained workforce equipped to design, develop and deploy them will be key to the success of Calif ornia’s long-term efforts to combat global warming. Bold, long-range environmental policies h elp drive innovation and investment in emission-reducing products and services in part by attracting private capital. Typically, the private sector under invests in research and develo pment for products that yield public benefits. However, when environmental policy is pr operly designed and sufficiently robust to support a market for such products, private capi tal is attracted to green technology development as it is to any strategic growth opport unity.

California’s leadership in environmental and energy efficiency policy has helped attract an increasing share of venture capital investment in g reen technologies. According to statistics from PricewaterhouseCoopers and the National Ventur e Capital Association, California’s share of U.S. venture capital investment in innovat ive energy technologies increasedScoping Plan III. Evaluations

81 dramatically from 1995 to 2007 (see Figure 5 below)

. 52 The same period saw a stream of pioneering environmental policy initiatives, includ ing energy efficiency codes for buildings and appliances, a renewables portfolio standard for electricity generation, climate change emissions standards for light-duty automobiles and, most recently, AB 32. Flows of venture capital into California are escalating as a direct result of the focus on reductions of greenhouse gas emissions. As mentioned above, Cali fornia captured the largest single portion of global venture capital investment ($800 million out a total of two billion dollars) during the second quarter of 2008.



### Figure 5

California's Growing Share of Venture Capital Inves tment in Energy Innovation, 1995-2007 (current $, % share )

$0 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 $1,400,000,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 200 7Annual VC Investment

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

CA VC $

Linear (CA %)

Source: PricewaterhouseCoopers MoneyTree Report, av ailable at: [https://www.pwcmoneytree.com].

A survey of clean technology investors by Global In sight and the National Venture Capital Association found that public policy influences whe re venture capitalists invest. 53
Furthermore, investments in green technology soluti ons produce jobs at a higher rate than investments in comparable conventional technologies

. 54 Venture capitalists estimate that

52 Based on historical trend data for the ‘Industrial /Energy’ industry for California and the United Sta tes from the PricewaterhouseCoopers MoneyTree Report. https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?pa ge=historical (accessed October 12, 2008)

53 Clean Tech Entrepreneurs & Cleantech Venture Netwo rk LLC. Creating Cleantech Clusters: 2006 Update

. May 2006. p.43 http://www.e2.org/ext/doc/2006%20National%20Cleante ch%20FORMATTED%20FINAL.pdf (accessed October 12, 2008)

54 Report of the Renewable and Appropriate Energy Lab oratory. Putting Renewables to Work: How Many Jobs Can the Clean Energy Industry Generate? Energy and Resources Group/Goldman School of Publ ic Policy atIII. Evaluations Scoping Plan

82 each $100 million in venture capital funding, over a period of two decades, helps create 2,700 jobs, $500 million in annual revenues, and ma ny indirect jobs. 55

Access to capital controlled by institutional inves tors is also enhanced by policies that encourage early adoption of green technologies. Wh en California-based corporations use green technologies to reduce their exposure to clim ate change risk, institutional investors reward them by facilitating their access to capital . The Investor Network on Climate Risk – including institutional investors with more than $8 trillion of assets under management – endorsed an action plan in 2008 that calls for requ iring asset managers to consider climate risks and opportunities when investing; investing i n companies developing and deploying clean technologies; and expanding climate risk scru tiny by investors and analysts. 56

Additional capital for green technologies helps dri ve increased employment, both indirectly, as energy savings are plowed back into other sector s of the economy, and directly, as new green products are successfully commercialized.

McKinsey & Company projects average annual returns of 17 percent on global investments in energy productivity, and estimates the global in vestment opportunity at $170 billion annually through 2020. 57 Meanwhile, global investment in energy efficiency and renewable energy has grown from $33 billion to more than $148 billion in the last four years. Beyond 2020, green technologies are expected to attract in vestment of more than $600 billion annually. 58 In short, green technology is now a bona fide global growth industry.

Today, green technology businesses directly employ at least 43,000 Californians, primarily in energy efficiency and energy generation, according to a 2008 study from the California Economic Strategy Panel. Green jobs are concentrat ed in manufacturing (41 percent), and professional, scientific and technical services (28 percent), with median annual earnings of

University of California, Berkeley. April 13, 2004

. http://rael.berkeley.edu/old-site/renewables.jobs.2 006.pdf (accessed October 12, 2008)

55 Report prepared for the National Venture Capital A ssociation. Venture Impact 2004: Venture Capital Benefits to the U.S. Economy . Prepared by: Global Insight. June 2004. http://www.globalinsight.com/publicDownload/generic Content/07-20-04_fullstudy.pdf (accessed October 12, 2008)

56 The Investor Network on Climate Risk. Final Report, 2008 Investor Summit on Climate Risk . February 14,

2008. http://www.ceres.org//Document.Doc?id=331 (accessed October 12, 2008)

57 McKinsey Global Institute. The Case for Investing in Energy Productivity. McKinsey & Company. February, 2008. p.8 http://www.mckinsey.com/mgi/reports/pdfs/Investing_ Energy_Productivity/Investing_Energy_Productivity.p df (accessed October 12, 2008)

58 United Nations Environment Programme-New Energy Fi nance Ltd. Global Trends in Sustainable Energy Investment 2008: Analysis of Trends and Issues in t he Financing of Renewable Energy and Energy Efficiency 2008. p.12 ISBN: 978-92-807-2939-9 http://www.unep.fr/energy/act/fin/sefi/Global_Trend s_____2008.pdf (accessed October 12, 2008)Scoping Plan III. Evaluations

83 $35,725 and $56,754, respectively. 59 By 2030, under a moderate growth scenario, green businesses nationwide are expected to generate reve nues of $2.4 trillion, (2006 dollars), and employ 21 million Americans. 60

As a leader in green technology development and use , California has already realized substantial economic benefits from the adoption of energy efficiency policies. State energy efficiency measures have saved enough energy over t he past 30 years to avoid construction of two dozen 500-megawatt power plants. Today, Cal ifornia’s per capita electricity consumption is 40 percent below the national averag e, and the carbon intensity of California’s economy is among the lowest in the nat ion. 61

Renewable energy, such as solar, wind, biomass, geo thermal, will also bring new employment opportunities to Californians while spur ring economic growth. California enjoys significant comparative advantages for renew able energy: concentrated innovation resources, a large potential customer base, key nat ural resources such as reliable solar and wind, and supportive regulatory programs, including the California Renewables Portfolio Standard, the Million Solar Roofs Initiative, the C alifornia Global Warming Solutions Act of 2006, and the Solar Water Heating and Efficiency Ac t of 2007.

Other researchers have estimated that under a natio nal scenario with 15 percent renewables penetration by 2020, California will experience a n et gain in direct employment of 140,000 jobs. 62 Because investments in green technologies produce jobs at a higher rate than investments in conventional technologies, jobs loss es that occur in traditional fossil fuel industries will be more than compensated for by gai ns in the clean energy sector.

Furthermore, if California’s renewable energy suppl iers field products that are sufficiently competitive to penetrate the export market, employm ent and earnings dividends for the state will also increase. California renewable energy in dustries servicing the export market can generate up to 16 times more employment than those that only manufacture for domestic

59 California Economic Strategy Panel with Collaborat ive Economics. Clean Technology and the Green Economy . March 2008. P.14-15 http://www.labor.ca.gov/panel/pdf/DRAFT_Green_Econo my_031708.pdf (accessed October 12, 2008)

60 The American Solar Energy Society. Renewable Energy and Energy Efficiency: Economic Dr ivers for the

21 st Century. 2007. p.39 ISBN 978-0-89553-307-3 http://www.ases.org/images/stories/ASES-JobsReportFinal.pdf (accessed October 12, 2008)

61 California Energy Commission. 2007 Integrated Energy Policy Report . Document No. CEC-100-2007-008- CMF. 2007. p. 3 http://www.energy.ca.gov/2007publications/CEC-100-2 007-008/CEC-100-2007-008-

CMF.PDF (accessed October 12, 2008)

62 Tellus Institute and MRG Associates. Clean Energy: Jobs for America’s Future. As cited in: Putting Renewables to Work: How Many Jobs Can the Clean En ergy Industry Generate? Energy and Resources Group/Goldman School of Public Policy at University of California, Berkeley. April 13, 2004. http://rael.berkeley.edu/old-site/renewables.jobs.2 006.pdf (accessed October 12, 2008)III. Evaluations Scoping Plan

84 consumption, according to a study by the Research a nd Policy Center of Environment

California. 63



## C. Cost - Effecti Effecti Effectiveness

As noted in several provisions of AB 32, cost-effec tiveness is an important requirement to be considered in the design and implementation of emis sion reduction strategies. (See HSC §§38505, 38560, 38561, 38562.) AB 32 defines “ cost-effective” or “costeffectiveness” as “the cost per unit of reduced emi ssions of greenhouse gases adjusted for its global warming potential.” (HSC §38505(d)) This de finition specifies the metric (i.e., dollars per ton) by which the Board must express cost-effec tiveness, but it does not provide criteria to assess if a regulation is or is not cost-effecti ve. It also does not specify whether there should be a specific upper-bound dollar per ton cos t that can be considered cost-effective, or how such a bound would be determined or adjusted ov er time. ARB has investigated different approaches that could be used to evaluate the cost-effectiveness of regulations and is recommending the following approach.

The estimated cost per ton of greenhouse gas emissi ons reduced by the measures recommended in this Plan ranges from $-408 (net sav ings) to $133, with all but one (the Renewables Portfolio Standard) costing less than $5 5 per ton. The RPS is being implemented for energy diversity purposes, not just greenhouse gas reductions, and the $133 per ton figure does not take these other benefits i nto account. Therefore, it should not be used as a reference to define the range of cost-eff ective greenhouse gas measures. These

estimates are based on the best information availab le as ARB prepared this Plan. Updated estimates and greater certainty will be provided as the measures are further developed during the rulemaking process.

In the meantime, the current estimates provide a ra nge illustrating the cost per ton of the mix of measures that collectively meet the 2020 target. This range will assist the Board in evaluating the cost-effectiveness of individual mea sures when considering adoption of regulations. The range of acceptable cost-effectiv eness may change if effective lower-cost measures and options are identified. Because both the projections of “business-as-usual” 2020 emissions and the degree of reductions from an y given measures may be greater or less than current estimates, the determination should re main flexible to accommodate a higher or lower estimate of cost-effectiveness. In addition, the approach must provide flexibility to pursue measures that simultaneously achieve policy objectives other than greenhouse gas emissions reduction (such as energy diversity).

The criteria for judging cost-effectiveness will be updated as additional technological data and strategies become available. As ARB moves from adoption of the Scoping Plan to

63 Environment California Research and Policy Center

. Renewable Energy and Jobs. Employment Impacts of Developing Markets for Renewables in California . July 2003. As cited in: Putting Renewables to W ork: How Many Jobs Can the Clean Energy Industry Generate? Energy and Resources Group/Goldman School of Publ ic Policy at University of California, Berkeley. Apri l 13, 2004. http://rael.berkeley.edu/oldsite/renewables.jobs.2006.pdf (accessed October 12, 2008)Scoping Plan III. Evaluations

85 developing specific regulations, and as regulations continue to be adopted, updated costeffectiveness estimates will be established in a ri gorous and transparent process with full stakeholder participation. As ARB progresses from proposed measures and estimated costs to actual regulations, the comparison of cost-effec tiveness would move toward the well established practice of comparing the cost-effectiv eness of new regulations to the costeffectiveness of previously enacted and/or similar regulations. This approach is consistent

with how cost-effectiveness is evaluated for strate gies to reduce criteria and toxic pollutants.



