Posted on January 6, 2009 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: Low Carbon Fuel Standard

This post was written by Katie Annand.

The Scoping Plan envisions reducing GHG emissions in the transportation sector through the use of a low carbon fuel standard (LCFS). The LCFS is an effort to lower the carbon intensity of fuels sold in California. The standard would require transportation fuel providers to ensure the fuels they sell meet a declining standard for GHG emissions in carbon dioxide equivalent per energy unit of fuel sold. The LCFS, an Discrete Early Action measure that will be up for consideration in March of 2009, will look at the full fuel cycle: from extraction, transportation, distillation, distribution and indirect land use. 

The plan estimates that the carbon intensity off transportation fuels in California will be reduced by close to ten percent by 2020. An additional effect will be an incentive to develop a diverse set of clean, low carbon transportation fuel options. 

The LCFS will incorporate market compliance mechanisms that provide flexibility to fuel providers. In other words, fuel providers who exceed the performance standards set by CARB will receive credits that they can trade. 

Click here to return to Scoping Plan overview.

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Posted on January 6, 2009 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: California Cap and Trade Program

This post was written by Robert Dellenbach.

The California cap-and-trade program is a prominent component of the California Air Resources Board’s Climate Change Scoping Plan.

Highlights:

  • Caps on greenhouse gas emissions will be imposed beginning in 2012, and by 2015, 85 percent of California greenhouse gas producers will be subject to caps; these caps will decline over time to achieve 1990-level emissions by 2020
  • Tradable allowances will be distributed to producers, giving them the right to emit greenhouse gasses, up to their respective caps, for specific periods of time
  • By January 1, 2011, California regulators must finalize regulations for the system, including the mechanics of the market for trading allowances.
  • It has not yet been determined whether allowances initially will be granted, sold or auctioned – we expect many interests to weigh in before the final program is adopted
  • Development of this system will result in substantial cost and wealth transfers, requiring vigilance by affected businesses and offering a number of opportunities for entrepreneurs and opportunistic enterprises.

Cap-and-trade refers to a system in which production of pollutants is capped, producers receive allowances, giving them the right to pollute up to their respective caps, and a market is created for trading allowances among producers, The ability to trade allowances gives producers the opportunity to choose between reducing production or buying allowances from producers that don’t need them – by reducing their own production below their caps. Cap-and-trade systems have been adopted in Europe for greenhouse gas emissions under the European Union Emission Trading Scheme and in the US for the reduction of acid rain. A federal cap-and-trade program for greenhouse gas emissions has been proposed, but is not yet as developed as the program mandated by California AB32. In theory, the cap-and-trade market rewards more efficient constituents and offers flexibility to more deliberate constituents, allowing the benefits of reduced emissions to be achieved at the least overall cost. In practice, a number of challenges, including market resistance and the cost of administration, face cap-and-trade systems as they are implemented.

To implement the cap-and-trade program under the Scoping Plan, the state plans to:

  • impose a cap on total greenhouse gas emissions which will decline over time to achieve 1990 levels by 2020;
  • issue and distribute “allowances,” units of allowed emissions under the cap, to greenhouse gas producers;
  • award “offsets” for verifiable reductions in emissions not otherwise covered by a cap or other regulation that may be applied toward compliance in addition to allowances; and
  • create a market in which allowances and offsets may be traded.

The declining cap specifies the ceiling on greenhouse gas emissions for a specified producer at a given time. By 2012, caps will be imposed on electricity generation and large industrial facilities emitting more than 25,000 metric tons of CO2E per year, and by 2015 the caps will extend to other industrial facilities as well as commercial, residential and transportation fuel combustion. Each of the capped producers will require allowances or offsets to be able to emit greenhouse gasses after the applicable cap effective dates.

Creating a market for allowances and offsets offers flexibility and encourages innovation and investment while striving to achieve an overall reduction in greenhouse gas emissions. Opportunistic producers may sell their excess allowances or offsets to more deliberate producers, giving prospective sellers an incentive to innovate and invest in reduction programs and offering buyers additional flexibility in achieving compliance. Allowances may also be banked for future use, encouraging early emission reductions and reducing market volatility. In addition, allowances may be set aside for dedicated purposes, including early compliance and use by local governments for targeted projects.

