Source: https://www.cwclaw.com/article/ab-32-deconstructed-the-global-warming-solutions-act-of-2006-part-1/
Timestamp: 2019-04-19 15:06:37+00:00

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California enacted the Global Warming Solutions Act (Health & S C §§38500–38598) in 2006 amid growing concern over the potential long-term adverse impacts to its natural resources and economy associated with global warming and climate change. Commonly referred to as AB 32, the legislation is intended to reduce and eventually cap statewide emissions of greenhouse gases. The California Air Resources Board (CARB), as the State’s lead air pollution control agency, was assigned primary responsibility for coordinating development of those measures needed to achieve the required emissions reductions. In June 2008, CARB plans to issue for public review and comment a Scoping Plan that will outline the range of emission reduction measures proposed to achieve the statutory mandate. AB 32 requires that the Scoping Plan be finalized by January 1, 2009. While specific details regarding many of the proposed measures may not be fully available until a draft version of the Scoping Plan is issued in June (and, in many instances, will still be in flux as this article goes to print), the Scoping Plan will likely have a direct or indirect impact on all major sectors of the California economy, and will likely affect most Californians.
In preparation for the issuance of the Scoping Plan, Part 1 of this article summarizes the key deadlines and requirements found in AB 32 and outlines the steps being taken by CARB, in conjunction with other agencies, to implement the more significant aspects of the statute. Part 2 of this article (to be published in the July 2008 issue of the Reporter) will discuss the early implementation measures and conclude with a discussion highlighting some of the issues raised by AB 32- many of which are likely to be addressed in the Scoping Plan—that are of potential interest to the real estate practitioner.
Events leading to the introduction and eventual passage of AB 32 are typically traced to Executive Order S-3-05 (June 1, 2005). In the Order, the Governor acknowledged the actions that California businesses have undertaken to reduce emissions of greenhouse gases, as well as past regulatory measures intended to achieve such reductions. However, in recognition of the increasing threat that global warming poses to the State’s economy and natural resources, coupled with the economic benefit that, it was perceived, could accrue to the State through the development and implementation of clean technologies focused on the reduction of greenhouse gas emissions, the Order outlined a more coordinated level of action.
President of the Public Utilities Commission (CPUC).
This group is referred to as the “Climate Action Team.” The Secretary must report to the Governor and the legislature by January 2006, and every two years thereafter, on the efforts being undertaken through the Climate Action Team to meet the statewide emissions targets.
In part, AB 32 is intended to codify and provide additional enforcement authority to enable the State to meet one of the Governor’s emission reduction targets—the reduction of greenhouse gas emissions to 1990 levels by 2020.
Responsibility for regulating sources of greenhouse gas emissions subject to AB 32 rests with CARB. Health & S C §38510. In carrying out its statutory mandate, CARB is required to consult with other states, and the federal government, and other nations to identify the most effective strategies and methods to reduce greenhouse gases, manage greenhouse gas control programs, and to facilitate the development of integrated and cost-effective regional, national and international greenhouse gas reduction programs.
Health & S C §38564 . CARB must also work with the Climate Action Team, which is expressly authorized to “continue its role in coordinating overall climate policy.” Health & S C §38501(i).
Health & S C §38505 (g). Carbon dioxide, methane, and nitrous oxide occur naturally in the atmosphere; at normal levels, they play a vital role in moderating the earth’s temperature. However, increasing concentrations of these constituents attributed to industrial activity and fossil fuel combustion are thought to be responsible for the recent increases in global temperatures above historical levels. Hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, associated exclusively with industrial operations, are also responsible.
Although CARB is accorded significant discretion in developing and implementing measures necessary to achieve the required level of statewide emissions reductions, it has fairly strict timelines within which certain regulatory actions must be completed. These deadlines can be extended by the Governor for up to one year at a time, but only on a showing of “extraordinary circumstances, catastrophic events, or threat of significant economic harm.” Health & S C §38599.
June 30, 2007: Identification of a list of “discrete early action” measures that can be implemented in the near term to begin the steps necessary to achieve the required level of emission reductions while other larger-scale actions are under development. Regulations implementing each of these measures must be adopted and enforceable by January 1, 2010. Health & S C §38560.5.
January 1, 2008: Issuance of regulations governing the mandatory reporting of greenhouse gas emissions by all significant emission sources. Health & S C §38530.
January 1, 2008: Development of an estimate of the statewide emissions of greenhouse gases in 1990 and the setting of a limit equivalent to this level that cannot be exceeded in 2020. Health & S C §38550.