## D. Small Business Impact Small Business Impact Small Business Impact

Small businesses play an important role in Californ ia’s economy. As required under AB 32, ARB analyzed the impact that implementation of the Scoping Plan would have on small businesses in the state. The analysis indicates th at the primary impacts on small businesses as a result of AB 32 will come in the form of chang es in the costs of goods and services that they procure, and in particular, changes in energy expenditures. Due to the number of measures in the plan that will deliver significantl y greater energy efficiencies, our analysis projects that implementation of the plan will have a positive impact on small business in California even after taking into account the highe r per-unit energy prices that are likely to

occur between now and 2020. Small businesses also will benefit as a result of the robust economic growth and the increases in jobs, producti on, and personal income that are projected between now and 2020 as AB 32 is implemen ted. Additional information is provided in Appendix G.

Recent analysis from Energy and Environmental Econo mics, Inc. (E3) forecasts that a package of greenhouse gas emissions reduction measu res similar to those recommended in this Plan would deliver a five percent decrease in electricity expenditures for the average California electricity customer relative to busines s-as-usual in 2020. 64 This projection is based on the assumption that increases in electrici ty prices will be more than offset by the continued expansion of energy efficiency measures a nd that more efficient technologies will be developed and implemented. 65 For purpose of this analysis, expenditures on nat ural gas are assumed to remain the same, balancing the proje cted 29 percent decrease in natural gas consumption in California with the model's projecte d natural gas price increase of almost 9 percent.

Based on this assessment, implementation of the Sco ping Plan will likely have minor but positive impacts on small businesses in the state. These benefits are attributable primarily to the measures in the plan that will deliver signific antly greater energy and fuel efficiencies. Even when higher per unit energy prices are taken i nto account, these efficiencies will decrease overall energy expenditures for small busi nesses. Additionally, as previously described, the California economy is projected to e xperience robust economic growth

64 Based on their GHG Calculator, CPUC/CEC GHG Docket (CPUC Rulemaking.06.04.009, CEC Docket 07- OIIP-01), available at http://www.ethree.com/cpuc_ghg_model.html

.
65 The E3 analysis focuses on direct programmatic mea sures and does not include the incremental price im pact of the cap-and-trade program, which will depend upo n allowance price, allocation strategy, the capped sector industry response, and other program design decisio ns.III. Evaluations Scoping Plan

86 between now and 2020 as AB 32 is implemented. Smal l businesses will experience many of the benefits associated with this growth in the for m of more jobs, greater production activity, and rising personal income.

The projected decrease in electricity expenditures is especially important for small businesses since they typically spend more on energy as a perc entage of revenue compared to larger enterprises. For example, firms with a single empl oyee spend approximately 3.3 percent of each sales dollar on electricity, while businesses with between ten and forty-nine employees spend around 1.2 percent. As a result, smaller bus inesses are likely to experience a greater relative benefit from decreased energy expenditures relative to their larger counterparts.

From the broader economic perspective, these change s will make California more competitive as a location for small business, movin g it from 7 th highest to 19 th among all states in terms of the percentage of revenue that b usinesses expend on electricity. 66 As was noted above for low income households, care must be taken to ensure that the program is structured to allow small businesses to participate in and benefit from the energy efficiency

measures.

While ARB’s analysis indicates a positive impact on small businesses from AB 32 implementation, to ensure that these benefits are r ealized to the fullest potential it will take

additional outreach and communication efforts on th e part of ARB and many other state and local entities. There are a number of existing pro grams that are designed to help small businesses achieve greater efficiencies in energy u se. These programs can be enhanced and expanded upon, and new programs and efforts can be developed to ensure that all small

businesses in California are aware of and able to t ake cost-effective steps to reduce energy use and enjoy the associated economic savings. For example, as discussed more completely in Chapter IV, ARB and our partners in State gover nment are working together to develop an on-line small business “toolkit” designed for sm all and medium-sized businesses to provide a one-stop shop of technical and financial information resources. As further development and implementation of the measures in t he plan proceeds, we will work with other state and local partners to ensure that small businesses can both benefit from and play a role in helping to achieve our greenhouse gas emiss ion reduction requirements.



## E. Public Health/Environmental Benefits Analyses Public Health/Environmental Benefits Analyses Public Health/Environmental Benefits Analyses

AB 32 requires ARB to evaluate the environmental an d public health impacts of the Scoping Plan. The analysis of this plan is focused primari ly on the quantification of public health benefits from air quality improvements that would r esult from implementation. Unlike traditional pollutants and toxic emissions, global warming pollutants do not typically have localized impacts. At ambient levels, carbon dioxi de, which makes up over 80 percent of global warming pollutants in California, has no dir ect environmental or public health consequences. Climate change caused by greenhouse gas pollutants emitted in another state

66 Although the natural gas data is less specific, a similar scenario is expected where increased prices are typically offset by greater efficiencies for most s mall businesses.Scoping Plan III. Evaluations

87 or country has the same potential to damage our pub lic health and the environment as does climate change due to pollutants emitted within Cal ifornia. Although this analysis does not consider the public health impacts of climate chang e, the potential public health impacts are great, and have been well documented elsewhere. Ho wever, many of the measures aimed at reducing global warming pollutants also provide co- benefits to public health and California’s

natural resources.

The environmental and cumulative impacts of the Pla n are discussed in the California Environmental Quality Act (CEQA) document that is i ncluded in Appendix J. As the Scoping Plan is implemented, and specific measures are developed, ARB will conduct further CEQA analyses, including cumulative and mul ti-media impacts. As ARB further develops its approach for consideration of these is sues in future rulemakings, and updates needed analytical tools and data sets, we will cons ult with outside experts and the EJAC. ARB recognizes that the adoption of the Scoping Pla n will launch a variety of regulatory proceedings in many different venues. ARB will wor k closely with other California State agencies including: the Office of Planning and Rese arch, Environmental Protection Agency, Resources Agency, Integrated Waste Management Board , Department of Public Health, Office of Environmental Health Hazard Assessment, S tate Water Resources Control Board, Department of Toxic Substances Control, Department of Water Resources, Board of Forestry, Department of Fish and Game, Public Utili ties Commission, California Energy Commission, and others to identify and address pote ntial multi-media environmental impacts early in the regulatory development process.

California’s actions to reduce greenhouse gas emiss ions will help transition the State to new technologies, improved efficiencies, and land use p atterns also necessary to meet air quality standards and other public health goals. Californi a’s challenging public health issues associated with air pollution are already the focus of comprehensive regulatory and incentive programs. These programs are reducing smog forming pollutants and toxic diesel particulate matter at a rapid pace. However, to meet increasin gly stringent air quality standards and air toxics reduction goals, transformative changes are needed in the 2020 timeframe and beyond. Implementation of AB 32 will provide additional sup port to existing State efforts devoted to protecting and improving public health.



### 1. Key Air Quality 1. Key Air Quality-

- Related Public Health Benefits Related Public Health Benefits Related Public Health Benefits

The primary direct public health benefits of the Sc oping Plan are reductions in smog forming emissions and toxic diesel particulate matt er. The most significant reductions are of oxides of nitrogen (NOx), which f orms both ozone and particulate pollution (PM2.5), and directly emitted PM2.5, whic h includes diesel particulate matter. The analysis focuses on PM2.5 impacts and quantifies 2020 public health benefits of this plan in terms of avoided premature deaths, hospitalizations, respiratory effects, and lost work days. Additiona l benefits associated with the reductions in ozone forming emissions were not quan tified since statewide 2020 photochemical modeling is not available.III. Evaluations Scoping Plan

88 The estimated air quality-related public health ben efits of the Scoping Plan are above and beyond the much greater benefits of California’ s existing programs, which are reducing air pollutant emissions every year. This continuing progress is the result of California’s plans for meeting air quality standard s (“State Implementation Plans” or SIPs), reducing emissions from goods movement activ ities, and addressing health risk from diesel particulate matter. These programs add ress both existing and new sources of air pollution, taking into account popul ation and economic growth. The additional benefits of the Scoping Plan in 2020 are significant, and in the longer term, can be expected to increase with further reductions in fossil fuel combustion, the primary basis for the estimated public health benef its.

The recommended measures in the Scoping Plan that r educe smog forming (“criteria”) pollutants are shown in Table 29 along with the estimated reductions. Statewide, these measures would reduce approximatel y 61 tons per day of NOx and 15 tons per day of PM2.5 in 2020. As shown in Tabl e 30, this equates to an estimated air quality-related public health benefit of 780 av oided premature deaths statewide. In comparison, reductions in PM2.5 from California’ s existing programs and 2007 SIP measures are estimated to result in 12,000 avoi ded premature deaths statewide in

the same timeframe.



### Table 29: Statewide Criteria Pollutant Emission Re ductions in 2020 from

Proposed Scoping Plan Recommendation 67

(tons per day)

Measure NOx PM2.5
Light-Duty Vehicle

• Pavley I and Pavley II GHG Standards

• Vehicle Efficiency Measures 1.6 1.4

Goods Movement Efficiency Measures 16.9 0.6
Medium and Heavy-Duty Vehicle GHG Emission Reductio n

• Aerodynamic Efficiency

• Hybridization

• Engine Efficiency 5.6 0.2

Local Government Actions and Regional Targets 8.7 1 .4
Energy Efficiency and Conservation (Electricity) 7. 0 4.0
Energy Efficiency and Conservation (Natural Gas) 10 .4 0.8
Solar Water Heating 0.3 0.03

Million Solar Roofs 1.0 0.6

Renewables Portfolio Standard 9.8 5.6

Total 61 15

67 Table 29 does not include the criteria pollutant c o-benefits of additional greenhouse gas reductions that would be achieved from the proposed cap-and-trade regulat ion because we cannot predict in which sectors they would

be achieved.Scoping Plan III. Evaluations

89 

### Table 30: Estimates of Statewide Air Quality-Relat ed

Health Benefits in 2020

Health Endpoint Health Benefits of Existing Measures

and 2007 SIP

mean Health Benefits of

Recommendations in the Proposed Scoping Plan

mean Avoided Premature Death 12,000 780
Avoided Hospital Admissions for Respiratory Causes 1,300 87

Avoided Hospital Admissions for

Cardiovascular Causes 2,600 170

Avoided Asthma and Lower Respiratory Symptoms 190,000 12,000

Avoided Acute Bronchitis 15,000 980
Avoided Work Loss Days 1,200,000 77,000
Avoided Minor Restricted Activity Days 7,000,000 45 0,000

In addition to the quantified air-quality-related h ealth benefits, our analysis indicates that implementation of the Scoping Plan can deliver other public health benefits as well. These include potential health benefits asso ciated with local and regional transportation-related greenhouse gas targets that can facilitate greater use of alternative modes of transportation, such as walkin g and bicycling. These types of moderate physical activities reduce many serious he alth risks including coronary heart disease, diabetes, hypertension and obesity. 68 Finally, it is important to note that the steps California is taking to address glob al warming, along with actions by other regions, states, and nations, will help mitig ate the public health effects of heat waves, more widespread incidence of illness and dis ease, and other potentially severe impacts.

The measures in the Scoping Plan are designed prima rily to help spur the transition to a lower carbon economy. However, in addition to im proving air quality, these measures can also improve California’s environmenta l resources, including land, water, and native species. Land resources will be affected by regional transportationrelated targets leading to improved land use planni ng, and forest carbon sequestration targets which can result in better stewardship of C alifornia lands and reduced wildfire

risk. A number of conservation measures will aid i n effective management of the State’s precious water resources. Demand for waste disposal and hazardous materials should decrease as measures to encourage recycling and reuse transform our wastes into fuel, energy, and other useful products are im plemented. Additional analysis of the way that implementation of the Scoping Plan wil l impact these environmental resources will be conducted as we proceed. Many of these measures serve the dual purpose of mitigating greenhouse gas emissions and helping California adapt to the impacts of climate change.