The California cap-and-trade system will be linked with the regional cap-and-trade system being developed by the Western Climate Initiative, which was formed in 2007, and includes the states of California, Arizona, New Mexico, Oregon, Washington, Utah, and Montana, and the Canadian provinces of British Columbia, Manitoba, Ontario, and Quebec. Regional cap-and-trade offers even greater flexibility and market stability and helps reduce “leakage,” the movement of greenhouse gas production from California to other areas.

A number of significant challenges will need to be addressed in the rule-making process. These include:

  • Determining and setting caps for individual producers;
  • The method for distributing allowances, whether by grant, sale or auction;
  • Measuring compliance with allowances and verifying milestones for offsets; and
  • The nature of incentives offered for early compliance.

Businesses and business operations in California should plan for the impact of the impending caps and consider providing input into the rule-making process. Allowances and offsets will represent substantial economic value, and many interests are expected to weigh in on development of the final regulations for the program.

Implementation of the cap-and-trade system in California and the Western Climate Initiative offers a number of opportunities for entrepreneurs and opportunistic enterprises. In addition to producers who can derive value from early reduction of greenhouse gas emissions, these include developers of alternative energy sources, biofuels, energy storage and management systems, green manufacturing processes, chemicals and building materials, and water purification and distribution technologies, valuation experts and financial engineers who can assist producers in evaluating alternatives and generating and trading allowances and offsets, market makers and brokers, and investors in the enterprises addressing each of these areas.

Click here to return to Scoping Plan overview.
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Posted on December 23, 2008 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: Targeted Fees

This post was written by Katie Annand.

The Scoping Plan incorporates various targeted fees on GHG emission producing activities as part of the state’s comprehensive reduction strategy. The plan also considers potential uses for revenue raised by these fees and others. 

High Global Warming Potential Gases

  • One targeted fee in the Scoping Plan is a mitigation fee for high global warming potential (GWP) gases. The plan focuses on high GWP gases because they are relatively inexpensive, there is no incentive to develop alternatives, reduce leakage or recover these gases from old units. The plan anticipates that a mitigation fee would better reflect the impact of these gases on the environment, would promote alternatives to using these gases, and would improve removal and recycling of the gases. 
  • The high GWP gas fee would be variable and associated with the impact the chemical has on public health and on the environment. The fees would decrease as the manufacturer or producer redesigned the product or found alternatives.
  • The plan proposes using funds generated by the fee to reduce emissions from high GWP gases and other GHGs.
  • In addition to fees, the plan recommends reducing high GWP gas emissions through regulating commercial and industrial refrigeration, changing refrigerants used in air conditioning systems, and preventing leakage from auto and stationary refrigeration systems.

Water Usage

  • The Scoping Plan also intends to implement a public goods charge on water usage for funding investments in water management. The funds raised by the fee would improve water and energy efficiency and reduce GHG emissions.
  • The fee, which could be added to water bills, is estimated to generate $100 million to $500 million annually. In addition to raising revenue, the fee would also improve water quality and water supply reliability.
  • In addition to the public goods charge, the plan intends to reduce GHG emissions from water usage through water efficiency, water recycling and water system energy efficiency measures.

Use of Revenues

  • The Scoping Plan considers the use of revenues raised by programs such as targeted fees – and cap and trade [link to Cap and Trade] allowances. First, the plan recommends that some revenue or allowances stay within the sector that generated it. The plan also sets forth other uses for revenues and allowances:
  • Reducing the cost of emissions reductions and achieving additional reductions by funding energy efficiency and renewable resource development
  • Achieving environmental co-benefits by enhancing GHG emission reductions that also provide reductions in air and other pollutants that affect public health
  • Incentives to local governments for land-use planning, infrastructure projects, recycling, composting and generating renewable energy from anaerobic digestion
  • Consumer rebates to offset some of the cost associated with increased investments in renewable resources and to encourage increased energy efficiency
  • Direct refunds to consumers
  • Climate change adaption program>
  • Subsidies to reduce the immediate cost impact on industries
  • Support for research, development and deployment of green technologies
  • Worker transition assistance
  • Administration of AB 32 programs and operating costs
  • Direct emissions reductions through projects, such as afforestation and reforestation, which would both sequester CO2.

The above potential uses of revenue generated under the Scoping Plan will also help CARB implement the community benefit section of AB 32, which requires that CARB ensure that its GHG reduction program directs investment towards disadvantaged communities in California.

Click here to return to Scoping Plan overview.
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Posted on December 23, 2008 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: Transportation

This post was written by Thomas Quinlan.

