Tag Archives: Assembly Bill 32

Government & Business, Power

Another Whack at a Federal Climate Bill

87767226The latest version of a federal climate bill sets a series of national targets for greenhouse gas emissions and would halt California’s plans for state and regional carbon trading.

Unveiled by Senators John Kerry and Joe Lieberman today, the American Power Act aims to push GHG emissions down to slightly below 2005 levels by 2013, then sets a longer-term reduction timetable of 83% (of 2005 levels) by 2020, 58% by 2030, 17% by 2050 (or to flip it around, an 83% reduction from 2005 levels by 2050), in line with the promise that President Obama made following the “Copenhagen Accord.”

The 987-page bill regulates seven greenhouse gases, with room for the Environmental Protection Agency to add others under the Clean Air Act. The cap-and-trade provisions focus on “7,500 factories and power plants,” which is to say those that put out more than 25,000 metric tons of carbon per year. That’s the same benchmark used by the federal EPA in its proposed regulations.

Like previous drafts, this one nullifies state and regional carbon regulation, setting up “one clear set of rules” for industry and providing “compensation for the revenues lost as a result of the termination of their cap-and-trade programs,” such as California’s AB 32, and regional efforts, such as the Western Climate Initiative. California’s Legislative Analyst has estimated that the state has committed about $120 million so far, to the implementation of its 2006 climate law. California regulators have already weighed in on the concept of “federal preemption,” warning against leaving the job of carbon reduction to the federal government alone. The Kerry-Lieberman bill requires “consultation” with states that currently have their own emissions plans.

Significantly, the first several sections of the Senate bill address development of energy sources. The reduction goals for greenhouse gas emissions aren’t even spelled out completely until page 265. Energy provisions that may come to bear on California policy include:

Agribusiness:

– All farms appear to be exempt from cap & trade but benefit from offset programs

Oil Industry:

– According to a summary of the bill from Kerry’s office: “Producers and importers of refined products” will get a fixed price for their carbon allowances.

– Offshore drilling is included as part of the energy strategy but states can prohibit leasing within 75 miles of the coast

Nuclear Power:

– Provides several incentives, including an “expedited procedure for issuing combined construction & operating licenses for qualified new nuclear reactors.”

– Increases loan guarantees to $54 billion

Missing from the bill is a comprehensive national strategy for storage of spent nuclear fuel, an unresolved issue that prevents California utilities from any expansion of nuclear power.

Governor Schwarzenegger issued a statement that barely acknowledged federal preemption, saying only that “California has been an unparalleled leader in clean energy, pioneering policies that have benefited the entire nation, and we must be able to continue our important, groundbreaking work that will both improve the environment and help our economy.”

Some environmentalists have already responded with raspberries. In a statement based on draft summaries of the bill, the group Friends of the Earth called it “dangerous,” claiming that the bill would “scrap crucial tools for solving the climate crisis” and provide “billions in giveaways to corporate polluters.” In a statement from the Environmental Defense Fund, on the other hand, its western regional vice president said that the bill’s announcement “marks real progress in the fight against climate change.”

Andrea Seabrook reported on the bill’s rollout and prospects for NPR’s All Things Considered.

Government & Business

AB 32 Stopper Headed for Ballot

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It looks like there will be a measure on November’s statewide ballot to block full implementation of California’s greenhouse gas regulations.

Groups supporting the measure they call the “California Jobs Initiative” claim they gathered more than 800,000 signatures, nearly twice what they needed to qualify the proposal as a statewide referendum.

The existing climate law, known widely as AB 32, allows for the Governor to declare an emergency suspension of up to one year. But John Kabateck, who heads the California branch of the National Federation of Independent Businesses, says small businesses in particular can’t wait to see what the next governor might do; that the measure is needed to “stop the madness.” Kabateck said it’s time to “just push the pause button and please stop loading small businesses with new costs, new mandates and new regulations at a time when we need to crawl out of the hole.”

Studies have reached varying conclusions about what effect the state’s current regulatory path for carbon emissions would have on the California economy. Opponents of the measure have already formed their own campaign, trying to keep momentum behind the three-year-old climate law known as AB-32.

