Bill Text: CA SB1391 | 2021-2022 | Regular Session | Amended

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Bill Title: greenhouse gases: market-based compliance mechanism.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2022-08-29 - Motion to reconsider made by Assembly Member Stone. [SB1391 Detail]

Download: California-2021-SB1391-Amended.html

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Amended  IN  Assembly  June 14, 2022

Amended  IN  Senate  March 17, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill

No. 1391

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Introduced by Senator Kamlager

February 18, 2022

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An act to amend Section 12894 of the Government add Section 38562.3 to the Health and Safety Code, relating to greenhouse gases.

LEGISLATIVE COUNSEL'S DIGEST

SB 1391, as amended, Kamlager. greenhouse gases: market-based compliance mechanisms: linkages to the state. mechanism.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act authorizes the state board to include in its regulation of greenhouse gases the use of market-based compliance mechanisms. Existing law prohibits a state agency from linking, as defined, a market-based compliance mechanism with any other state, province, or country unless the state agency notifies the Governor. Existing law requires the Governor to issue specified findings within 45 days of receiving that notice from a state agency and to provide those findings to the Legislature.

This bill would additionally prohibit a state agency from linking a market-based compliance mechanism with any other state, province, or country unless all of the following conditions are met: (1) the state agency has completed one or more formal regulatory processes within the last 3 years to review the state’s market-based mechanisms, as provided, (2) the state agency publicly consulted with the Independent Emissions Market Advisory Committee as part of that process, and (3) if the market-based compliance mechanism proposed for linking has issued or is authorized to issue an offset credit that can be used for compliance purposes, then the market-based compliance mechanism includes a provision that automatically reduces the number of emissions allowances it makes available for compliance purposes, as provided. The bill would make other technical and nonsubstantive changes.

This bill would require the state board, at least once every 3 years, to conduct a review, as provided, of the market-based compliance mechanisms to, among other things, evaluate and address concerns related to allowance overallocation and offset credit eligibility. The bill would require the state board, in conducting the review, to consult with the Independent Emissions Market Advisory Committee and the environmental justice advisory committee. The bill would require the first review to begin by a certain date. The bill would require the state board, in consultation with the Independent Emissions Market Advisory Committee, to develop and publish allowance banking metrics, as defined, concurrently with the first review and would require the review to be based on observed and expected outcomes resulting from the application of allowance banking metrics.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 38562.3 is added to the Health and Safety Code, to read:

38562.3.

 (a) (1) At least once every three years, the state board shall conduct a review of the market-based compliance mechanism adopted pursuant to subdivision (c) of Section 38562. In the review, the state board shall, at a minimum, do all of the following:

(A) Evaluate and address concerns, if any, related to allowance overallocation.

(B) Evaluate and address concerns, if any, related to whether offset credits eligible for compliance purposes satisfy each of the requirements of subdivision (d) of Section 38562.

(C) Determine whether the future supply of allowances needs to be automatically reduced by the number of offset credits issued, including historical and ongoing offset credit issuance, and if not, whether future supply of allowances needs to be automatically reduced by the number of offset credits retired, including historical and ongoing offset credit retirements.

(D) Determine whether the establishment of facility-specific direct emission reductions would help reduce pollution disparities in disadvantaged communities, and also whether the establishment of sector-specific emission limits would help reduce pollution disparities in disadvantaged communities.

(2) The review shall be conducted in accordance with the requirements for public notice, hearing, and comment for a rulemaking under the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

(b) As part of the review under subdivision (a), the state board shall consult with the Independent Emissions Market Advisory Committee established pursuant to Section 38591.2 and the environmental justice advisory committee established pursuant to Section 38591 or any similar standing or successor environmental justice advisory bodies.

(c) The state board shall commence the first review pursuant to subdivision (a) on or before January 30, 2023, or within 30 days of the completion of the update to the scoping plan pursuant to Section 38561 that is pending as of January 30, 2023, whichever date is later.

(d) (1) The state board, in consultation with the Independent Emissions Market Advisory Committee, shall develop and publish allowance banking metrics concurrently with the first review conducted pursuant to subdivision (c).

(2) The review conducted pursuant to subdivision (a) shall be based on the observed and expected outcomes derived from the application of the allowance banking metrics.

(3) For purposes of this subdivision, “allowance banking metrics” means a methodology used to determine summary statistics concerning the total number of allowances in circulation, including, but not limited to, the number of allowances held by market participants.

SECTION 1.Section 12894 of the Government Code is amended to read:

12894.

(a)(1)The Legislature finds and declares that the establishment of nongovernmental entities, such as the Western Climate Initiative, Incorporated, and linkages with other states, provinces, and countries by the State Air Resources Board or other state agencies for purposes of implementing the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) should be done transparently and should be independently reviewed by the Attorney General for consistency with all applicable laws.

(2)The purpose of this section is to establish new oversight and transparency over linkages with other states, provinces, and countries and related activities undertaken in relation to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) by state agencies to ensure consistency with applicable laws.