Transportation-related GHG emissions are one of the key elements of the Scoping Plan as passenger vehicles account for almost 30 percent of California’s GHG emissions. CARB is pursuing a three-prong strategy in this sector: reduce GHG emissions from vehicles, reduce the carbon content of fuels, and reduce the miles vehicles travel. 

To meet these goals, the plan incorporates the following programs:

Light Duty Vehicles

  • Under the authority of AB 1493 (Pavley), CARB adopted vehicle standards that lowered GHG emissions beginning in 2009. These standards have not taken effect yet because of various legal challenges and delay by US Environmental Protection Agency (EPA). Implementation of the Pavely standards and a second, more stringent, phase of regulation is proposed in the Scoping Plan. 
  • CARB is also evaluating the use of “feebates,” which would combine a rebate program for low emitting vehicles with a fee program for high emitting vehicles. Feebates would be used either to complement the Pavley standards or to achieve similar goals if the Pavley standards do not take effect. 
  • CARB is also evaluating whether to expand the vehicle types covered by the regulations.
  • In 2009, CARB will also consider proposals to accelerate and expand the Zero-Emission Vehicle (ZEV) program. Currently, the ZEV program requires placement of hundreds of ZEVs and thousands of near-ZEVs through 2012.
  • CARB administers the Air Quality Improvement Program which provides approximately $50 million for grants per year to fund clean vehicle/equipment projects and research on the air quality impacts of alternative fuels and advanced technology vehicles. CEC will spend up to an additional $120 million per year to develop, demonstrate and deploy innovative technologies relating to fuel and vehicle types.

Vehicle Efficiency Measures

  • Additional measures to reduce GHG emissions from light duty vehicle emissions are focused on tires, such as sustainable tire practices, fuel-efficient tire standards, and inflation studies and guidelines.

Regional Transportation-Related GHG Targets

  • CARB proposes developing regional GHG reduction targets for passenger vehicles.
  • This measure works with SB 375, which requires regions to integrate development patterns and transportation networks in a way that achieves GHG emission reductions, partly by reducing vehicle miles traveled. CARB will develop, in consultation with metropolitan planning organizations (“MPOs”), GHG reduction targets and will appoint a Regional Targets Advisory Committee to make recommendations in this area.
  • SB 375 requires MPOs to prepare a sustainable communities strategy to achieve the targets provided by CARB. This sustainable vision must accommodate growth in a carbon efficient way, such as increasing low-carbon travel choices (public transit, car-pooling, etc.).
  • Other measures to be considered include congestion pricing strategies and programs to reduce vehicle trips such as telework strategies, car sharing and parking policies. The California Insurance Commissioner has also recently announced support for (and has proposed regulations to allow) pay as you drive insurance that would reduce insurance premiums when people drive less.

Goods Movement & Heavy/Medium Duty Vehicles

  • CARB has adopted a regulation requiring ship electrification at ports as part of the Goods Movement Emission Reduction Plan and the 2007 State Implementation Plan and is proposing to develop and implement additional measures to reduce GHG emissions from goods movements.
  • CARB has also added a Heavy-Duty Vehicle Efficiency measure to encourage use of advanced combustion strategies, friction reduction and other measures to increase efficiency. Regulations will not be developed immediately in this area, but they have the potential to reduce GHG emissions associated with goods movement.

High Speed Rail

  • The high speed rail, which will connect northern and southern California, is part of the strategy to provide more mobility choice and reduce GHG emissions. 
  • The first phase is expected to begin service in 2020 and to be expanded to several cities by 2030.

Click here to return to Scoping Plan overview.
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Posted on December 23, 2008 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: Renewable Portfolio Standard

This post was written by Steven Gasser.

The approved Scoping Plan revises California’s Renewable Portfolio Standard to achieve a 20 percent renewable energy mix statewide by 2010, and a 33 percent renewable energy mix by 2020. The plan defines renewable energy sources as wind, solar, geothermal, small hydroelectric, biomass, anaerobic digestion and landfill gas. The state currently is at a 12 percent renewable energy mix.

To achieve this goal, the Plan proposes the following:

  • Making significant investment in the transmission infrastructure to renewable resource zones. The Renewable Energy Transmission Initiative (RETI), a broad collaborative of state agencies, utilities, the environmental community, and renewable generation developers, will work to identify and prioritize renewable generation zones and associated transmission projects.
  • Implementing systems changes to allow integration of large quantities of intermittent wind and solar generation, e.g. grid improvements so that fluctuations in power availability can be accommodated; improved communications technology, automated demand response, electronic sub-station improvements to accommodate intermittent energy sources.
  • Reducing complexity and cost faced by small renewable developers (20 megawatt or less) in contracting with utilities to supply renewable generation. 
  • Requiring investor owned utilities to increase the share of renewables in their portfolios to 20 percent by 2010.
  • High Recycling / Zero Waste initiatives, which may also contribute to achieving the 33% goal through deployment of anaerobic digestion for production of fuel/energy.