Steve Maviglio, who works for the the pro-AB 32 Californians for Clean Energy and Jobs, formed to oppose the ballot initiative, says he doesn’t think all those signatures necessarily signify broad support. “I think what that represents is the travesty of the initiative system and how out-of-state oil companies can buy their way onto the ballot,” he told me, in a telephone interview. The push to get the measure on the ballot has been financed largely by Texas-based oil companies and a somewhat obscure organization called the Adam Smith Foundation, based in Missouri.

“It took them $2 million to round up these signatures” said Maviglio. “And if you look at every single poll, you can see that Californians know we can have both clean air and a strong economy, and that we’re not going to be fooled by Texas oil companies,” he added.

The proposed ballot measure would freeze AB-32 until the state’s unemployment level dropped to five-and-a-half percent—or lower–for one full year. That’s something that’s happened only three times since the mid-1970’s: once in the late 1980s (for about ten quarters), a similar stretch in the late ‘90s, and once in 2005-06. After the deep recession of the early ‘80s, it took the state’s unemployment rate about four-and-a-half years to move from its 11% peak back to the 5.5 percent threshold.

Governor Arnold Schwarzenegger today called the effort to halt AB-32 “the work of greedy oil companies.”

Government & Business

States Bridle Against “One-Size” Carbon Rules

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Next week the US Senate will take the wraps off a long-awaited national energy and climate bill, which–even before its unveiling–is already making California businesses and regulators nervous.

Though exact language has not been revealed, the compromise bill reportedly includes sections that would nullify state and regional programs to regulate carbon emissions. That does not sit well with Mary Nichols, California’s chief carbon regulator. “When it comes to energy policy and the environment, one size truly does not fit all,” Nichols told reporters in a Tuesday conference call. Nichols chairs the California Air Resources Board, which is the lead agency charged with implementing the state’s Global Warming Solutions Act, passed in 2006.

The state has already invested three years and more than $100 million dollars (approximately $40 million per year, according to a policy brief issued last week by the state’s non-partisan Legislative Analyst’s Office), laying the groundwork for sweeping new regulations, including a carbon trading scheme with several other Western states. The regional cap-and-trade program known as the Western Climate Initiative could also be jeopardized by the current Senate bill, though from most appearances, the program is already languishing.

Businesses also have much at stake. Jan Smutny-Jones heads the Independent Energy Producers Association, whose members generate almost half the electric power produced in California. “My members are making literally billion-dollar decisions about infrastructure that’s going to be around in California generating electricity or transporting electricity to customers for the next 40-50 years, and they kind of need to know sooner rather than later, in terms of what the actual rules of the road are gonna be,” Smutny-Jones told me in his Sacramento office on Monday. “Having the rules change is disruptive,” he said.

California Senator Barbara Boxer, who co-sponsored the first Senate version of the bill last fall, says she does “not support federal preemption” but also wants to avoid overlap between the state and federal systems. “It depends on how the bill is written,” Boxer told reporters at the recent state Democratic Convention. “I’ve had environmentalists say ‘Well if we do a trading system on the credits, we want one system, we don’t want two systems,’ so there’s some areas where it may make sense.”

Nichols offered little latitude in her remarks on Tuesday.  “We need to put down a marker here and remind the senators that they will not have an effective climate program without the states,” she said. “We don’t want there to be any room for doubt about whether states are permitted to do things that advance their economic and energy agendas.” Nichols cited large amounts of “green” venture capital flowing into California as fruit already borne by the state’s actions toward reducing carbon emissions.

The Senate bill is expected to be rolled out on Monday. Optimists are hoping that a finished bill could reach the Senate floor by June or July, according to a report from Reuters news service.

Government & Business

Stop-AB 32 Drive Draws Money from Farther Afield

87606151Environmentalists have registered much consternation over the fact that out-of-state oil companies have been bankrolling a ballot measure to freeze implementation of AB 32, backbone of the state’s climate strategy.

Today Anthony York updates the situation with the latest intrigue on his Capitol Weekly website.

The latest major contribution–nearly a half-million dollars–reportedly comes from a Missouri foundation with tenuous links to climate policy.

Government & Business, Power

The Escalating Conflict Over AB 32

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Bearfight_blogCalifornia has had a climate change mitigation law on the books for more than three years now–but getting that law’s regulations fully in place is proving to be a tough slog.