68 Appendix H contains a reference list of studies do cumenting the public health benefits of alternative transportation.III. Evaluations Scoping Plan

90 

### 2. Approach 2. Approach

ARB quantified the potential reductions of NOx and PM2.5 from implementation of the Plan’s recommendations, and the public health b enefits associated with the resulting potential air quality improvement. These analyses compare NOx and PM2.5 emissions in 2020 with the implementation of the Sc oping Plan with NOx and PM2.5 emissions in 2020 in the absence of the Scoping Pla n – a “business-as-usual” scenario. The methodology used to evaluate the pub lic health benefits of the emission reductions is similar to the methodology u sed in ARB’s 2006 Goods Movement Emission Reduction Plan (GMERP), as update d in the recent staff report for estimating premature death from exposure to par ticulate matter. 69 This methodology is based on a peer-reviewed methodology developed by the U.S. Environmental Protection Agency (U.S. EPA). ARB au gmented U.S. EPA’s methodology by incorporating the result of new epid emiological studies relevant to California’s population, including regionally speci fic studies, as they became

available.

AB 32 directs ARB to conduct several levels of anal ysis as we proceed through the development and implementation of a comprehensive g reenhouse gas emissions reduction strategy. As part of the Scoping Plan de velopment, ARB is required to assess both the economic and non-economic impacts o f the plan as noted above. Additionally, AB 32 requires ARB to undertake addit ional analysis at the time of adoption of regulations, including market-based com pliance mechanisms.

Although not yet at the stage of regulatory develop ment and adoption, in this analysis ARB conducted an evaluation of the air quality-rela ted public health benefits associated with the Scoping Plan based on a communi ty level emissions analysis example. As regulations that rely on market-based compliance mechanisms are further developed for consideration by the Board, m ore detail about the specific regulatory proposals will be developed, enabling AR B to more closely evaluate the potential for direct, indirect and cumulative impac ts.



### 3. Existing Programs for Air Quality Improvement i n California n California

The public health analysis of the Scoping Plan pres ents air-quality benefits that will

occur in addition to the benefits of California’s c omprehensive air quality programs designed to meet health-based standards and reduce health risk from air toxics. It is also important to note that under both a “business- as-usual” scenario and under the implementation of the Scoping Plan, the population and economy of California are projected to continue to grow. New businesses and industries will continue to be sited in California, bringing both economic opportu nity and potential environmental impacts. Federal, State, and local laws and regula tions have established requirements to ensure that new and modified sources of pollutio n are carefully evaluated and that

69 Air Resources Board. Methodology for Estimating Premature Deaths Associa ted with Long-term Exposure to Fine Airborne Particulate Matter in California. October 24, 2008. http://www.arb.ca.gov/research/health/pm-mort/pm-mo rt_final.pdf (accessed December 9, 2008)Scoping Plan III. Evaluations

91 significant impacts are mitigated. Emissions from existing businesses are also tightly controlled by local air pollution control districts . Statewide programs are in place to reduce emissions from cars, trucks, and off-road eq uipment, along with smog check, cleaner gasoline and diesel fuels, and regulations to reduce evaporative emissions from consumer products, paints, and refueling. Add itional information about the existing regulatory framework for sources of air po llution is provided in Appendix H.

It is important to evaluate the air quality and pub lic health benefits of the Scoping Plan in the context of the State’s on-going air qua lity improvement efforts. California’s long-standing air pollution control pr ograms have substantially improved air quality in the state and will continue to do so in the future. By 2020, these programs will deliver reductions in statewide NOx e missions of 441 tons per day and direct fine particle emission reductions of 34 tons per day. Through 2020, three key ARB efforts will deliver deep reductions in air pol lutant emissions despite continuing growth:

• Diesel Risk Reduction Plan

• Goods Movement Emission Reduction Plan

• 2007 State Implementation Plan

Measures in these plans will result in the accelera ted phase-in of cleaner technology for virtually all of California’s diesel engine fle ets including trucks, buses, construction equipment, and cargo handling equipmen t at ports. Adoption and implementation of these and other measures are crit ical to achieving clean air and public health goals statewide.

The U.S. Environmental Protection Agency has set a new, more stringent, national ambient air quality standard for ozone that will ha ve compliance deadlines well past 2020 for the most severely impacted areas like sout hern California. 70 The unmitigated impacts of climate change will make it harder to meet this standard and to provide healthful air to Californians.



### 4. Statewide Analysis 4. Statewide Analysis

For this evaluation, ARB examined the recommended m easures to determine the potential for impacts on air, land, water, native s pecies and biological resources, and waste and hazardous materials. Local government, S tate government, and green building sectors were not included in this evaluati on as they represent means of implementation of the greenhouse gas emission reduc tion measures. As noted, the main focus of this analysis is on air quality. To the extent feasible, ARB quantified estimated emissions reductions in criteria pollutan ts associated with each recommended measure except cap-and-trade. Reductio ns in NOx and PM2.5 were

70 U.S. Environmental Protection Agency. National Ambient Air Quality Standards for Ozone. Final Rule. 73 Federal Register 16436. March 27, 2008. http://www.epa.gov/fedrgstr/EPA-AIR/2008/March/Day27/a5645.pdf

(accessed October 12, 2008)III. Evaluations Scoping Plan

92 used to estimate public health benefits. The estim ated statewide reductions are 61 tons per day of NOx and 15 tons per day of PM2.5 . Further analysis of the potential criteria pollutant benefits of a cap-and- trade program will be done as part of regulatory development.



### 5. Regional Assessment: South Coast Air Basin Exam ple

In order to assess potential air quality benefits o f the Scoping Plan on a regional level, ARB evaluated associated criteria pollutant reducti ons in the South Coast Air Basin as an example case. Existing programs will reduce current NOx emissions by almost 50 percent in 2020. With the new 2007 SIP measures , NOx emissions will be reduced almost 60 percent. Because of the large po pulation and high pollutant concentrations in this region, greater benefits occ ur from each ton of pollution reduced. The estimated air quality-related public health benefits of the Scoping Plan for the South Coast region are shown in Table 31. The significant air quality-related public health benefits in this region are largely a ttributed to the additional reductions

in PM2.5.



### Table 31: Estimated Air Quality-Related Health Be nefits of Existing Program, 2007 SIP, and Scoping Plan in the South Coast Air Basin, 2020

6. Community Leve 6. Community Level Assessment: Wilmington Example

l Assessment: Wilmington Example l Assessment: Wilmington Example

ARB also conducted an evaluation of the potential a ir quality impacts of the Scoping Plan in the community of Wilmington as an illustrat ion of the potential for localized impacts. Wilmington is in southern Los Angeles Cou nty and includes a diverse range of stationary and mobile emissions sources, includi ng the ports of Los Angeles and Long Beach, railyards, major transportation corrido rs, refineries, power plants, and other industrial and commercial operations. Like t he regional analysis, additional

emission reductions from the 2007 SIP were estimate d and show significant reductions in Wilmington by 2020 – approximately a 45 percent reduction in NOx and a 40 percent reduction in directly-emitted PM2. 5. Mobile source emissions are projected to continue to be proportionately greater than stationary source emissions in

2020 even as mobile source emissions decline. Health Impacts / Scenario Benefits from Existing Program Additional

Benefits from

2007 SIP Additional CoBenefits from Scoping Plan

Premature Deaths Avoided 4,800 2,000 360

Hospitalizations Avoided – Respiratory 550 230 40
Hospitalizations Avoided – Cardiovascular 1,100 440 77
Asthma & Lower Respiratory Symptoms Avoided 80,000 35,000 6,200

Acute Bronchitis Avoided 6,400 2,800 500
Work Loss Days Avoided 510,000 220,000 38,000
Minor Restricted Activity Days Avoided 3,000,000 1, 300,000 220,000Scoping Plan III. Evaluations

93 For this assessment, ARB evaluated criteria polluta nt emission reductions in the Wilmington study area assuming that the source-spec ific quantified measures are implemented, including measures to reduce emissions from oil and gas extraction and

refineries. It was further assumed that the non-so urce specific program elements, such as the proposed cap-and-trade program, result in a 10 percent reduction in fuel combustion by affected sources within the study are a. For example, it is estimated that industrial sources would achieve greenhouse ga s emission reductions through efficiency measures that reduce on site fuel use by 10 percent either in response to a cap-and-trade program, or due to the results of the facility energy efficiency audits. While it is likely that the actual onsite reduction s will differ across individual facilities from the assumed uniform ten percent red uction, 71 the analysis identifies

how reductions at these facilities affect the overa ll level of co-benefits.

The estimated NOx co-benefit of about 1.7 tons per day is small relative to the projected reductions of 24 tons per day that will o ccur as a result of the SIP and other measures. For example, an 8 ton per day NOx reduct ion is expected from cleaner port trucks. In comparison, the potential NOx bene fit from a 10 percent efficiency improvement in major goods movement categories is e stimated at about 1.5 tons per day. The estimated PM2.5 co-benefits, on the order of 0.12 tons per day, are also small relative to the projected reductions of 2.3 t ons per day that will occur as a result of the SIP and other measures. Approximately 30 pe rcent (0.04 ton per day) of the

PM 2.5 co-benefit reduction is associated with assu med energy efficiency measures at the four large refineries in the study area, while another 30 percent would occur due to a 10 percent efficiency improvement by goods mov ement sources.

The co-benefit emissions reductions in the study ar ea would produce regional air quality-related health benefits. A relatively smal l portion of these benefits would occur in the study area (approximately 300,000 area residents). Health benefits due to reductions in NOx are mostly at the regional lev els, since NOx emissions have usually travelled some distance before they are tra nsformed into PM via atmospheric reactions. Point source combustion PM emissions pe rsist in the atmosphere and increase exposures both in the area where they are emitted and broadly throughout the region. Based on previous modeling studies of the impact of port and rail yard PM emissions in the South Coast Air Basin conducted by ARB, PM exposures will be reduced far beyond the study area, and a majority o f the health benefits are expected to occur in areas outside of the Wilmington communi ty. 72

Using the previously described methodology that cor relates emission reductions in the air basin with expected regional health benefit s there would be an estimated

71 The reductions at any one facility could be much g reater or lesser than 10 percent For example, ver y small or no reductions might occur because available cost -effective industrial emission reductions have alre ady been implemented at a particular site.

72 ARB analysis indicates that about 20 percent of th e health benefits would occur in the Wilmington are a.III. Evaluations Scoping Plan

94 24 avoided premature deaths attributed to emission reductions that occur in Wilmington as a result of the Scoping Plan. 73



## F. Summary of Societal Benefits Summary of Societal Benefits Summary of Societal Benefits

AB 32 requires ARB to “consider the overall societa l benefits, including reductions in other air pollutants, diversification of energy sources, and other benefits to the economy, environment, and public health” (HSC § 38562(b)(6)) when developing regulations to implement the Scoping Plan. ARB conducted an initi al assessment of societal benefits associated with AB 32 implementation. This section summarizes those that have been identified during development of the Scoping Plan, including diversification of energy sources, mobility, regressivity, and job creation. More detailed economic and environment/public health analyses can be found in Appendix G and H, respectively. The impact of low income households (regressivity), imp acts on small businesses, and impact on jobs are described in the Economic Analysis section and Appendix G.



### 1. Energy Diversification 1. Energy Diversification

Generally, energy-related measures in this Scoping Plan are expected to result in a transformation of the State’s energy portfolio, dri ven primarily by the Low Carbon Fuel Standard (LCFS), which addresses transportatio n fuel, and the 33 percent RPS, which increases renewably-produced electricity prod uction and distribution to

households and businesses.

The LCFS aims to achieve at least a 10 percent redu ction in the carbon intensity of California’s transportation fuels by 2020. As the State moves toward less dependence upon one source of fuel for transportation, our eco nomy will be less at risk from significant fluctuations in fuel prices. Measures within the Scoping Plan will force energy diversification in California toward low-car bon intensive energy sources and encourage significant growth in infrastructure, cap ital, and investment in biofuels.

The move toward 33 percent renewables will, by defi nition, increase the diversification of California’s electrical supply. Increased use of wind, solar, geothermal and biomass (including from the organic fraction of municipal solid waste) generation will all add to ensuring the stat e has a broader portfolio of energy inputs.