Click here to return to Scoping Plan overview.

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Posted on December 23, 2008 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan: Energy Efficiency

This post was written by Sara Mo.

The approved Scoping Plan includes measures that expand and strengthen existing energy efficiency programs as well as building and appliance standards. 

The plan establishes new targets for statewide annual energy demand reductions of 32,000 gigawatt hours and 800 million therms from businesses. In addition, the plan sets forth the following energy efficiency strategies:

  • Cross-cutting Strategy for Buildings– Construction of “Zero Net Energy” buildings that regulate building energy use over the course of a typical year by reserving surplus energy to a grid and drawing from the grid when additional energy is needed;
  • Codes and Standards Strategies– More stringent building codes and appliance efficiency standards; broader standards for new types of appliances and for water efficiency; improved compliance and enforcement of existing standards; voluntary efficiency and green building targets beyond mandatory codes;
  • Strategies for Existing Buildings – Voluntary and mandatory whole-building retrofits for existing buildings; innovative financing to overcome first-cost and split incentives for energy efficiency on site, renewables and high efficiency distributed generation;
  • Existing and Improved Utility Programs – More aggressive utility programs to achieve long-term savings; and
  • Other Needed Strategies – Water system and water use efficiency and conservation measures; local government programs that lead by example and tap into local authority over planning, development, and code compliance; additional industrial and agricultural efficiency incentives; providing real time energy information technologies to help consumers conserve and optimize energy performance.

The Scoping Plan also promotes the use of solar water heating systems and builds on existing legislation, such as the Solar Water and Efficiency Act of 2007, which authorized a ten-year, $250 million incentive program for solar water heaters with a goal of promoting installation of 200,000 systems in California by 2017. In addition, the plan recommends developing combined heat and power systems rather than building new power plants or replacing existing ones.

The Scoping Plan accounts for other innovative approaches that may be used to motivate private investment in efficiency improvements. For example the cap and trade program [link to Cap and Trade], will provide incentives to pursue projects to reduce GHG emissions, such as the bundling of energy efficiency improvements for small businesses. California will also pursue comparable investment in energy efficiency from all retail providers of electricity in California, including both investor-owned and publicly owned utilities.

Click here to return to Scoping Plan overview.

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Posted on December 23, 2008 by David Wagner

California Air Resources Board Approves Climate Change Scoping Plan

This post was written by Katie Annand.

(This is the first post in a series of seven.  This overview post can be used to view selected issues within the Scoping Plan.  Please see bulleted list below.)

On December 11, 2008, the California Air Resources Board (CARB) approved the Scoping Plan for AB 32, the Global Warming Solutions Act of 2006. The Scoping Plan, which has been in draft form since June 2008, outlines California’s strategies for meeting AB 32’s ambitious mandate: reduction of California greenhouse gas (GHG) emissions to 1990 levels by 2020. The plan has the potential to be a model for other states’ – and the federal government’s – climate change strategies.

The measures in the plan are continuing to be developed by CARB and will be in place by 2012. For more information about specific focus areas discussed in the plan, click on the links above. For the complete Scoping Plan, click here.

 Key strategies addressed in the Scoping Plan include Emissions Reduction Measures. These measures take into account both existing policies and new proposals and focus on the following areas:

  • Energy Efficiency. Expanding and strengthening existing energy efficiency programs and raising efficiency standards. For more information, click here.
  • Renewable Energy. Achieving a statewide renewable energy mix, requiring 33 percent of the state’s electricity to come from renewable sources by 2020. For more information, click here.
  • Cap and Trade Programs. Establishing a broad-based California cap and trade program to provide finite limits on emissions. For more information, click here.
  • Transportation. Developing a wide range of programs and regulations to decrease GHG emissions from the transportation sector. For more information, click here.  
  • Fuel Standards. Adopting and implementing a low carbon fuel standard (LCFS) to reduce the carbon intensity of fuels sold in California. For more information, click here.
  • Targeted Fees. Creating targeted fees on GHG emission producing activities. For more information, click here.
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