Fans and mortal enemies of California’s Global Warming Solutions Act (AB 32) all exude certainty about what the carbon emissions-cutting law will do for–or to–the state’s economy. Lately the debate has escalated into full-scale PR warfare. Major battlefronts include:

– A signature campaign for a ballot initiative to suspend the law

– An online campaign to boycott oil companies funding the above

– Studies & surveys from both sides proclaiming their case

– A gubernatorial candidate who has vowed to suspend AB 32

This week both sides weighed in afresh.

The California branch of the National Federation of Independent Business today announced support of what proponents still call the “California Jobs Initiative,” even though the measure has been renamed by Attorney General Jerry Brown, who supports AB 32.

The measure would suspend most provisions of the climate law until the state’s official unemployment rate improves substantially from its current 12.5% level. NFIB statements say “the measure is headed for the November ballot” but only if proponents gather more than 400,000 required signatures.

John Kabateck, executive director of  NFIB/California said in a conference call with reporters today that his organization would help gather signatures to qualify the measure. He called the climate law “one more arrow in the quiver of damage and pain inflicted on small business right now.” In a companion news release, Kabatek ventured that full implementation of AB 32 would cost California more than a million jobs.

California’s non-partisan Legislative Analyst has concluded that while the exact job impact is hard to pin down, AB 32’s overall effect would be relatively minor compared to the state’s total economy.

Meanwhile, pro-AB 32 activists are circulating an online petition calling for a boycott of Valero and Tesoro, two Texas-based oil companies that are helping bankroll the suspension measure in California.

The NFIB announcement followed by one day the unveiling of a new poll showing support for AB-32 among California voters. The survey shows 58% of Californians “favor” the law either “strongly” (34%) or “somewhat.” One in four surveyed said they strongly opposed the measure. Sixty-four percent said they supported charging industry for excess emissions, while 31% opposed that. The poll was conducted in March by Field Research for Next 10, a public policy think tank that strongly supports AB 32.  Field polled about 500 voters for the survey, which has a margin of error of 4.5%.

Business is sharply divided over AB 32. The viewpoint of those wary of it is generally represented by the AB 32 Implementation Group. Other business leaders strongly support the law, including it’s cap-and-trade provisions. An outspoken example is Barry Cinnamon, CEO of Akeena Solar, who recently laid out his position for Alison van Diggelin, publisher of the Fresh Dialogues blog site.

In that conversation, Cinnamon skewered the “inane commentary” of  gubernatorial candidates calling for the undoing of AB 32. Republican candidate Meg Whitman has pledged to order a one-year “moratorium” on regulations under AB 32, on her “first day as governor,” calling the policy “wrong for these challenging times.”

Government & Business

AB 32 and the Economic Road Ahead

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By 2020, California will see two million new jobs whether the state implements its climate law AB 32 or not, according to a revised analysis from the California Air Resources Board.

The report, released Wednesday, predicts modest growth in the state economy over the next 10 years, including growth of 2.4% in both personal income and gross state product with or without the law.

During a Wednesday conference call,  CARB chairman Mary Nichols told reporters that sectors where California is strong, such as renewable energy and informational technology, will benefit from AB 32.

“California is uniquely positioned to benefit because this is the direction in which our economy is going anyway,” she said.

Nichols added that industries heavily dependent on petroleum will also benefit, but that they will have to go through a transition.

“We will see economic benefits overall by 2020,” said Nichols, “but it will be easier for some than for others.”

The report was reviewed by the 16-member Economic and Allocation Advisory Committee (EAAC), an independent panel of policy, business and economic experts appointed by Nichols and California Environmental Protection Agency Secretary Linda Adams.

The report finds that AB 32 provides, “neither a huge boost nor a major negative impact on California,” said Larry Goulder, chair of the EAAC and of Stanford’s Economics Department on a call Wednesday with reporters.  “These findings are not that different from other studies that have been done.”

The Air Board’s original analysis was questioned earlier this month in a report from the non-partisan Legislative Analyst’s Office, which projected a mixed bag of pluses and minuses, with a short-term negative impact on jobs.