Based on ARB’s economic analysis, the combined ener gy diversification and increased energy efficiency expected from implement ation of the Scoping Plan is predicted to result in: a 25 percent decrease in g asoline usage (4.6 billion gallons), a 17 percent decrease in diesel fuel use (670 million gallons), a 22 percent decrease in electricity (74,000 GWh reduction) and a 24 percent reduction in natural gas (3,400 therms).

73 See Appendix HScoping Plan III. Evaluations

95 The cap-and-trade program, offsets, and other measu res that contain market-based features may also help diversify California’s energ y portfolio by incentivizing the development and deployment of clean and efficient e nergy generating technologies.



### 2. Mobility and Shifts in Land Use Patterns 2. Mobility and Shifts in Land Use Patterns

Mobility is analyzed through multiple approaches in the Scoping Plan. Appendix C includes an analysis of a proposed measure for regi onal transportation-related greenhouse targets. Reductions in vehicle miles tr aveled (VMT) are expected to result from regional and local planning which targe t land use, building and zoning improvements.

As the Scoping Plan is implemented, measures that s upport shifts in land use patterns are expected to emphasize compact, low impact growt h in urban areas over development in greenfields. Communities could real ize benefits, such as improved access to transit, improved jobs-housing balance, p reservation of open spaces and agricultural fields, and improved water quality due to decreased runoff. Local and regional strategies promoting appropriate land use patterns could encourage fewer miles traveled, lowering emissions of greenhouse ga ses, criteria pollutants and PM. More compact communities with improved transit serv ice could increase mobility, allowing residents to easily access work, shopping, childcare, health care and recreational opportunities.

Furthermore, if open spaces and desirable locations become more accessible and communities are designed to encourage walkability b etween neighborhoods and shopping, entertainment, schools and other destinat ions, residents are likely to increase their levels of physical activity. Resear ch shows that regular physical activity can reduce health risks, including coronar y heart disease, diabetes, hypertension, anxiety and depression, and obesity. Measures in the Scoping Plan encourage Californians to use alternatives to perso nal vehicle travel that could result in increased personal exercise. To complement thes e changes, future community developments may evolve to include trails and pedes trian access to major centers. However, where compact development may increase pro ximity to large sources of pollution, such as high traffic arterials, distribu tion centers, and industrial facilities, it will be critical to analyze the anticipated and una nticipated impacts and benefits, to ensure that increases in exposure to vehicular air pollution and other toxics and particulates do not occur .



## G. California Environmental Quality Act Functional Eq ivalent California Environmental Quality Act Functional Equ ivalent

Document Document

The California Environmental Quality Act (CEQA) and ARB policy require an analysis to determine the potential adverse environmental impac ts of proposed projects. ARB’s analysis of the potential adverse environmental impacts of t he Scoping Plan is presented in Appendix J. The analysis summarizes and discusses the speci fic strategies in the Scoping Plan that, if adopted and implemented, will reduce greenhouse gas emissions throughout the state. TheIII. Evaluations Scoping Plan

96 evaluation is programmatic by necessity; it allows consideration of broad policy alternatives and program-wide mitigation measures at a time when an agency has greater flexibility to deal with basic problems of cumulative impacts. A programmatic document also plays an important role in establishing a structure within w hich future reviews of related actions can be effectively conducted. The Secretary of Califor nia’s Resources Agency determined that ARB meets the criteria for a Certified Regulatory P rogram and requires ARB to prepare a substitute document. This functionally equivalent document (FED) is intended to disclose potential adverse impacts and identify mitigation m easures specific to the actions identified in the Scoping Plan. The analysis generally found that the proposed Low Carbon Fuel Standard, Renewables Portfolio Standard and Water m easures have the most potential to cause adverse environmental impacts due to the pote ntial for land conversion when projects are undertaken. Additional environmental analysis will be needed when regulations are adopted and at the individual project level to iden tify mitigation for project specific impacts.



## H. Administrative Burden Administrative Burden Administrative Burden

ARB conducted a assessment of the administrative bu rden of implementing the Scoping Plan recommendation. (HSC §38562 (b)(7)) The recommenda tion calls for ARB to develop a cap-and-trade program – a market-based regulatory p rogram to cap and reduce emissions from the Industrial, Electricity, Natural Gas, and Transportation sectors. This program would require stringent monitoring and reporting on the p art of the regulated community, and comprehensive enforcement on the part of ARB. Sour ces under the cap would need to analyze the best approach for their company to comp ly with a cap – assessing the cost of reducing emissions and comparing that to the cost o f purchasing emission reductions in a market. Although ARB has not previously developed this type of market regulation, there is extensive experience to draw upon from within Calif ornia, nationally, and internationally. In addition, the other regulatory components of the re commendation would require ARB and other State agencies to adopt a series of measures requiring regulatory development, outreach to stakeholders and the public, implementation by i ndustry, and enforcement for numerous measures and programs.



## I. De Minimis Emission Threshold De Minimis Emission Threshold De Minimis Emission Threshold

A minimum level at which regulations are determined not to apply is termed the ‘de minimis threshold.’ In recommending a de minimis level, AR B must take into account the relative contribution of each source or source category to s tatewide greenhouse gas emissions and the adverse effect on small business. (HSC §38561(e)) This threshold acts as a buffer below which the burden of regulation is determined to out weigh the potential harmful effect of the minimal level of emissions. However, it should not be assumed that an individual source of greenhouse gas emissions that is minimal if taken b y itself will fall below the threshold. ARB often looks at the aggregate emissions from a s ource category or related source category when determining regulatory applicability.

A source category may be evaluated as the aggregate of businesses doing the same type of work (e.g., semiconductor manufacturers), a type of equipment (cargo handling equipment, cars), a process or product (cans of pressurized du ster), or other aggregated sources ofScoping Plan III. Evaluations

97 emissions. Emissions of greenhouse gases from any individual entity within these source categories by themselves could be small. However, when emissions from the source category are evaluated, the relative contribution t o climate change can be significant.

As ARB developed the Scoping Plan, potential measur es were evaluated against criteria that

included the relative contribution of the source to climate change. After this review and considering the level of emissions needed to meet t he 1990 target established by AB 32,

ARB recommends a de minimis level 0.1 MMTCO 2 E annual emissions per source

category. 74 Source categories whose total aggregated emission s are below this level are not proposed for emission reduction requirements in the Scoping Plan but may contribute toward the target via other means.

ARB and other agencies implementing measures includ ed in the Scoping Plan should carefully consider this de minimis level in develop ing regulations, and only regulate smaller source categories if there is a compelling necessit y.

As each regulation to implement the Scoping Plan is developed, ARB and other agencies will consider more specific de minimis levels below whic h the regulatory requirements would not apply. These levels will consider the cost to comp ly, especially for small businesses, and

other factors.

74 The Forest sector was not included in determining the de minimis level because this sector serves bot h as a source and a sink for carbon, making the concept of a de minimis level less applicable.98 This page intentionally blank.Scoping Plan IV. Implementation

99 

## IV. IMPLEMENTATION: Putting the Plan into Action IMPLEMENTATION: Putting the Plan into Action IMPLEMENTATION: Putting the Plan into Action

Adoption of this Scoping Plan will be a groundbreak ing step forward for California. However it is only the beginning of a journey that will last for decades, gradually moving the State into a low-carbon, clean energy future. Putt ing the Scoping Plan into action will be challenging but with adequate commitment and leader ship from Californians up and down the state, it will be a success.



## A. Personal Action Personal Action Personal Action

The greenhouse gas emission reductions required und er AB 32 cannot be realized without the active participation of the people of California. While many of the measures in this Plan must be taken by large sources of emissions, such a s power plants and industrial facilities, it is the voluntary commitment and involvement of mill ions of individuals and households throughout the State that will truly make this Cali fornia’s Plan.

Shifts in individual choices and attitudes drive ch anges in the economy and in institutions. This dynamic of changing individual behavior will i nfluence California’s effort to reduce greenhouse gas emissions. For example, as market f orces and environmental awareness encourage more people to drive low-greenhouse gas e mitting vehicles, the auto manufacturers will respond with more innovative mod els and more intensive research. Regulations requiring auto manufacturers to provide these cars will complement the market

demand.

This means that thinking about climate change and o ur carbon footprint will naturally become part of how individuals make decisions about travel, work, and recreation. Some families may choose to purchase a more efficient ve hicle when it comes time to replace their current model. Households may choose to lower thei r thermostat to 68 degrees Fahrenheit during the colder months, and raise it to 78 degree s when air conditioning is required. Some households may choose to swap out incandescent ligh t bulbs for more efficient compact fluorescent lights. Others may choose to install s olar water heaters, or arrays of solar electric panels on their roofs to take advantage of renewabl e energy, and lower their household energy bills. Many households may choose to plant trees to shade and cool their homes, and use landscaping and plants that require less water.

This Plan recommends measures that will help suppor t many of these individual decisions to improve energy efficiency. Statewide measures and regional efforts will result in programs to promote public transportation or riding in carpo ols, subsidize the purchase of energy efficient appliances, or provide incentives to bett er insulate and weatherize older homes. ARB is fully committed to assuring California consu mers have the widest possible choice of vehicles that emit fewer greenhouse gases than toda y’s models, including the most advanced technology vehicles produced anywhere in the world.IV. Implementation Scoping Plan

100 Californians have embraced statewide programs that support positive change in home and business behavior. In less than two decades, separ ating household waste and recycling at home and work have become commonplace, as has the w idespread purchase of appliances with the Energy Star label to save energy. Reducin g our carbon footprint by moving toward a cleaner more efficient economy will produce a wid e range of benefits to individuals, through lower energy bills and a healthier environm ent for all.

Conservation can also play a key role. By employin g practices to use our resources more sparingly, consumers can both save money and reduce greenhouse gas emissions. On August 18, 2008, Governor Arnold Schwarzenegger launched t he EcoDriving program – a comprehensive effort to save consumers money at the gas pump, reduce fuel use and cut CO 2 emissions. By following a set of easy-to-use best practices for driving and vehicle maintenance, a typical EcoDriver can improve mileag e by approximately 15 percent. Furthermore, safety is improved when driving speeds are reduced, a key EcoDriving strategy.

Similarly, consumers and businesses can save money and reduce greenhouse gas emissions by conserving resources at homes, offices and comme rcial buildings. For example, wireless monitor devices to provide instantaneous energy-usa ge information inside the home are being developed to show users how many kilowatt hou rs they're consuming at any given moment – as well as how much it’s costing them. 75 Providing real-time information on appliance energy use can greatly assist consumers i n conserving electricity use.

Many Californians concerned about climate change ha ve also begun to buy carbon offsets to mitigate the impact of their daily activities. The se can take various forms, including options

that allow consumers to add ‘carbon credits’ when b uying airline tickets, or paying a small monthly charge on utility bills to buy green power. ARB will be working to establish clear rules for voluntary reductions and offsets that mig ht be used for compliance with AB 32. These rules will also help establish clear guidelin es for these types of voluntary carbon credit programs and provide California’s businesses and co nsumers greater assurance that money spent on these programs result in real reductions i n greenhouse gas emissions.

For more information about how to reduce one’s pers onal carbon footprint, visit www.coolcalifornia.org . This web site provides a carbon footprint calcul ator and a “top ten” list of ways to save energy at home.



## B. Public Outreach and Education Public Outreach and Education Public Outreach and Education

To be successful, a climate action program needs an effective public outreach and education program. The Plan calls for a robust statewide pro gram designed to generate awareness and involvement in California’s climate change efforts.