January 1, 2009: Adoption of what is referred to as a Scoping Plan, which will identify the complete range of measures proposed for implementation to achieve the mandated emission reductions. Health & S C §38561. These measures can include direct emission reduction measures, market-based compliance mechanisms, alternative compliance mechanisms, monetary and nonmonetary incentives, and other appropriate actions.
January 1, 2011: Establishment of annual emission limits and regulations implementing the selected measures, which must be enforceable by January 1, 2012. Health & S C §38562.
As required by AB 32, CARB has appointed an Environmental Justice Advisory Committee (EJAC) and an Economic and Technology Advancement Advisory Committee (ETAAC). The EJAC periodically provides recommendations to CARB on AB 32 implementation issues on behalf of communities historically impacted by air pollution, while the ETAAC primarily supplies advice on economic and technological issues associated with new greenhouse gas reduction technologies. Health & S C §38591.
Actions taken and planned by CARB to carry out each of its statutory obligations are discussed below.
The Global Warming Solutions Act requires CARB to adopt regulations on or before January 1, 2008, to cover the reporting and verification of greenhouse gas emissions. Health & S C §38530. The regulations must require the reporting of emissions from the largest generators of greenhouse gas emissions and account for the emissions resulting from “all electricity consumed in the state, including transmission and distribution line losses from electricity generated within the state and imported from outside the state.” Health & S C §38530(b)(1), (2). While CARB has significant discretion in developing its reporting regulations, to the extent practical, the rules must be consistent with similar types of requirements in place at the state, federal, and international levels, including applicable standards and protocols issued by the California Climate Action Registry. Health & S C §38530(b)(3), (c)(2).
Proposed regulations governing the mandatory reporting of greenhouse gas emissions, incorporated in the California Code of Regulations at 17 Cal Code Regs §§95100-95133, were issued by CARB on October 19, 2007. On December 6, 2007, CARB approved a version of the regulations containing a number of modifications to those previously circulated for public comment. CARB purportedly will soon issue these regulations for a final round of public comments. After formally addressing all public comments submitted during this process, CARB will forward the regulations to the Office of Administrative Law for approval.
CARB has estimated that approximately 800 commercial and industrial facilities will be subject to its mandatory reporting regulation. These facilities are responsible for approximately 94 percent of the total greenhouse gas emissions attributed to commercial and industrial sources located in California; however, given the large volume of such emissions attributed to transportation-related mobile sources, their share of the statewide total is much smaller. CARB, Staff Report: Initial Statement of Reasons for Rulemaking—Public Hearing to Consider Mandatory Reporting of Greenhouse Gas Emissions Pursuant to the California Global [PAGE 72]Warming Solutions Act of 2006 (Oct. 19, 2007); CARB News Release 07-59 (Dec. 6, 2007).
Other facilities emitting at least 25,000 metric tons of carbon dioxide from stationary combustion sources.
Exemptions exist for electric generating facilities powered exclusively by nuclear, hydroelectric, wind, or solar energy, portable equipment designated for backup or emergency use, primary and secondary schools, and hospitals. 17 Cal Code Regs §95101(b), (c).
Reporting requirements attach to the operator of a covered facility. 17 Cal Code Regs §95103(a). Operator status is defined by reference to “operational control,” which means “the authority to introduce and implement operating, environmental, health and safety policies.” In situations when authority over a facility’s operations rests with a number of separate entities, operational control will be deemed to lie with the entity “holding the permit to operate from the local air pollution control district or air quality management district.” 17 Cal Code Regs §95102(a)(134).
Covered facilities are generally required to report annual emissions of carbon dioxide, nitrous oxide, and methane from designated stationary combustion, process, and fugitive sources. 17 Cal Code Regs §95103(a)(2). Certain facilities also need to report on their fuel consumption and indirect energy usage, as reflected by their “consumption of purchased or acquired electricity, heat, cooling or steam.” 17 Cal Code Regs §95103(a)(5), (a)(8), and (a)(9). All covered facilities have the discretion to report combustion emissions of any of the above constituents from mobile sources. 17 Cal Code Regs §95103(a)(4). Additional requirements are tailored to specific types of covered operations. For example, facilities within the electric power sector must also report fugitive emissions of hydrofluorocarbons and sulfur hexafluoride from selected operations. 17 Cal Code Regs §95111.