CARB’s first economic projections were criticized by others, including UCLA economics professor Matthew Kahn.   Kahn said he is much happier with this new report because of adjustments made to the baseline scenario and because of the independent review made by EAAC panel, which he called a “dream team” of economists.  However, the report still falls short, Kahn says, because its macroeconomic approach doesn’t identify how specific industries and businesses will fare under AB32.

“The report released today is about averages. And where I think we need more research is in how individual firms will be affected,” said Kahn. “When I was in graduate school, I had a professor who used to say ‘if your feet are in the fridge and your head is in the oven, on average, you’re ok’ and I always thought that was a funny joke, but I think it’s apropos about California today.”

Also on Wednesday, Kahn published an opinion piece in the LA Times with co-author James L. Sweeney, director of Stanford’s Precourt Energy Efficiency Center, arguing that a study frequently cited by opponents of AB 32 is seriously flawed.  The study, known as the Varshney/Tootelian analysis, estimates that the law will cost small businesses $50,000 a year and each household $3,857 a year once the new rules kick in.

Opponents of AB 32 are advocating for a ballot initiative that would suspend the law’s regulations until the state economy improves and the state unemployment rate drops to 5.5%. It’s currently pegged at 12.5%, officially.

Government & Business, Power

Governor Rejects LAO Jobs Report on AB-32

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Governor Arnold Schwarzenegger said today that he’s “absolutely convinced” that California’s climate law “will create jobs more than kill jobs.”

“Unlike others that only have theoretical opinions,” he said, “I travel up and down the state and see first-hand.”  By “theoretical opinions,” the Governor appeared to be dismissing last week’s analysis by the non-partisan Legislative Analyst’s Office of the likely economic impact of the climate mitigation law, usually known by it’s legislative shorthand, AB-32.

But the report was hardly an unqualified downer. While the LAO concedes that “certain individual businesses and households…would be seriously affected,” the ten-page analysis presents a mixed bag of pluses and minuses, costing jobs in the near term but with potential long-term benefits. According to the report:

“The effects of the SP (Air Board Scoping Plan) on California jobs are difficult to accurately predict but would be mixed, with gains in some occupations and industries (including so-called” green” jobs) and losses in others (primarily involving fossil fuel-related energy production). On balance, however, we believe that the aggregate net jobs impact in the near term is likely to be negative, even after recognizing that many of the SP’s programs phase in over time.”

The report, issued in response to a request from state Senator Dave Cogdill (R-Fresno), is an assessment of California’s Global Warming Solutions Act, passed in 2006 to reduce greenhouse gas emissions, and set for full implementation in 2012. The law is under attack as a potent job killer, by a gubernatorial hopeful and a nascent ballot measure. Business groups are divided on AB-32’s overall effects.

The LAO report concludes that the law’s cap-and-trade program of carbon pricing “would almost certainly raise the near-term prices of electricity, gasoline, and certain other energy sources,” but at the same time, tighter energy efficiency standards for buildings would lower utility bills. Another measure, the low-carbon fuel standard, would raise the price of new cards but also reduce their operating costs.

Netting out the opposing effects of all these components is tricky business, involving a “complex model with hundreds of equations,” as described in the report. The LAO concludes that farther out on the time horizon, economic effects of AB-32 become fuzzier:

“In the longer term, its net effect on jobs-potentially either positive or negative-is unknown and will depend on a variety of factors. In a relative sense, however, its effect on jobs in both the near term and longer term will probably be modest in comparison to the overall size of the state’s economy.”

The Air Resources Board, California’s lead agency in implementing AB-32, initially projected the law would produce a net gain of 120,000 jobs in California by 2020. “They could be exactly correct,” LAO staff economist James Nachbauer told me, though his office isn’t putting its own number on the jobs effect. In it’s report, the LAO “questions the reliability” of the estimate in the scoping plan and concludes that the Air Board’s models “are not able to provide reliable estimates of the jobs impacts” in 2020. To meet it’s goals, AB-32 requires cutting emissions by about 15% from current levels, by 202o.

The Air Board has promised to provide a revised analysis, which LAO staffers say they expect to receive later this month. But as Nachbauer sums it up, “These weren’t created as jobs programs.”