75 The Sacramento Municipal Utility District (SMUD) i s subsidizing PowerCost Monitors to 5,000 customers as a part of a demonstration program. [ www.smud.org/residential/saving-energy/monitor.html ]Scoping Plan IV. Implementation

101 The Climate Action Team will convene a steering tea m that includes State agencies and other public agencies such as the state’s air districts, and public and private utilities, which have a strong track record of successful efforts at public education to reduce driving (Spare the Air) or promote energy efficiency and reduce energy dema nd. With the release of the California Energy Efficiency Strategic Plan, the CPUC has comm itted to the launch of a new brand for California Energy Efficiency in 2009, focused on en ergy efficiency opportunities and coordinated with climate change messaging under AB 32. The steering committee will develop a coordinated array of messages and draw up on a wide range of messengers to deliver them. These will include regional and loca l governments whose individual outreach campaigns can reinforce the broader State outreach themes while also delivering more targeted messages directly tied to specific local a nd regional programs.

To ensure that all Californians are included in eff orts to address climate change, California will also support highly localized efforts at publi c education and outreach at the community and neighborhood level. This includes service club organizations and existing faith-based communities – churches, mosques and synagogues. Ot her private-sector entities including

businesses and local chambers of commerce will be i nvited to partner in spreading the word.



### 1. Involving the Public and Stakeholders in Measur e Development e Development

In keeping with the requirements of AB 32 and the l egacy of four decades of regulatory development at ARB, we have worked to ma ke this process fully transparent and will continue to do so as regulatio ns to implement the plan are developed. We will continue our efforts to involve the public to the greatest extent feasible at every stage of the process, including i nformal and formal rulemaking activities. This will include disadvantaged commun ities and those with localized concerns, as well as affected industries and small businesses.

Local and community meetings and outreach have been and will continue to be a central element of all rulemaking, with State agenc ies working closely with disadvantaged communities, EJAC, public health expe rts, and other stakeholders to fully evaluate the impacts associated with Californ ia’s greenhouse gas emissions reduction strategies. State agencies involved in m easure development will continue to meet periodically with communities to assess any challenges to implementation, or to discover possible new measures or approaches. S takeholders will be invited to participate in the many additional workshops, workg roups and seminars that will be held as individual measures are developed.



### 2. Education and Workforce Development 2. Education and Workforce Development

The transition to a clean energy future presents Ca lifornia with a tremendous opportunity to continue growing its green economy a nd to expand the growth of green job opportunities throughout the state. Maki ng this transition will require a technically educated workforce that is equipped wit h the skills to develop and deploy

21 st century technologies. Investments in training, ca reer technical education, workerIV. Implementation Scoping Plan

102 transition assistance, and collaboration between pu blic and private partners will be key to ensuring that California fully reaps the eco nomic and job opportunities that will accompany implementation of AB 32.

Setting California on track to a low-carbon future beyond 2020 will be a multigenerational challenge. To meet this challenge, cl imate-related education in schools must be a central element of California’s plan. By 2010, California will develop climate change education components to the State’s new K-12 model school curriculum as part of the Education and the Environ ment Initiative (AB 1548, Pavley, Chapter 665, Statutes of 2003). Expanding the know ledge and opportunities of young people to participate in promoting their own and th eir communities’ environmental health will be an important theme for all these eff orts. In the meantime, ARB’s educational outreach will continue through the Cool California web pages ( www.coolcalifornia.org ) and the continued support of student educators th rough the California Climate Champions programs. ARB will al so rely on partners throughout the state to develop and display options for curric ula that will enhance the K-12, community college, trade technical training program s, and programs at four-year colleges.

The demand for workers to fill green jobs is rising . There are currently more than 3,000 green businesses in the state, accounting for about 44,000 jobs: 36 percent of these jobs are in professional, scientific, and tec hnical services; 19 percent are in construction; and 15 percent are in manufacturing. 76 Some of these jobs are in new fields, yet many others are simply augmentations of existing skills and vocations such as electrical, construction, machining, auto tech, and heating ventilation and air conditioning. As we move toward 2020, tens of thou sands of new green job opportunities will be created. 77 Whether these opportunities come in entirely new fields of employment or in existing areas, it will be critical for California to have a

trained workforce available.

Ensuring that California can continue to meet the d emand for green jobs will require close coordination between workforce development ag encies, businesses, State and local governments, labor unions, and community coll eges and universities. Many organizations are already developing strategies and identifying steps to simultaneously meet industry workforce needs and he lp build a more sustainable economy. For instance, the California Labor and Wo rkforce Development Agency (LWDA) provides a comprehensive range of employment and training services in partnership with State and local agencies and organ izations. Similar additional efforts will be crucial in ensuring that the transition to a green economy benefits working

76 California Economic Strategy Panel. Clean Technology and the Green Economy; Growing Pro ducts, Services, Businesses and Jobs in California’s Value Network , Draft, March 2008. http://www.labor.ca.gov/panel/pdf/DRAFT_Green_Econo my_031708.pdf

77 Tellus Institute and MRG Associates. Clean Energy: Jobs for America’s Future. As cited in: Putting Renewables to Work: How Many Jobs Can the Clean En ergy Industry Generate? Energy and Resources Group/Goldman School of Public Policy at University of California, Berkeley. April 13, 2004. p. 11 http://rael.berkeley.edu/old-site/renewables.jobs.2 006.pdfScoping Plan IV. Implementation

103 families in California by providing a steady supply of livable-wage jobs. In the area of energy efficiency, the California Long Term Ener gy Efficiency Strategic Plan, adopted by the CPUC, details a vision and supportin g strategies for the development of a workforce trained and engaged to achieve Calif ornia’s energy-efficiency objectives.

The following strategies will be key to ensure that California’s workforce is equipped to help lead the transition to a clean energy futur e:

• Strengthen and expand access to Career and Technica l Education (CTE) in California public schools for the next generation o f workers who will build a

green economy. Over the past several decades, there has been a s teady decline in career and technical education. In 2007, less than one-third of all high school

students in the state were enrolled in some form of CTE. 78 To take full advantage of the emerging green economy and meet the goals of AB 32, California needs to expand opportunities for CTE in schools. This coul d include pursuing strategies such as requiring CTE coursework for all middle- an d high-school students; increasing the number of CTE credentialed teachers; expanding investment in facilities and equipment for career and technical e ducation; and aligning educational curricula more closely with the skill a nd workforce needs of the emerging green economy.

• Ensure an adequate pipeline of skilled workers who are trained in the new technologies of a greener economy. While some green jobs will be in new businesses and new occupations, most green jobs are variations of traditional occupations in sectors like construction, utilities , manufacturing and transportation. 79 In light of the fact that forty percent of the na tion’s skilled workers are slated to retire in the next 5 to 10 ye ars, 80 there is an urgent need for educational and training programs to fill these job s. Strategies to create a steady pipeline of skilled workers include expanding curri culum choices in schools, colleges, and universities to fully reflect career opportunities available in an economy increasingly centered on clean technologies . Other strategies include offering a greater array of industry- and technolog y-specific courses that would link directly with postsecondary training such as a pprenticeship programs, vocational training, or college.

• Ensure that California’s higher education instituti ons continue to produce the next generation of clean tech engineers, scient ists and business leaders. In addition to providing valuable research on potentia l climate-change mitigation and adaptation strategies, California’s world-class research institutions are the

78 Get REAL. Aligning California’s Public Education System with the 21st Century Economy Policy Paper for Discussion at Governor Arnold Schwarzenegger’s Summ it on Career and Technical Education , March 6, 2007

79 Ibid.

80 The New Apollo Program, Clean Energy, Good Jobs: A National Economic Strategy for the New American Century, July 2008. p. 20 http://apolloalliance.org/downloads/fullreportfinal .pdf (accessed October 12, 2008)IV. Implementation Scoping Plan

104 incubators for many of the clean tech companies tha t will contribute to

California’s environmental and economic future. It will be critical for California to continue to cultivate university research and tr aining programs in a way that takes full advantage of this valuable state resourc e.

A successful transition to a clean energy future de pends heavily on California’s ability to provide a well-trained workforce to meet the demands of the growing green economy. ARB and our key partners will continue wo rking throughout the state to ensure that an adequate supply of skilled workers i s positioned to take advantage of the growing opportunities for high quality jobs and careers that implementation of AB 32 will bring.



### 3. Small Businesses 3. Small Businesses

Small businesses play a crucial role in California’ s economy. As noted in Chapter III, our analysis indicates that this plan will have a n et positive impact on small businesses. These impacts are attributable primari ly to the measures in the plan that will deliver significantly greater energy and fuel efficiencies. However, as also noted in the analysis, ensuring that these benefits are r ealized to the fullest potential will require additional outreach and communication effor ts by ARB and many other state

and local entities.

One of ARB’s Early Action measures is designed to h elp businesses during AB 32 implementation. With our State partners, we are de veloping an on-line small business “toolkit” designed for small and medium-sized busin esses that will provide a one-stop shop for technical and financial resources. Toolki t components will include a business-specific calculator to assess a company’s carbon footprint; a voluntary greenhouse gas inventory protocol for measuring gre enhouse gas emissions; recommended best practices for energy, transportati on, building, purchasing, and recycling; case studies demonstrating how small and medium California businesses have reduced greenhouse gas emissions; program fina ncing resources; peernetworking opportunities; and an awards program to recognize reductions of greenhouse gas emissions among California businesse s.

ARB will also continue working with the many busine ss associations, organizations, and other State partners, such as the Small Busines s Advocate’s AB 32 Small Business Task Force, the Labor and Workforce Develo pment Agency, and Business, Transportation, and Housing Agency that have the re sources, input and expertise to provide. These partners will help to further devel op and implement an effective outreach plan to provide technical assistance to bu sinesses through a variety of means, including attendance at business events, wor kshops, and working with local economic development agencies.



## C. Implementation of the Plan Implementation of the Plan Implementation of the Plan

This Scoping Plan outlines the regulations and othe r mechanisms needed to reduce greenhouse gas emissions in California. ARB and ot her State agencies will work closelyScoping Plan IV. Implementation

105 with stakeholders and the public to develop regulat ory measures and other programs to implement the Plan. ARB and other State agencies w ill develop any regulations in accordance with established rulemaking guidelines. Table 32 shows the status of the proposed measures in the plan.



### Table 32: Status of Scoping Plan Measures

Existing Laws, Regulations, Policies And Programs

Light-Duty Vehicle Greenhouse Gas Standards (Pavle y I)

Renewables Portfolio Standard (to 20%)

Solar Hot Water Heaters

Million Solar Roofs
High Speed Rail

Measures Strengthening & Expanding Existing Policie s & Programs

Electricity Efficiency
Natural Gas Efficiency

Renewables Portfolio Standard (from 20% to 33%)

Sustainable Forests
Light-Duty Vehicle Greenhouse Gas Standards (Pavle y II)

Discrete Early Actions

Low Carbon Fuel Standard
High GWP in Consumer Products (Adopted)
Smartways
Landfill Methane Capture
High GWP in Semiconductor Manufacturing
Ship Electrification (Adopted)
SF6 in non-electrical applications
Mobile Air Conditioner Repair Cans
Tire Pressure Program

New Measures

California Cap-and-Trade Program Linked to WCI Part ner Jurisdictions

Increase Combined Heat and Power
Regional Transportation-Related GHG Targets
Goods Movement Systemwide Efficiency
Vehicle Efficiency Measures
Medium/Heavy Duty Vehicle Hybridization
High GWP Reductions from Mobile Sources
High GWP Reductions from Stationary Sources
Mitigation Fee on High GWP Gases

Oil and Gas Extraction

Oil and Gas Transmission
Refinery Flares
Removal of Methane Exemption from Existing Refinery RegulationsIV. Implementation Scoping Plan

106 Rulemakings will take place over the next two years . As with all rulemaking processes, there will be ample opportunity for both informal interac tion with technical staff in meetings and workshops, and formal interaction. ARB will consid er all information and stakeholder input during the rulemaking process. Based on this infor mation, ARB may modify proposed measures to reflect the status of technological dev elopment, the cost of the measure, the costeffectiveness of the measures and other factors bef ore presenting them to the Board for consideration and adoption.