(b)(1)The state membership of the board of directors of the Western Climate Initiative, Incorporated, shall be modified as follows:

(A)One member, or the member’s designee, who shall serve as an ex officio nonvoting member, shall be appointed by the Senate Committee on Rules.

(B)One member, or the member’s designee, who shall serve as an ex officio nonvoting member, shall be appointed by the Speaker of the Assembly.

(C)The Chair of the State Air Resources Board or the chair’s designee.

(D)The Secretary for Environmental Protection or the secretary’s designee.

(2)Sections 11120 through 11132 do not apply to the Western Climate Initiative, Incorporated, or to the members specified in subparagraphs (C) and (D) of paragraph (1) when those members are performing their duties under this section.

(c)The State Air Resources Board shall provide notice to the Joint Legislative Budget Committee, consistent with the notice required for Department of Finance augmentation or reduction authorizations pursuant to subdivision (e) of Section 28.00 of the annual Budget Act, of any funds over one hundred fifty thousand dollars ($150,000) provided to the Western Climate Initiative, Incorporated, or its derivatives or subcontractors, no later than 30 days prior to transfer or expenditure of these funds.

(d)The Chair of the State Air Resources Board and the Secretary for Environmental Protection, as voting members representing the state on the Western Climate Initiative, Incorporated, shall report every six months to the Joint Legislative Budget Committee on any actions proposed by the Western Climate Initiative, Incorporated, that affect state government or entities located in the state.

(e)A state agency, including, but not limited to, the State Air Resources Board, shall not link a market-based compliance mechanism established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) and specified in Sections 95801 to 96022, inclusive, of Title 17 of the California Code of Regulations with any other state, province, or country unless the state agency notifies the Governor of the agency’s intent, and the Governor, acting in the Governor’s independent capacity, makes all of the following findings:

(1)The jurisdiction with which the state agency proposes to link has adopted program requirements for greenhouse gas reductions, including, but not limited to, requirements for offsets, that are equivalent to or stricter than those required by the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code).

(2)Under the proposed linkage, the state is able to enforce, to the maximum extent permitted under the United States and California Constitutions, the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) and related statutes against any entity subject to regulation under those statutes and against any entity located within the linking jurisdiction.

(3)The proposed linkage provides for the enforcement of applicable laws by the state agency or by the linking jurisdiction of program requirements that are equivalent to or stricter than those required by the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code).

(4)The proposed linkage and any related participation of the state in the Western Climate Initiative, Incorporated, shall not impose any significant liability on the state or any state agency for any failure associated with the linkage.

(f)The Governor shall issue written findings pursuant to subdivision (e) within 45 days of receiving a notice from a state agency pursuant to that subdivision, and shall provide those findings to the Legislature. The findings shall consider the advice of the Attorney General. The findings to be submitted to the Legislature shall not be unreasonably withheld. The findings shall not be subject to judicial review.

(g)A state agency, including, but not limited to, the State Air Resources Board, shall not link a market-based compliance mechanism established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) and specified in Sections 95801 to 96022, inclusive, of Title 17 of the California Code of Regulations with any other state, province, or country unless all of the following conditions are met:

(1)Within the past three years, the state agency has completed one or more formal regulatory processes to review the state’s market-based compliance mechanisms, including all provisions governing the issuance and use of offset credits, for consistency with existing statutory standards. At a minimum, the state agency shall evaluate and address concerns regarding all of the following:

(A)Allowance overallocation in the state agency’s market-based compliance mechanisms, pursuant to subparagraph (D) of paragraph (2) of subdivision (c) of Section 38562 of the Health and Safety Code.

(B)Whether offset credits eligible for use in the state agency’s market-based compliance mechanisms satisfy the requirements of paragraph (1) of subdivision (d) of Section 38562 of the Health and Safety Code.

(C)Whether offset credits eligible for use in the state agency’s market-based compliance mechanisms satisfy the requirements of paragraph (2) of subdivision (d) of Section 38562 of the Health and Safety Code.

(2)As part of the formal regulatory review process conducted pursuant to paragraph (1), the state agency publicly consulted with the Independent Emissions Market Advisory Committee established pursuant to Section 38591.2 of the Health and Safety Code.

(3)If a market-based compliance mechanism proposed for linking has issued or is authorized to issue an offset credit that can be used for compliance purposes, then the market-based compliance mechanism includes a provision that automatically reduces the number of emissions allowances it makes available for compliance purposes by a number that is equivalent to the climate benefits claimed by either of the following:

(A)The issuance of all offset credits, as observed historically and on an ongoing basis.

(B)The retirement of all offset credits used for compliance purposes, as observed historically and on an ongoing basis.

(h)For purposes of this section, “link,” “linkage,” or “linking” means an action taken by the State Air Resources Board or any other state agency that will result in acceptance by the state of compliance instruments issued by any other governmental agency, including any state, province, or country, for purposes of demonstrating compliance with the market-based compliance mechanisms established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) and specified in Sections 95801 to 96022, inclusive, of Title 17 of the California Code of Regulations.