Reporting obligations begin in 2009, at which time a facility’s emissions during calendar year 2008 must be reported. To provide operators of covered facilities with sufficient time to familiarize themselves with the appropriate reporting standards and protocols, reports submitted to CARB in 2009 (referred to as “emissions data reports”) need only be based on “best available data and methods to develop emissions estimates.” All reporting in subsequent years must comply with the detailed specifications set forth in the regulations. 17 Cal Code Regs §95103(a)(1). Certain categories of covered facilities are required to submit completed emissions data reports to CARB on or before April 1 of each year (covering emissions-related information from the prior calendar year), while other types of facilities are subject to a June 1 reporting deadline. 17 Cal Code Regs §95103(b).
Beginning in 2010, covered facilities are required to have their final emissions data reports verified by an accredited third party or by the appropriate air pollution control district or air quality management district. 17 Cal Code Regs §95103(c). For certain facilities, a verification opinion must be obtained with respect to each year’s emissions data report; for other categories of sources, such action is required only on a triennial basis. 17 Cal Code Regs §95103(c). In general, verification is intended to provide third-party confirmation that a covered facility has complied with the applicable standards and protocols governing the estimation and reporting of greenhouse gas emissions and that the emissions data report as submitted to CARB is “free of material misstatement.” 17 Cal Code Regs §95102(a)(191). A “material misstatement” is defined to mean “one or more inaccuracies discovered in the course of verification that result in the total reported emissions, or reported purchases, sales, imports, or exports of electricity, being outside the 95 percent accuracy required to receive a positive verification opinion.” 17 Cal Code Regs §95102(a)(108). After a verification report has been submitted to CARB, a facility’s emissions data report will be considered final, with any subsequent revisions also subject to verification requirements. 17 Cal Code Regs §§95104(d)(3), 95131(d).
The Global Warming Solutions Act requires CARB to determine, before January 1, 2008, the level of statewide emissions of greenhouse gases in 1990 and an equivalent statewide emissions limit to be effective in 2020. Health & S C §38550. Unless amended or repealed, the 2020 emissions limit will also be used to evaluate additional emission reduction measures for implementation beyond this date. To determine the scope of measures that must be employed to achieve the necessary emissions reductions, CARB also needed to determine the expected statewide emissions of greenhouse gases in 2020 under a “business-as-usual” scenario. For this analysis, CARB relied on accepted forecasts of economic and population growth, but assumed that no new measures to reduce greenhouse gas emissions would be undertaken. CARB Staff Report: California 1990 Greenhouse Gas Emissions [PAGE 73]Level and 2020 Emissions Limit (Nov. 16, 2007) (Emissions Staff Report).
In developing the 1990 emissions level, CARB initially relied on an existing inventory of greenhouse gas emissions maintained by the California Energy Commission (CEC). CARB staff then spent nearly a year reviewing the assumptions and calculations that served as the foundation of the CEC’s inventory. CARB also actively solicited public input throughout this process, holding numerous public hearings and technical meetings from late 2006 through mid-2007. Emissions Staff Report at 11. Although CARB’s aggregate 1990 statewide emissions level is very close to that originally developed by the CEC, numerous revisions were made to many of the inventory’s individual components to better comport with guidance previously established by both the Intergovernmental Panel on Climate Change (IPCC) and the U.S. Environmental Protection Agency (EPA). Consistent with statutory mandates, the CARB inventory also includes imported electricity and ships operating within California waters as two new emissions sources. Emissions Staff Report at 10.
On December 6, 2007, CARB approved staff’s recommendation that the 1990 statewide emissions level be set at 427 million metric tons of carbon dioxide equivalents (MMTCO2e). This figure represents the statewide emissions of each of the greenhouse gases regulated under AB 32, expressed in terms of their carbon dioxide equivalents. By way of background, the IPCC has developed a system for use in comparing the potential for different greenhouse gases to impact climate change, referred to as “global warming potential” or “GWP.” Carbon dioxide is used as the reference point in this system, with the GWPs for the other greenhouse gases subject to AB 32 ranging from 21 for methane to 23,900 for sulfur hexafluoride (meaning, for example, that one ton of methane emissions has roughly the same climate change impact as 21 tons of carbon dioxide). Emissions Staff Report at 4. Nearly 90 percent of California’s 1990 greenhouse gas emissions consisted of carbon dioxide, primarily resulting from fossil fuel combustion. Methane and nitrous oxide comprised roughly 6 percent and 4 percent, respectively, of the total, with sulfur hexafluoride and halogenated gases making up the remainder. Emissions Staff Report at 3.
To compare past emissions with recent trends, CARB also estimated statewide emissions of greenhouse gases in 2004. Total emissions in 2004 were determined to be 484 MMTCO2e, roughly a 13.3-percent increase over 1990 levels. Table I summarizes the percentage of total emissions in 1990 and 2004 attributed to specific economic sectors that may be subject to eventual regulation under AB 32.