In addition to these existing approaches, AB 32 imp oses other requirements for the rulemaking process. Section 38562(b) explicitly ad ded requirements for any regulations adopted for greenhouse gas emissions reductions. A RB also recognizes the need to expand the scope of analysis required when adopting future greenhouse gas emission reduction regulations. These expanded evaluations include th e unique enforcement nature of climate change-related regulations and the possible extende d permitting considerations and timelines that must be taken into account when establishing c ompliance dates. An important consideration in developing regulations will be the potential impact on California businesses. The potential for leakage, the movement of greenhou se gas emissions (and economic activity) out of state, will be carefully evaluated during the regulatory development.

As noted above, as the Scoping Plan is implemented and specific measures are developed, ARB and other implementing agencies will also condu ct further CEQA analyses, including cumulative and multi-media impacts. ARB must desig n equitable regulations that encourage early action, do not disproportionately impact low- income and minority communities, ensure that AB 32 programs complement and do not interfere with the attainment and maintenance of ambient air quality standards, consider overall societal benefits (such as diversification of energy resources), minimize the administrative burd en, and minimize the potential for leakage. AB 32 requires that, to the extent feasib le and in furtherance of achieving the statewide greenhouse gas emission limit, ARB must c onsider the potential for direct, indirect and cumulative emission impacts from market-based c ompliance mechanisms, including localized impacts in communities that are already a dversely impacted by air pollution, design the program to prevent any increase in emissions, a nd maximize additional environmental and economic benefits prior to the inclusion of mar ket-based compliance mechanisms in the regulations. As ARB further develops its approach for consideration of these issues in future rulemakings, and updates needed analytical tools an d data sets, we will consult with outside experts and the EJAC.

ARB already conducts robust environmental and envir onmental justice assessments of our regulatory actions. Many of the requirements in AB 32 overlap with ARB’s traditional evaluations. In adopting regulations to implement the measures recommended in the Scoping Plan, or including in the regulations the u se of market-based compliance mechanisms to comply with the regulations, ARB will ensure that the measures have undergone the aforementioned screenings and meet th e requirements established in HSC §38562 (b) (1-9) and §38570 (b) (1-3).Scoping Plan IV. Implementation

107 

## D. Tracking and Measuring Progress Tracking and Measuring Progress Tracking and Measuring Progress

Many State agencies, working with the diverse set o f greenhouse gas emissions sources, have collaborated in the process of developing the strat egies presented in this plan. As the agency responsible for ensuring that AB 32 requirements ar e met, ARB must track the regulations adopted and other actions taken by both ARB and oth er State agencies as the plan is implemented.

The emissions reductions enumerated in this plan ar e estimates that may be modified based on additional information. As the proposed measure s are developed over the coming years, it is possible that some of these strategies will not develop as originally thought or not be technologically feasible or cost-effective at the l evel given in the plan. It is equally likely that new technologies and strategies will emerge af ter the initial adoption schedule required in AB 32, that is, regulation adoption by January 1 , 2011. If promising new tools or strategies emerge, ARB and other affected State age ncies will evaluate how to incorporate the new measures into the AB 32 program. In this w ay, new strategies ensuring that the commitments in the plan remain whole and that the 2 020 goal can be met will be incorporated into the State strategy.

ARB will update the plan at least once every five y ears (HSC §38561(h)). These updates will allow ARB to evaluate the progress made toward the State’s greenhouse gas emission reduction goals and correct the Plan’s course where necessary. This section discusses the tracking and measurement of progress that ARB envis ions. The Report Cards and audits, along with an evaluation of new technologies – both emerging and those recently incorporated into the Plan – will also provide valu able input into ARB’s update process. Continuous atmospheric monitoring of greenhouse gas es may also be useful for determining the effectiveness of emission reduction strategies and for future inventory development.



### 1. Report Card 1. Report Card

SB 85 (Budget Committee, Chapter 178, Statutes of 2 007) requires every State agency to prepare an annual “Report Card,” detailin g measures the agency has adopted and taken to reduce greenhouse gas emission s, including the actual emissions

reduced as a result of those actions. The informat ion must be submitted to CalEPA, which is then required to compile all the State age ncy data into a report format, which

is made available on the Internet and submitted to the Legislature. The information allows comparisons of each agency’s projected and a ctual greenhouse gas emissions reductions with the targets established by the CAT or the Scoping Plan. This would be the State’s ‘Report Card’ on its efforts to redu ce greenhouse gas emissions.

Agencies are also required, as funds are available, to have an outside audit of greenhouse gas-related actions completed every thre e years to verify actual and projected reductions.IV. Implementation Scoping Plan

108 

### 2. Tracking Progress by Implementing Agen 2. Tracking Progress by Implementing Agencies cies

As the lead agency responsible for implementing AB 32, ARB must track the progress of both our efforts and the efforts of our partners in implementing their respective provisions of this plan. Communication between ARB and the other implementing agencies will be especially important as regulations and programs are developed. In support of the Report Card requireme nt noted above, ARB will work with CalEPA to develop a process to track and repor t on progress toward the plan’s goals and commitments.



### 3. 3. Progress Toward the State Government Target Progress Toward the State Government Target Progress Toward the State Government Target

The CAT recently established a State Government Sub group to work with State agencies to create a statewide approach to meet the Scoping Plan’s commitment to reduce greenhouse gas emissions by a minimum of 30 percent by 2020 below the State’s estimated business-as-usual emissions – app roximately a 15 percent reduction from current levels. State agencies must lead by e xample by doing their part to reduce emissions and employ practices that can also be transferred to the private sector. The statewide plan will serve as a guide f or State agencies to achieve realistic, measurable objectives within specific timelines. T his newly created State Government Subgroup will assist State agencies thro ugh these steps in a timely

manner.



### 4. Mandatory Reporting Regulation 4. Mandatory Reporting Regulation

ARB’s mandatory reporting rule, adopted in December 2007, will help the State obtain facility-level data from the largest sources of greenhouse gas emissions in California. This data will help ARB better underst and these sources to develop the proposed emissions reduction measures outlined in t his plan.

The regulation requires annual reporting from the l argest facilities in the state, accounting for 94 percent of greenhouse gas emissio ns from industrial and commercial stationary sources in California. There are approximately 800 separate sources that fall under the new reporting rules, wh ich include electricity generating facilities, electricity retail providers and power marketers, oil refineries, hydrogen plants, cement plants, cogeneration facilities, and industrial sources that emit over 25,000 tons of carbon dioxide each year from on-sit e stationary source combustions such as large furnaces. This last category include s a diverse range of facilities such as food processing, glass container manufacturers, oil and gas production, and mineral processing.

Affected facilities will begin tracking their green house gas emissions in 2008, to be reported beginning in 2009 with a phase-in process to allow facilities to develop reporting systems and train personnel in data colle ction. Emissions for 2008 may be based on best available data. Beginning in 2010, e missions reports will be more rigorous and will be subject to third-party verific ation. Reported emissions data will allow ARB to improve its facility-based emissions i nventory data. Originally, the statewide greenhouse gas inventory was based on agg regated sector data and couldScoping Plan IV. Implementation

109 not be broken down to the facility level. The faci lity-level reporting required under the Mandatory Reporting regulation will improve dat a on greenhouse gas emissions for individual facilities and their emitting proces ses. This information could also help improve emissions inventories for criteria pollutan ts, and provide additional data for assessing cumulative emission impacts on a communit y level.

ARB emissions reporting requirements are expected t o be modified over time as AB 32 is implemented.



## E. Enforcement Enforcement Enforcement

Enforcement is a critical component of all of the S tate’s regulatory programs, both to ensure that emissions are actually reduced and to provide a level playing field for entities complying with the law. To meet the 2020 target this plan ca lls for aggressive action by a number of State agencies. Each of those agencies will employ its full range of compliance and enforcement options to ensure that planned reductio ns are achieved. The remainder of this section discusses ARB’s portion of the enforcement program in more detail.

ARB has an extensive and effective enforcement prog ram covering a wide variety of regulated sources, from heavy-duty vehicle idling, to consumer products, to fuel standards and off-road equipment. To increase the effectiven ess of its enforcement efforts and provide greater assurance of compliance, ARB also partners with local, State and federal agencies to carry out inspections and, when necessary, prosecut e violators.

ARB will continue its strong enforcement presence a s the State's primary air pollution control agency. A critical function of this respon sibility is to ensure that all enforcement actions are timely, effective, and appropriate with the severity of the situation. ARB will also continue its close working relationship with local air districts in the development and enforcement of applicable regulations contained wit hin the Scoping Plan and collaborate with the appropriate State agencies on greenhouse g as emission reductions measures.

For the stationary source regulations called for in the plan, ARB will work closely with the local air districts that have primary responsibilit y for implementing and enforcing criteria pollutant regulations. Not only are local air dist ricts familiar with the individual facilities and their compliance history, but information conta ined in district permits can be used to verify the accuracy of greenhouse gas emissions rep orted by sources subject to ARB mandatory reporting requirements. Using this data, regulators can also examine any correlation between greenhouse gases and toxic or c riteria air pollutants as a result of emissions trading or direct regulations.

ARB will also continue to partner with the Californ ia Highway Patrol and other State and local enforcement agencies on mobile source and oth er laws and regulations where joint enforcement authorities apply.IV. Implementation Scoping Plan

110 Although many of the measures in the Scoping Plan a re modeled on existing ARB regulations, a multi-sector, regional cap-and-trade program would bring unique enforcement challenges. ARB and CalEPA have begun the process of engaging and consulting with other State agencies, such as California’s Department of Justice, Public Utilities Commission, Energy Commission, as well as the Independent Syste m Operator, on market tracking and enforcement. These working group meetings are ongo ing and will culminate in a comprehensive enforcement plan to accompany the pro posed cap-and-trade program when the Board considers regulatory requirements. This enforcement plan would describe the

administrative structures needed for market monitor ing, prosecution, and penalty setting. Public input regarding these issues would also be a key part of the public stakeholder process conducted during development of the cap-and-trade p rograms regulations.

Accurate measurement and reporting of all emissions would be necessary to assure accountability, establish the integrity of allowanc es, and provide sufficient transparency to sustain confidence in the market. To ensure compli ance, ARB would administer penalties for entities that hold an insufficient quantity of allowances to cover their emissions or fail to report their greenhouse gas emissions. Missed comp liance deadlines would also result in the application of stringent administrative, civil, or criminal penalties.

This plan recommends that California implement a ca p-and-trade program that links with other Western Climate Initiative partner programs t o create a regional market system. This system would require California to formalize enforc ement agreements with its WCI partner jurisdictions for all phases of cap-and-trade progr am operations, including verification of emissions, certification of offsets based on common protocols, and detection of and punishment for non-compliance. As needed, Californ ia would also work with federal regulatory and enforcement agencies that oversee tr ading markets, such as the Commodity Futures Trading Commission and the Federal Energy R egulatory Commission. While California would work with other jurisdictions on j oint enforcement activities, ARB will exercise all of its authority under HSC §38580 and other provisions of law to enforce its regulations against any violator wherever they may be.



## F. State and Local Permitting Considerations State and Local Permitting Considerations State and Local Permitting Considerations

Some of the proposed emissions reduction strategies in this Scoping Plan may require affected entities to modify or obtain state or loca l permits. California’s existing permit process ensures that health and safety concerns are evaluated, met, and when appropriate, mitigated. The State recognizes the potential for conflicts between various federal, state and local permitting requirements, which may cross vari ous media – air, water, etc. CalEPA is actively involved in identifying and addressing the se regulatory overlap issues with the ultimate goal of consolidating permits where feasib le while maintaining all permit requirements. Two such examples are CalEPA’s dige ster permit working group and the CalEPA-Air District Compost Emissions Work Group.