Government & Business

Committee: No Free Lunch for Carbon Emitters

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California’s cap-and-trade program took another baby step toward fruition on Monday, with the release of the state-appointed Economic and Allocation Advisory Committee’s final report on implementing carbon regulation.

Stopping just short of recommending a 100% auction of emission credits, the report, which is non-binding and was written to help the California Air Resources Board develop an economically sound cap-and-trade program, advises the state to sell off the majority of its carbon permits to emitters — with a few exceptions. Industries that “rely heavily” on carbon-based energy or compete directly with firms that do not face carbon regulation, the report says, should be “provided with assistance” or given funds earned from the auction.

The report pointedly advises against handing out free permits to utilities. Although the state’s utilities will almost certainly pass increased costs onto customers, the committee predicts that the price spike will provide an incentive for Californians to start saving energy. The committee’s press release says the report takes a “household friendly” approach to cap-and-trade, recommending that at least 75% of the proceeds from selling carbon permits be returned to households through either tax cuts or direct financial transfers.

Even before the report was released on Monday, the looming possibility of a carbon permit auction was causing anxiety in industrial circles. The AB-32 Implementation Group, an organization that aims to protect California business interests, claimed last week that if the price of carbon is set to $60 per ton, “large employers could be subject to an ‘Auction Tax’ of up to $143 billion by 2020.” Environmental groups have been urging the Air Board to auction off all the carbon permits initially offered.

In a written statement, Governor Arnold Schwarzenegger responded to the committee’s report, saying “the best program will be one that returns value to the people through tax cuts, rebates or dividends, and I applaud the Committee for recognizing those options.”

Here’s a quick run down of the rest of the report’s key recommendations:

Protect Low Income Households

The report recommends returning some of the auction’s profits to low income households, since such households tend to spend a greater percentage of their income on energy.

Invest in a Low Carbon Economy

The committee recommends that the state create an independent Investment Advisory Board to help make it reach its low carbon targets.

Simple Auctions

The state’s carbon permit auctions should simple and allow the public to sell permits in the auctions along with the state.

Government & Business

State Senators Hear Cap-and-Trade Caveats

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Craig Miller
Photo: Craig Miller

The dark underbelly of cap-and-trade was somewhat exposed in a four-hour hearing today before the Senate’s Select Committee on Climate Change and AB-32 Implementation. AB-32, of course, is shorthand for California’s Global Warming Solutions Act of 2006, which mandates a carbon trading program be in place by 2012.

Here’s my “highlights reel” from the panel of experts who testified, in order of appearance:

Mary Nichols, Chair, California Air Resources Board

– On carbon pricing: “There is no approach that does not involve administrative costs & headaches” but cap-and-trade “seems like a pretty good mix” of certainty provided by an enforced cap and market flexibility (versus an outright carbon tax of some sort).

– On California going “solo” with carbon trading (i.e. without the other states and provinces currently signed to the Western Carbon Initiative): The larger the territory, the more potential for “bad actors” but the greater the potential for meaningful savings & benefits to the economy.

Michael Wara, Stanford Law Professor

– On carbon offsets: “…difficult to administer;” to ensure real reductions, changes in behavior, has proven to be “a significant and ongoing challenge, in practice.”

– California appears to be “opting for prudent limits” on allowable offsets, at an anticipated 4%, versus more than 30% in the Waxman-Markey bill that has cleared the US House of Representatives.

– “Very few [offset] programs have been run without controversy.”

Ken Alex, California Attorney General’s Office

– On enforcement: “Every system has cheaters, especially where billions of dollars are involved.”

– Cap-and-trade provides “a permanent incentive for cheaters.” Unassailable data is essential for regulators.

– Regulators “must have sufficient authority” to assess meaningful penalties. Alex, who was involved in sorting out the state’s energy crisis of 2000-2001, recalled that “million-dollar penalties were irrelevant.”

Dallas Butraw, Economist, Resources for the Future

– Warned against a “phone book-sized” regulation.

– Cost of carbon emissions permits will be passed along to consumers but could be offset by tax breaks or a dividend system similar to what oil & gas companies pay to residents of Alaska.

David Harrison, Economist, NERA Economic Consulting

– On lessons from Europe: Despite a rocky start for the EU’s “pilot” program, the system for carbon trading in 27 countries has “evolved over time” to become “very successful.”