Source: Emissions Staff Report at 6-8.
The emissions attributed to California’s industrial sector, as a percentage of total emissions, decreased slightly from 1990 to 2004. This is likely a reflection of the stringent regulations limiting airborne emissions from stationary sources that were developed during this time period and the tendency for industrial operations to expand outside California. Within the industrial sector, petroleum refineries had the highest share of emissions in both years, with cement manufacturers a relatively distant second. The share of emissions attributed to the transportation sector increased slightly from 1990 to 2004—a reflection of California’s population growth and development patterns that have resulted in a significant increase in the number of vehicle miles traveled. Emissions Staff Report at 7.
The transportation sector is comprised of on-road vehicles, in-state airplane flights, trains, and ships. In 1990, passenger cars and light duty trucks comprised more than 70 percent of the emissions attributed to this sector. Emissions Staff Report at 15. As the largest individual source of emissions, these vehicles currently are the focus of CARB emission reduction strategies.
Although California imported approximately 40 percent of the electrical energy required to meet the State’s energy needs in 1990, imported electricity accounted for 56 percent of the greenhouse gas emissions attributed to the electricity sector. Emissions Staff Report at 14, 17. Because a large portion of the imported energy supplied to the California power grid was produced by coal-fired power plants, efforts to transition to cleaner-burning technologies and other renewable energy sources may prove necessary if this sector is to reach any emission limits that may eventually be set by CARB.
Roughly 10 percent of 1990 greenhouse gas emissions was attributed to the residential and commercial sectors. [PAGE 74]Emissions in this sector were largely associated with the combustion of fuel needed to heat buildings and run appliances. Emissions Staff Report at 26. Revisions to the State’s existing energy efficiency and building standards may also prove necessary with respect to these sectors.
CARB has also prepared a preliminary estimate of greenhouse gas emissions in 2020 under a “business-as-usual” scenario. Although this estimate is subject to ongoing refinement, CARB presently believes that these emissions would be roughly 600 MMTCO2e, approximately a 40-percent increase over 1990 levels. Under AB 32, CARB will be responsible for ensuring that measures are implemented to reduce greenhouse gas emissions by approximately 173 MMTCO2e by 2020 (the difference between the 1990 statewide emissions level of 427 MMTCO2e and the 600 MMTCO2e presumed “business-as-usual” figure). The actions that CARB or other Climate Action Team member agencies have already committed to undertake to achieve a portion of the necessary emission reductions are discussed below.
The Global Warming Solutions Act requires CARB, by June 30, 2007, to develop a list of “discrete early action greenhouse gas emission reduction measures” that either are being implemented or that can be implemented during that period when other actions are under consideration. Regulations implementing each of these measures must be adopted and enforceable by January 1, 2010. Health & S C §38560.5.
CARB staff initially identified 36 early action measures for proposed adoption by the Board, which are organized into three distinct groups.
Group 2 consists of 23 measures on which CARB has plans to work between 2007 and 2009, but on which it cannot commit to having adopted enforceable regulations by the January 1, 2010, deadline. Collectively, those measures included as part of Groups 1 and 2 are estimated by CARB as likely to result in greenhouse gas emission reductions of between 33 and 46 MMTCO2e by 2020.
Included within Group 3 are 10 measures (subsequently increased to 11) directed at diesel particulate and ozone on which CARB intends to begin rulemaking proceedings that will also indirectly reduce emissions of greenhouse gases. CARB has not attempted to quantify the level of supplemental emission reductions that would be achieved by these latter measures. CARB, Proposed Early Actions to Mitigate Climate Change in California (Apr. 20, 2007).
At its June 2007 meeting, CARB’s Board of Directors approved 37 staff-proposed emission reduction strategies. However, based at least in part on concerns with the relatively low number of discrete early action measures proposed for adoption, the Board requested that staff reevaluate additional stakeholder recommendations. Staff consequently recommended that the Board approve a total of 44 early action measures, including 9 discrete early action measures. These measures are collectively estimated to reduce roughly 42 MMTCO2e of greenhouse gas emissions by 2020, approximately 25 percent of the total emissions reduction CARB needs to achieve by this date under AB 32. CARB, Expanded List of Early Action Measures to Reduce Greenhouse Gas Emissions in California for Board Consideration (Oct. 2007). At its October 2007 meeting, the Board adopted the recommended additions and modifications to the list of previously approved early action measures.