ARB recognizes that the permitting process may affe ct the viability of certain strategies and that the length of the permitting process could aff ect the timing of emissions reductions.Scoping Plan IV. Implementation

111 ARB, along with CalEPA and other State agencies, wi ll continue to evaluate steps to ensure that permit requirements harmonize across the affec ted media.

This Plan has been developed with an understanding of the important cross-media impacts. These efforts will continue during the implementati on of the Plan. Particular focus on the potential permitting impacts and cross-media conseq uences of a proposed rule will take place during the rulemaking process.



## G. Role of Local Air Districts Role of Local Air Districts Role of Local Air Districts

Local air districts are ARB’s partners in addressin g air pollution. ARB takes primary responsibility for transportation, off-road equipme nt and consumer products. Local districts lead in controlling industrial, commercial and othe r stationary sources of air emissions. AB 32 recognizes the need to develop a program that meshes with local and regional activities. Although AB 32 does not provide an exp licit role for air districts, their local presence as advocates for clean air and their resou rces, experience and expertise in regulating and enforcing rules for stationary sources make the m a logical choice to have an important role in several aspects of implementing California’ s greenhouse gas program. ARB would partner with local air districts to develop and eff ectively enforce both source-specific requirements on industrial sources, and to enforce related programs, such as the high GWP rules, that affect a large number of local business es.

ARB and local air districts are also actively worki ng to coordinate emission reporting requirements. Some districts, like the South Coast Air Quality Management District, have developed software to allow their industrial source s to simultaneously report their criteria pollutant emissions to the District and their green house gas emissions to ARB. Many air district staff are being trained as third-party ver ifiers to confirm the greenhouse gas emissions information provided by industrial sources under th e mandatory reporting regulation, and, similarly, could provide verification of voluntary greenhouse gas reductions in the future.

Local air districts will be key in both encouraging greenhouse gas emissions reductions from other regional and local government entities, and p roviding technical assistance to quantify and verify those reductions. Local agencies are an important component of ARB’s outreach

strategy.

Many local air districts have already taken a leade rship role in addressing greenhouse gas

emissions in their communities. These efforts are intended to encourage early voluntary reductions. For example, local districts are “lead agencies” under the California Environmental Quality Act (CEQA) for some projects. In order to ensure high-quality mitigation projects, some districts have establishe d programs to encourage local greenhouse gas reductions that could be used as CEQA mitigatio n. As the State begins to institutionalize mechanisms to generate and verify greenhouse gas em issions reductions, ARB and the districts must work together to smoothly transition to a cohesive statewide program with

consistent technical standards.IV. Implementation Scoping Plan

112 

## H. Program Funding Program Funding Program Funding

Administration, implementation, and enforcement of the emissions reduction measures contained in the Scoping Plan will require a stable and continuing source of funding. AB 32 authorizes ARB to collect fees to fund implementati on of the statute. ARB recently initiated a rulemaking for a fee program to fund administrati on of the program.

Approximately $36 million per year will be needed o n an ongoing basis to fund implementation by ARB and other State agencies, bas ed on the positions and funding included in the 2009-2010 fiscal year budget. Addi tional revenues are needed to repay the loans from State funds that were used to pay ARB an d CalEPA expenses in the startup of the program. ARB is moving on an expedited schedule to develop a fee regulation and expects to take a regulation to the Board in mid 2009, with the aim of beginning to collect fees in the 2009/2010 fiscal year.Scoping Plan V. A Vision for the Future

113 

## V. A VISION FOR THE FUTURE A VISION FOR THE FUTURE A VISION FOR THE FUTURE

California has the know-how, ingenuity, research ca pabilities, and culture of innovation to meet the challenge of addressing climate change. H owever, reaching the goals we have set for ourselves will not be easy. Successful impleme ntation of many of the proposed programs and measures described in this plan will require st rong leadership and a shared understanding of the need to reach viable and lasting solutions q uickly.

This challenge will also require establishing a wid e range of partnerships, both within California and beyond our borders. We will need to support additional research, and further develop our culture of innovation and technological invention. In order to continue the momentum and the commitment to a clean energy futur e, we will need to both build on existing solutions and develop new ones.

The following sections lay out some of the elements that will be necessary to forge a broadbased institutional strategy to address climate cha nge both within California and beyond. Also discussed is the need to build partnerships on the regional, national and international levels to ensure that our actions complement and su pport those being taken on a global scale. This section also looks forward to 2030, showing th at California is on the trajectory needed to do our part to stabilize global climate.



## A. Collaboration Collaboration Collaboration

1. Working Closely with Key Partners 1. Working Closely with Key Partners

True climate change mitigation will require many pa rties to work together for a global mitigation plan. California and other state s are filling a vacuum created by the current lack of leadership at the federal level. B y its bold actions, California is moving the United States closer to a seat at the ta ble among the developed countries that have agreed to reduce their carbon emissions, and lead a new international effort for an agreement to replace the Kyoto Protocol that expires in 2012.

Any national climate program must be built on a par tnership with State and local governments to ensure that states can continue thei r role as incubators of climate change policy and can implement effective programs such as vehicle standards, energy efficiency programs, green building codes, a nd alternative fuel development.

California will work for climate solutions with key federal agencies, including the U.S. Department of Energy and their national labs, the U.S. Environmental Protection Agency, the U.S. Bureau of Land Management, the U.S . Department of Agriculture, the U.S. Department of Transportation, and others.V. A Vision for the Future Scoping Plan

114 Through the Western Climate Initiative and in colla boration with other regional alliances of states, California can promote its own best practices and learn from others while helping to formulate the structure of a regio nal and ultimately national cap-andtrade program.



### 2. International 2. International

As one of the largest economies in the world, Calif ornia is committed to working at the international level to reduce global greenhouse gas emissions. As part of this effort, Governor Schwarzenegger and other U.S. gove rnors taking the lead in climate change are co-hosting a Global Climate Summit on Fi nding Solutions Through Regional and Global Action. This summit, held on N ovember 18th and 19th, 2008, began a state-province partnership with leaders fro m the U.S., Australia, Brazil, Canada, China, India, Indonesia, Mexico, the Europe an Union, and other nations, taking urgent steps to contain global climate chang e and jointly setting forth a blueprint for the next global agreement on climate change solutions.

California is also a charter member of the Internat ional Carbon Action Partnership (ICAP), an organization composed of countries and r egions that have adopted carbon caps and that are actively pursuing the implementat ion of carbon markets through mandatory cap-and-trade systems. California’s cont inued involvement in ICAP will be very beneficial for sharing experiences and know ledge as we design our own market program.

In addition to participating in ICAP, California ho pes to engage developing countries to pursue a low-carbon development path. With deve loping nations expected to suffer the most from the effects of climate change, California and others have an obligation to share information and resources on co st-effective technologies and approaches for mitigating both emissions and future impacts as changes in climate

and the environment occur.

California recognizes the “common but differentiate d responsibilities” among developed and developing countries (as articulated in the Kyoto Protocol), but the reality is that rapidly escalating greenhouse gas e missions in developing countries could possibly negate any efforts undertaken in Cal ifornia. To the extent that we are part of the global economy, California’s demand for goods manufactured in developing countries further exacerbates growth of greenhouse gas emissions globally. Therefore, it is critical for Californiato help support the adoption of lowcarbon technologies and sustainable development in the developing world.

California can advance the international policy deb ate through state-provincial partnerships for achieving early climate action in developing countries. This approach envisions commitments by developed countri es to provide capacity building through technological assistance and investment sup port in return for developing countries adopting enhanced mitigation actions. Ca lifornia will consider working with developing countries or provinces that have, a t a minimum, pledged to achieve greenhouse gas intensity targets in certain carbon- intensive sectors throughScoping Plan V. A Vision for the Future

115 mechanisms, such as minimum performance standards o r sector benchmarks. California also recognizes that developing countrie s have the challenge and responsibility to reduce domestic emissions in a wa y that will promote sustainable development, but not undermine their economic growt h.

One possible manifestation of these collaborations could be the establishment of sectoral agreements that help to grow developing co untries’ economies in a lowcarbon manner. In a sectoral approach, energy-inte nsive sectors adopt programs for reducing greenhouse gas emissions and/or energy use . Such sector-based approaches seem likely to win the support of developing countr ies and could also reduce concerns in developed countries about international competitiveness and carbon leakage.

A state-provincial partnership related to imported commodities (such as cement) would enable California to provide incentives to re duce greenhouse gas emissions associated with products that are imported by our s tate. California should continue to develop current relations and existing partnership arrangements with China – now the largest emitter of greenhouse gases in the world – because in addition to other compelling reasons much of the state’s imported cem ent originates in China.

California should also work to establish similar re lations with India and other countries to share research on both greenhouse gas mitigation and climate change adaptation activities. Projects in the Mexican bor der region may also be of particular interest, considering the opportunity to realize co nsiderable co-benefits on both sides

of the border.

Deforestation accounts for approximately 20 percent of global greenhouse gas emissions. California has set a strong precedent i n the effort to incorporate forest management and conservation into climate policy by adopting the CCAR forest methodology in October 2007. California also hopes to engage developing countries, including Brazil and Indonesia, to reduce emissions and sequester carbon through eligible forest carbon activities. Activities aime d at Reducing Emissions from Deforestation and Forest Degradation (REDD) were ex cluded from the rules governing the first Kyoto commitment period, but th ere is considerable momentum behind the effort to include provisions that would recognize such activities in a post2012 international agreement. Providing incentives to developing countries to help cut emissions by preserving standing forests, and t o sequester additional carbon through the restoration and reforestation of degrad ed lands and forests and improved forest management practices, will be crucial in bri nging those countries into the global climate protection effort. California recog nizes the importance of establishing mechanisms that will facilitate global partnerships and sustainable financing mechanisms to support eligible forest carbon activi ties in the developing world.V. A Vision for the Future Scoping Plan

116 

## B. Research Research Research

1. Unleash the Potential of California’s Universit ies and Private

Sector

Bringing greenhouse gas emissions down to a level t hat will allow the climate to stabilize will take a generation or longer. Many o f the ultimate solutions to achieve stabilization will be developed and implemented wel l into the future. Innovation in energy and climate will come from people who are no w in school. These young people will face unprecedented challenges, and they will need both wisdom and imagination to craft solutions. California’s respe cted public and private academic institutions must continue to develop and fund prog rams based on climate change science that cut across disciplines to address the multi-dimensional aspects of climate change.



### 2. Public 2. Public-

- Private Partnerships Private Partnerships Private Partnerships

To most effectively address the climate change dile mma, we must encourage collaborations between academia and the private sec tor. Industry is well-positioned to quickly attack problems. Combining the vast kno wledge housed in universities with businesses’ acumen and agility can unleash a p owerful collaborative force to tackle the problems associated with climate change.

Several important programs have already been initia ted at California universities, including Stanford’s Global Climate and Energy Proj ect and the University of California at Berkeley’s Energy Biosciences Institu te (EBI). 81 These and other efforts need to be recognized and encouraged, along with ot hers that can link the results of research directly to policy decisions that the Stat e must make.

Carbon Sequestration Carbon Sequestration

In addition to terrestrial carbon sequestration or natural carbon sinks, such as forests and soil, CO 2 can be prevented from entering the atmosphere thro ugh carbon capture and storage (CCS). This consists of separating CO 2 from industrial and energyrelated sources and transporting the CO 2 to a storage location for long-term isolation from the atmosphere. Potential technical storage m ethods include geological storage,

industrial fixation of CO 2 into inorganic carbonates, and other strategies. Large point

sources of CO 2 that may pursue CCS include large power plants, fo ssil fuel-based hydrogen production plants, and oil refineries. 82

81 The EBI is being developed in cooperation with Law rence Berkeley National Laboratory, the University of Illinois at Urbana-Champaign and BP.