– The EU experience “really does show that cap & trade works. Emissions have been reduced.”

– There is “no silver bullet” for determining allocations; that in Europe has been a “messy” and “contentious” process.

– In spite of it all, the EU experience demonstrates that cap-and-trade is “not perfect but it really is better than the alternatives,” and provides a good laboratory for California.

The committee, chaired by Fran Pavley (D-L.A.), also heard from several business and environmental groups. At one point a speaker from the Natural Resources Defense Council (NRDC) argued briefly with a utility representative about whether electric rates are actually higher or lower in California, compared to the nation as a whole (apparent compromise: rates may be higher but average bills are lower).

Utilities complained that the system, as proposed, forces power companies to bear the brunt of the burden. Business interests warned that unbridled implementation of AB-32 “could add to an already alarming increase in job losses,” claimed that the state has no authority to hold carbon permit auctions under AB-32, and asked for initial permits to be given away to industry. Environmentalists asked for the opposite, urging that 100% of initial permits be auctioned off, i.e. that emitters be made to pay for them.

Numerous speakers expressed nervousness over validity of carbon offset programs. Regarding the various schemes for carbon storage in forests or soil, Assemblyman Jared Huffman (D-San Rafael) said “This one makes my head hurt.” There’ll be a lot of Excedrin passed around before this is through.

Power

California’s Biggest Carbon Emitters

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Carbon addiction is the same as any other in at least one respect: the first step to recovery is admitting you have a problem. For greenhouse gases, reducing emissions requires knowing what you’re putting out to begin with.

The Conoco Phillips refinery in Rodeo, north of Oakland, is a relatively small player at 1.9 million metric tons of CO2 per year. Photo: Craig Miller
The Conoco Phillips refinery in Rodeo is a relatively small player, as refineries go, at 1.9 million metric tons of CO2 per year. Photo: Craig Miller

It was toward this end that this week the California Air Resources Board released the first comprehensive data on large-scale industrial carbon emissions in the state. Not surprisingly, the top emitters tend to fall into two categories: power plants and oil refineries, with cement manufacturers not far behind.

Individually, major oil refineries have the largest carbon footprint. Two of Chevron’s refineries–in Richmond and El Segundo, BP’s Carson refinery and the Shell refinery in Martinez, all clocked in at more than three million metric tons (tonnes), CO2-equivalent, for 2008.

Use the interactive map below, prepared by Climate Watch intern David Ferry, to locate the largest industrial emitters and see how they sort out by industry (We’ve been having difficulty with embedded maps vanishing from the blog, so if you don’t see the map below, just click on the link to it).

(Click here for a larger map and a list of all the largest emitters.)

View KQED: California’s Biggest Industrial CO2 Emitters of 2008 in a larger map

Cumulatively, electric power generation is California’s biggest emitter, despite the virtual absence of coal-powered plants in the state. The ARB report lists nearly 20 utility or industrial cogeneration plants in the million-plus club. Several plants put out more than two million tonnes, including Dynegy’s gas-fired plant at Moss Landing, the LaPaloma McKittrick plant, Southern California Edison’s Mountainview plant in Redlands, and the L.A. Department of Water & Power’s Haynes Generating Plant.

The federal EPA considers anything above 25,000 tonnes to be a large emitter. But with carbon emissions, “large” is a relative concept. California imports power from other states and we can get a clue to “large” from the carbon output numbers on some of the mostly coal-fired plants feeding the California grid from states like Utah and Wyoming. Some fossil fuel plants in those states weigh in at a hefty six, ten–even 15 million metric tons. Los Angeles still depends on out-of-state fossil plants for roughly half of its electric power.

A few large cement plants are also in the million-plus column. To find out why, listen to Amy Standen’s report for Quest.

Of course, all this careful accounting leaves aside the elephant in the room: transportation, which has a bigger footprint in California than all electrical generation combined, including imports from other states–and is about equal to total industrial emissions.

The industrial tally released this week is subject to revision and will be used to set caps and allowances for the carbon trading (cap & trade) system mandated by the state’s 2006 Global Warming Solutions Act, commonly known as AB-32. There’s more on the emissions report and what it means in Paul Rogers’ story for the San Jose Mercury News.