Adoption of a tire inflation program that would require, in part, that tire inflation be included as part of commercial automobile service work.
In addition to CARB, other agency members of the Climate Action Team have assumed responsibility for implementing measures to reduce greenhouse gas emissions. In April 2007, the Climate Action Team issued a report outlining measures within the respective jurisdiction of non-CARB member agencies that will either be adopted or be “underway” and “initiated” by January 1, 2010, to reduce statewide levels of greenhouse gas emissions. See [PAGE 75]California EPA, Climate Action Team Proposed Early Actions to Mitigate Climate Change in California—Draft for Public Review (Apr. 2007). CARB has evaluated these measures and concluded that they are likely to result in approximately 68 MMTCO2e of emission reductions by 2020. A more recent report issued by the Climate Action Team reflects these measures as anticipated to lead to emission reductions of roughly 72.5 MMTCO2e by 2020. Climate Action Team, State Agency Greenhouse G as Reduction Report Card (Mar. 5, 2008).
One of the more significant of these early action measures involves standards adopted by the CEC and the CPUC intended to require investor-owned and municipal utilities to transition to more renewable or sustainable supplies in accordance with SB 1368 (passed by the California legislature in 2006). The CEC has also committed to implementing ongoing improvements to its Energy Efficient Building Standards and its Energy Efficient Appliance Standards (including the potential adoption of light bulb efficiency standards). The Department of Transportation also plans to better integrate land use and transportation decisions and has committed to work, in conjunction with the California Transportation Commission, “to include GHG emissions criteria into regional transportation planning guidelines.” Further, the Climate Action Team has created a Land Use Subgroup (LUSCAT) to consider land use, transportation planning, and “smart growth” measures that can be implemented to reduce greenhouse gas emissions. Chaired by the CEC, the LUSCAT began holding public workshops in March 2008, and will shortly be submitting its final recommendations to CARB for proposed inclusion in the Scoping Plan.
CARB also intends to rely on emission reductions obtained through regulations approved in 2004 that establish greenhouse gas emission standards for passenger cars and light duty trucks, as required under AB 1493 (passed by the California legislature in 2002). These regulations were originally intended to apply to model years 2009 through 2016, and CARB estimates that they will result in a roughly 30 MMTCO2e reduction in greenhouse gas emissions by 2020. However, CARB cannot formally implement these regulations until it receives a waiver by the EPA of federal preemption under the Clean Air Act. On December 19, 2007, the EPA Administrator notified the State of his determination that insufficient evidence had been submitted in support of the waiver request. Shortly thereafter, the State filed a petition with the Ninth Circuit Court of Appeals seeking review of this decision. State of California v EPA (9th Cir 2008, No. 08-70011). The EPA subsequently published in the Federal Register a formal denial of the State’s waiver request, setting forth in detail the basis for the Administrator’s decision. 73 Fed Reg 12156 (Mar. 6, 2008). On April 10, 2008, the Ninth Circuit denied without prejudice motions to dismiss the State’s petition on jurisdictional grounds. A briefing schedule has now been set and the action remains outstanding. Notwithstanding the foregoing, the Global Warming Solutions Act provides that if CARB is prohibited from implementing its motor vehicle emission standards regulation, other regulations must be developed to achieve at least the same level of emissions reduction from mobile sources. Health & S C §38590.
When estimated emission reductions from all of the existing agency-directed early action measures are aggregated, it appears that the State has already identified measures anticipated to meet a significant percentage of the reductions that must be achieved by 2020. These proposals will be addressed in more detail in the draft Scoping Plan, along with those other measures and programs proposed for implementation to enable the State to meet or exceed the total 173 MMTCO2e emissions reduction target by 2020. Issues related to CARB’s development of the Scoping Plan will be discussed in Part 2 of this article, which will appear in the July 2008 issue of the Reporter.
Reprinted with the permission of the CEB (Continuing Education of the Bar – California). Part 2 of this article will appear in the June issue of the CEB Real Property Law Reporter and will contain a discussion of the early measures taken to date to implement AB 32 and the status of the Scoping Plan development; it will conclude with an analysis of several issues of interest to real estate practitioners.—Eds.

References: §38510
 §38564
 §38501
 §38505
 §38599
 §38560
 §38530
 §38550
 §38561
 §38562
 §38591
 §38530
 §38530
 §38530
 §95101
 §95103
 §95102
 §95103
 §95103
 §95103
 §95111
 §95103
 §95103
 §95103
 §95103
 §95102
 §95102
 §38550
 §38560
 §38590