Emissions Trading & Markets – California Global Warming Solutions Act (AB32)
U.S. Regulatory Programs and Markets:
In 2006, California passed two groundbreaking laws to reduce California’s emissions of carbon dioxide and other heat-trapping pollution. The California Global Warming Solutions Act – Assembly Bill 32, identified California as one of the first states in the country to begin the process of limiting statewide global warming pollution. The Greenhouse Gas Emissions Performance Standard Act, Senate Bill 1368, is legislation intended to ensure that new electric utility power plants meet a minimum performance level for global warming pollution.
Signed on September 27, 2006, Assembly Bill 32 (AB32) establishes a goal of capping greenhouse gas emissions at 1990 levels by 2020. AB 32 requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will ultimately reduce California’s greenhouse gas emissions. Mandatory enforceable greenhouse gas (GHG) limits are to become effective January 1, 2012 for significant sources and ratchet down to meet the 2020 goals. The AB 32 Scoping Plan identifies a cap-and-trade program as one of the main strategies California will employ to reduce the greenhouse gas (GHG) emissions that cause climate change.
Other actions of the Act requires CARB to:
- Adopt mandatory reporting rules for significant sources of greenhouse gases by January 1, 2009. (Status: In December 2007, the Board adopted a regulation requiring the largest industrial sources to report and verify their greenhouse gas emissions).
- Adopt a plan by January 1, 2009 indicating how emission reductions will be achieved from significant greenhouse gas sources via regulations, market mechanisms and other actions. (Status: The scoping plan, approved by the ARB Board December 12, 2008, provides the outline for actions to reduce greenhouse gases in California).
- Adopt regulations by January 1, 2011 to achieve the maximum technologically feasible and cost-effective reductions in greenhouse gas, including provisions for using both market mechanisms and alternative compliance mechanisms. (Status: The Board endorsed cap-and-trade regulations on December, 16, 2010, marking a significant milestone toward reducing California’s greenhouse gas emissions under its AB 32 law. The regulation will cover 360 businesses representing 600 facilities and is divided into two broad phases: an initial phase beginning in 2012 that will include all major industrial sources along with utilities; and, a second phase that starts in 2015 and brings in distributors of transportation fuels, natural gas and other fuels.)
- Convene an Environmental Justice Advisory Committee and an Economic and Technology Advancement Advisory Committee to advise CARB.
- Prior to imposing any mandates or authorizing market mechanisms, CARB must evaluate several factors, including impacts on California’s economy, public health, equity between regulated entities and ensure that the rules do not disproportionately impact low-income communities. (Completed)
California is working closely with six other western states and four Canadian provinces through the Western Climate Initiative (WCI) to design a regional cap-and-trade program that can deliver GHG emission reductions within the region at costs lower than could be realized through a California-only program. The regulation is designed so that California may link up with programs in other states or provinces within the Western Climate Initiative, including New Mexico, British Columbia, Ontario and Quebec. Efforts are also underway to link the WCI with other regional climate programs, such as the Midwest Greenhouse Gas Reduction Accord and the Regional Greenhouse Gas Initiative which covers the power generation emissions of 10 northeastern states. For more information, visit the California Air Resources Board website.