82 Intergovernmental Panel on Climate Change. Carbon Dioxide Capture and Storage: A Special Repor t of Working Group III of the IPCC . Cambridge University Press, UK; 2005. http://www.ipcc.ch/ipccreports/srccs.htm (accessed October 12, 2008)Scoping Plan V. A Vision for the Future

117 According to a 2005 report by the Intergovernmental Panel for Climate Change (IPCC), a power plant with CCS could reduce CO 2 emissions to the atmosphere by approximately 80 to 90 percent compared to a plant without CCS (including the energy used to capture, compress and transport CO 2 ). 83 While more research and development needs to occur, California should both support near-term advancement of the technology and ensure that an adequate frame work is in place to provide credit for CCS projects when appropriate.

The State is currently an active member of the West Coast Regional Carbon Sequestration Partnership (WESTCARB), a public-priv ate collaboration to characterize regional carbon sequestration opportun ities in seven western states and one Canadian province. Established in 2003, this r esearch project is comprised of more than 80 public and private organizations. WES TCARB is conducting technology validation field tests, identifying majo r sources of CO 2 in its territory, assessing the status and cost of technologies for s eparating CO 2 from process and exhaust gases, and determining the potential for st oring captured CO 2 in secure geologic formations. 84



## C. Reducing California’s Emissions Further Reducing California’s Emissions Further Reducing California’s Emissions Further –

A Look Forward to 2030 A Look Forward to 2030

In order to assess whether implementing this plan a chieves the State’s long-term climate goals, we must look beyond 2020 to see whether the emissions reduction measures set California on the trajectory needed to do our part to stabilize global climate.

Governor Schwarzenegger’s Executive Order S-3-05 ca lls for an 80 percent reduction below 1990 greenhouse gas emission levels by 2050. This results in a 2050 target of about

85 MMTCO 2 E (total emissions), as compared to the 1990 level (also the 2020 target) of

427 MMTCO 2 E. Climate scientists tell us that the 2050 target represents the level of greenhouse gas emissions that advanced economies mu st reach if the climate is to be

stabilized in the latter half of the 21 st century. Full implementation of the Scoping Plan will put California on a path toward these required long -term reductions. Just as importantly, it will put into place many of the measures needed to keep us on that path.

Figure 6 depicts what an emissions trajectory might look like, assuming California follows a linear path from the 2020 AB 32 emissions target to the 2050 goal needed to help stabilize

climate. While the measures needed to meet the 205 0 goal are too far in the future to define in detail, we can examine the policies needed to ke ep us on track through at least 2030.

83 Ibid

84 WESTCARB. WESTCARB Overview. http://www.westcarb.org/about_overview.htm (accessed October 12, 2008)V. A Vision for the Future Scoping Plan

118 

### Figure 6: Emissions Trajectory Toward 2050

14.3

13.3

1.4 3.4 5.8 9.6 13.3 452

427 522

422

284

185

85

0.0 100.0 200.0 300.0 400.0 500.0

1990 2000 2010 2020 2030 2040 2050 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0

Per-capita Emissions (MT/person/year) Emissions (MMTCO2E)

To stay on course toward the 2050 target our State’ s greenhouse gas emissions need to be

reduced to below 300 MMTCO 2 E by 2030. This translates to an average reduction of four percent per year between 2020 and 2030. An additio nal challenge comes from the fact that California’s population is expected to grow by abou t 12 percent between 2020 and 2030. To counteract this trend, per-capita emissions must de crease at an average rate of slightly less than five percent per year during the 2020 to 2030 period.

Are such reductions possible by 2030? What measure s might be able to provide the needed

reductions? How do the needed measures relate to t he efforts put into place to reach the 2020 goal? All of these are critical questions, an d are addressed below.

The answer to the first question is yes, the reduct ions are possible. Furthermore, the measures needed are logical expansions of the progr ams recommended in the Scoping Plan that get us to the 2020 goal. We could keep on tra ck through 2030 by extending those programs in the following ways:

• Using a regional or national cap-and-trade system t o further limit emissions from the 85 percent of greenhouse gas emissions in capped se ctors (Transportation Fuels and other fuel use, Electricity, Residential/Commercial Natural Gas, and Industry). By 2030 a comprehensive cap-and-trade program could lo wer emissions in the capped

sectors from 365 MMTCO 2 E in 2020 to around 250 MMTCO 2 E in 2030;Scoping Plan V. A Vision for the Future

119 • Achieving a 40 percent fleet-wide passenger vehicle reduction by 2030, approximately double the almost 20 percent expected in 2020;

• Increasing California’s use of renewable energy;

• Reducing the carbon intensity of transportation fue ls by 25 percent (a further decrease from the 10 percent level set for 2020);

• Increasing energy efficiency and green building eff orts so that the savings achieved in the 2020 to 2030 timeframe are approximately double those accomplished in 2020;

and

• Continuing to implement sound land use and transpor tation policies to lower VMT

and shift travel modes.

The effects of these strategies are presented in Ta ble 33.



### Table 33: Potential Distribution of California Gre enhouse Gas

Emissions by Sector in 2030

Sector Potential Emissions
( MMTCO 2 E )
Transportation Fuels * 102

Other Fuel Use * 149
Uncapped Sectors 33

Total 284

* Capped sector

With these polices and measures in place, per-capit a electricity consumption would decrease by another five percent. Well over half of our ele ctricity demand could be met with zero or near zero greenhouse gas emitting technologies, ass uming nuclear and large hydro power holds constant at present-day levels. In response to a lower cap on emissions, existing coal generation contracts would not be renewed, or carbo n capture and storage would be utilized to minimize emissions. The remaining electricity g eneration would come from natural gas combustion either in cogeneration applications or f rom highly efficient generating units.

By 2030, the transportation sector would undergo a similarly massive transition both in terms of the vehicle fleet and the diversity of fuel supp lies. Due to the combination of California’s clean car standards (ARB’s ZEV program and the Low Carbon Fuel Standard), the number of battery-electric vehicles, plug-in hybrid electr ic vehicles, and fuel cell vehicles would increase dramatically, to about a third of the vehi cle fleet. Flex-fuel vehicles would comprise a large fraction of the remaining fleet, with more efficient gasoline and diesel vehicles making up the difference. Electricity, advanced bi ofuels, improved gasoline and diesel, renewable natural gas and hydrogen would all play a role in powering this high-tech fleet of

efficient vehicles.V. A Vision for the Future Scoping Plan

120 Regional land use and transportation strategies wou ld grow in importance and would reverse the trend of per-capita vehicle miles traveled, a r eduction of about eight percent below

business-as-usual in 2030. With ambitious but reas onable action, statewide passenger vehicle greenhouse gas emissions could be reduced t o half of 2020 levels in 2030, which is

also about half of business-as-usual for 2030. Eff iciency strategies and low carbon fuels for heavy-duty and off-road vehicles, as well as for sh ips, rail, and aviation, would need to be greatly expanded in order to achieve additional red uctions from the transportation sector in

2030.

In tandem with efficiency measures that lower deman d for electricity, natural gas and transportation fuels, California’s cap-and-trade pr ogram would incent large industrial sources as well as commercial and residential natural gas c ustomers to further reduce emissions. By tightening the cap over time, it is expected that f acilities in the industrial and natural gas sectors would achieve reductions well beyond those needed to meet the 2020 emissions cap.

The Scoping Plan proposes several measures for redu cing high GWP gases that collectively, will substantially reduce emissions. With a transi tion toward reduced consumption of these gases, improved containment in their end uses, and substitution of low GWP alternative gases, it is expected that emissions from this sect or could decrease by 75 percent between

2020 and 2030.

For uncapped sectors, we assume that the agricultur e sector will reduce emissions by about 15 percent between 2020 and 2030. Net forest uptak e of CO 2 must be preserved or enhanced, likely through both expansion of forests and reduction in carbon loss from forest fires, which are predicted to increase over this ti me period. This example assumes a 10 percent reduction in direct landfill emissions f rom the recycling and waste sector; however, aggressive implementation of the suite of measures proposed in this Plan could further reduce emissions from this sector by 2030.

In total, the measures described above would produc e reductions to bring California’s statewide greenhouse gas emissions to an estimated 284 MMTCO 2 E in 2030. While the potential mix of future climate policies articulate d in this section is only an example, it serves to demonstrate that the measures in the Scoping Pla n can not only move California to its 2020 goal, but also provide an expandable framework for much greater long-term greenhouse gas emissions reductions.



## D. Conclusion Conclusion Conclusion

California’s commitment to address global warming h as never been greater. The vast amount of interest, support, and input that ARB has received since this plan began to take shape is evidence of a clear understanding of the n eed to take action and support for the State’s efforts to lead the way. The time has come to shift away from a ‘business-as-usual’ approach to climate change and to move toward the l asting and sustainable goal of a clean energy future.Scoping Plan V. A Vision for the Future

121 Reaching our goals will take a great deal of leader ship, commitment, and a willingness to embrace new approaches and seek out new solutions. California’s plan to reduce greenhouse gas emissions must also take into account the impac ts of this transition and be designed in particular to address the needs of low-income commu nities, small businesses, and California’s working families.

Reaching our goals will also require involvement an d support from all levels of government in California, and a coordinated effort with other states, regions, and countries. The solutions and technologies we develop here will be used aroun d the world to help others transition to a clean energy future and contribute to the fight aga inst global warming.

Reaching our goals will also require flexibility. As we move forward, we must be prepared to make mid-course corrections. AB 32 wisely requi res ARB to update its Scoping Plan every five years, thereby ensuring that California stays on the path toward a low carbon

future.

This plan is part of a new chapter for California t hat in many ways began with the passage and signing of AB 32. It proposes a comprehensive set of actions designed to reduce greenhouse gas emissions in California, improve our environment, reduce our dependence on oil, diversify our energy sources, save energy, cre ate new jobs, and enhance public health. The challenge California has taken on is large but the opportunities are even greater. It is now time to turn this plan into action.122



## ACKNOWLEDGMENTS ACKNOWLEDGMENTS

This Scoping Plan was prepared by the Air Resources Board. This document was made possible by the hard work of numerous contributors. Below is a list of advisory committees and State agencies that directly provided input to this Scoping Plan.



### Team Support Team Support

Climate Action Team
Climate Action Team Sector Subgroups

• Agriculture

• Cement

• Energy

• Forest

• Green Buildings • Land Use

• Recycling and Waste Management

• State Fleet

• Water-Energy

• Economics



### Advisory Committees Advisory Committees

Market Advisory Committee
Environmental Justice Advisory Committee
Economic and Technology Advancement Advisory Commit tee



### State Agencies State Agencies

Governor’s Office of Planning and Research
California Environmental Protection Agency
Business, Transportation and Housing Agency

Resources Agency
State and Consumer Services Agency
Department of Food and Agriculture
California Energy Commission

California Public Utilities Commission
California Transportation Commission
Department of Conservation
Department of Forestry and Fire Protection Department of General Services
Department of Parks and Recreation
Department of Public Health
Department of Toxic Substances Control
Department of Transportation
Department of Water Resources
Housing and Community Development
Integrated Waste Management Board

Office of Environmental Health Hazard

Assessment

State Water Resources Control Board
Department of Pesticide Regulation

& Roberta Fegg

Sharon L. Anderson Darlene Atkinson Barbara Bamberger Bill B lackburn Jeannie Bla keslee Edie Chang Steve Cliff Jon Co stantino Cheri Davis Paul Domich Karin Donhowe Brieanne Do u ke Ashley Dunn Rob DuVall Mary Farr Jennifer Gray Jerry Har t Alana Hitchcock L isa Holm Kevin Kennedy Karen Khamou Bill K nox Renae Maher Dennis O’Bry ant Patti Ochoa Ray Olsson Cla udia Orlando Johnn ie Ray mond Christine Seghers Charles M. Shu loc k Sandee Smith Gina Sterlin g Bruce Tuter Lucille van Ommering Rich Varenchik Sam Wade Mark Wenzel Tabetha Will mon Matt Zaragoza123



## B B OARD RESOLUTION OARD RESOLUTION OARD RESOLUTION124125126127128129130131132133