Policy perspectives with Jon Costantino: What’s the latest on AB 32 at the California Air Resources Board?

May 1, 2016 by Harry Horner

Jon Costantino

It seems like a simple question: “What’s happening with AB 32 in California these days”? But the answer to that relatively straightforward question is rather complex, potentially very lengthy, constantly changing, but always fascinating. Let me give it a shot in under 10,000 words.

I don’t remember who won the 2006 World Series (it was the St. Louis Cardinals over the Detroit Tigers), but I do remember that September when California passed AB 32 which authorized the California Air Resources Board (ARB) to adopt measures to reduce California’s statewide greenhouse gas (GHG) emissions to 1990 levels by 2020. This was no small mandate as it set to change the course of a top ten world economy. It also kicked off a continuous four-year flurry of regulatory output never before seen from any state agency, even one with a track record such as ARB’s.  The work started with the 2007 GHG mandatory reporting regulation, ran through the first Low Carbon Fuel Standard (LCFS), then the release of the Original Scoping Plan. It also included a variety “complementary measures” and finally ended with the 2011 adoption of the first economy-wide Cap and Trade program. Whew!

In the time since, there have been continual updates/upgrades to these various regulations. Now flash forward to Governor Jerry Brown’s second Inaugural Address in January 2015. In it he basically doubled down on these climate policies, and exactly a year ago as of this writing (April 29, 2015), he issued an Executive Order (B-30-15) which proposed a new 2030 GHG target of 40% of the 1990/2020 levels—in a mere 15 years. This non-legislative action began another wave of regulatory and planning efforts that are piling up onto the legislative and judicial efforts that resulted from AB 32’s original implementation. Throw in other jurisdictions implementing a connected patchwork of regulations, and U.S. federal executive action (Clean Power Plan, methane rule), the result – a tsunami of actions that are currently “happening” right now.  Let’s look at the biggest ones here:

 2030 Scoping Plan

Originally designed to be updated every five years, ARB is about to release the third version of their foundational policy document in just eight years. The 2030 Scoping Plan ought to be completed before the other regulatory updates focused on 2030 since it is the document that brings all the pieces together. But it has been delayed for a variety of reasons, not least the request of the statutorily-authorized AB 32 Environmental Justice Advisory Committee.

The 2030 Scoping Plan should be bigger and more detailed than the 2014 place holder document known as the “First update”. This new version is tasked with all of the following jobs:

  • Provide a roadmap to achieve the 2030 statewide GHG target;
  • Address the regional nature of the Clean Power Plan;
  • Unite ARB’s other major transportation programs – ZEV’s, diesel risk reduction, goods movement, transportation incentives, and conventional fuels – under the GHG banner;
  • Incorporate a whole new set of policies aimed at Short Lived Climate Pollutants (SLCP), aka “Super Pollutants”;
  • Outline a more focused approach to Environmental Justice communities within the State; and
  • Achieve all of this in a shorter timeframe relative to the reductions needed, do it in a cost-effective manner, while evaluating its impact on the state’s economy and potential for GHG emissions to leak away or criteria pollutants to grow locally.

ARB is still conducting workshops about the plan’s impacts on various sectors like agriculture and working lands, but has committed to presenting a final version to the public and their board in the fall of this year. They have also publicly stated that a skeletal draft should be out by the end of May.

2016 Cap and Trade Amendments

Unlike interim changes, this regulatory effort is a major rulemaking update, and is currently still in the informal development stage. The formal 45-day regulatory package release date was recently pushed back from May to July.  It is expected that what is released in the 45-day package will be more of a “framework” document, to start the one-year adoption clock. ARB has suggested that many of the interlaced details will be finalized through 15-day updates over the next 12 months.

The existing structure of the Cap and Trade should remain relatively consistent, but ARB is proposing significant changes to a variety of its intricate mechanisms, including utility and industrial allocation, cost-containment provisions, and the cap/slope of the cap itself.  These changes are quite major and with stakeholders having a much firmer grip on what they mean in costs and benefits, the discussions have been far more lengthy this time around.

If the internal changes weren’t significant enough, ARB needs to factor in, and coordinate with potentially Canada’s second linked province, Ontario AND the U.S. EPA’s implementation of the Clean Power Plan (CPP). The surprising stay decision by SCOTUS on the CPP only adds to the uncertainty surrounding its implementation. And to make the rule even more complicated, there is a significant push to include sector-based offsets.

So needless to say, the process has necessarily become much more deliberate with lots of weedy stakeholder involvement. The most recent schedule is assumed to be a first board hearing in September with a final re-adoption next spring or early summer. The ultimate timing goal is to have the rule effective by October 1, 2017 to allow for any changes to allocations in the 3rd compliance period allocations to be in place.

Short-Lived Climate Pollutants

The final version of the SLCP plan, as it is known, was just released on April 11.  It focuses additional spotlights on methane, refrigeration gases, and black carbon. Each of these gases has a distinct control strategy that comes with their own controversies and costs. The release of this plan was delayed by almost six months due to concerns over its treatment (or lack thereof) of forest issues, among other things. One of its main proposed control strategies is focused on methane emissions from the Oil/Gas sector. That rule has itself has been delayed for almost a year so that it could be rewritten after stakeholder concerns.

Low Carbon Fuel Standard

The LCFS was recently completely reworked and readopted after a lawsuit caused it to be implemented in suspended animation for three years. The new rule took effect January 1 this year, but is already scheduled for a full program review in 2017, and a regulatory update in 2018. The 2018 update will focus on the post-2020 LCFS. The revamped regulation required every fuel provider to use updated Carbon Intensity (CI) scores, the first batch of which were released last week. ARB will issue more biofuel CI batches in the coming months.

In Non-ARB News…

In a recent letter to legislative leadership, the state’s legislative counsel opined that the governor does not have the authority, without additional legislative approval, to extend beyond 2020 the provisions of AB 32. ARB disagrees with this and is continuing to move forward.

There is also a judicial shadow hanging over the Cap and Trade program. Though this isn’t a new lawsuit, it is expected that results of the California Chamber of Commerce’s appeal of a lower-court decision will be known by the end of this year. This lawsuit questions a fundamental aspect of the program and, depending on the ruling, could impact the current rulemaking efforts.

Legislatively, there is a call for both additional oversight of ARB and its efforts, and also an explicit extension of AB 32 such that lawsuits like the Chamber’s would be rendered moot.  In addition, the Legislature continues to appropriate the billions of dollars the Cap and Trade program generates each year.

Even with the constant barrage of suggestions, criticisms and attention surrounding ARB’s climate change efforts, it is a train that keeps churning down the tracks. By the time Fall rolls around and we figure out if the Cubs can finally win the World Series again, I am sure much of this will still be getting sorted though. It will be time for another ARB update as things change constantly out here in the land of wine and surf.

Jon Costantino oversaw the development and publication of the original AB 32 Scoping Plan when he served as Climate Change Planning Manager at the ARB. He is now a senior advisor in the Energy, Environment and Natural Resources practice group at Manatt, Phelps & Phillips, LLP, where he manages complex political and regulatory issues for clients in the areas of climate change, clean energy and environmental issues. Mr. Costantino can be reached at (916) 552-2365 or jcostantino@manatt.com.

Harry Horner – (harry@californiacarbon.info)

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