Amended  IN  Senate  May 18, 2023
Amended  IN  Senate  April 10, 2023
Amended  IN  Senate  March 14, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 308

Introduced by Senator Becker

February 02, 2023

An act to add Article 3 (commencing with Section 39742) to Chapter 4.3 of Part 2 of Division 26 of the Health and Safety Code, relating to greenhouse gases.


LEGISLATIVE COUNSEL'S DIGEST


SB 308, as amended, Becker. Carbon Dioxide Removal Market Development Act.
The California Global Warming Solutions Act of 2006 establishes the State Air Resources Board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act requires the state board to approve a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions level in 1990 to be achieved by 2020 and to ensure that statewide greenhouse gas emissions are reduced to at least 40% below the 1990 level by 2030. The act authorizes the state board to adopt a regulation that establishes a system of market-based declining annual aggregate emissions limits for sources or categories of sources that emit greenhouse gases, applicable from January 1, 2012, to December 31, 2030, inclusive, as specified. The act authorizes the state board to include in its regulation of those emissions the use of market-based compliance mechanisms.
The act requires the state board to prepare and approve a scoping plan for achieving the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions and to update the scoping plan at least once every 5 years. Existing law requires the state board, as part of its scoping plan, to establish specified carbon dioxide removal targets for 2030 and beyond.
The act also declares the policy of the state both to achieve net zero greenhouse gas emissions as soon as possible, but no later than 2045, and achieve and maintain net negative greenhouse gas emissions thereafter, and to ensure that by 2045, statewide anthropogenic greenhouse gas emissions are reduced to at least 85% below the 1990 levels.
Existing law also requires the state board to establish a Carbon Capture, Removal, Utilization, and Storage Program to, among other things, evaluate the efficacy, safety, and viability of carbon capture, utilization, or storage technologies and carbon dioxide removal technologies and facilitate the capture and sequestration of carbon dioxide from those technologies, where appropriate.
This bill would enact the Carbon Dioxide Removal Market Development Act that would require the state board, no later than December 31, 2027, to adopt a regulation to require certain emitting entities to purchase negative emissions credits equal to a specified amount of their greenhouse gas emissions, as determined by the state board, in each calendar year beginning in the 2028 calendar year in accordance with specified requirements. The bill would require the state board, no later than December 31, 2027, to establish rules and processes for certifying carbon dioxide removal processes that may be used to create negative emissions credits and for tracking negative emissions credits in accordance with certain criteria. The bill would also require negative emissions resulting from the use of negative emissions credits to be included in the calculation of the state’s net greenhouse gas emissions, as specified.
Because a violation of the requirement to purchase negative emissions credits would be a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 (a) The Legislature finds and declares all of the following:
(1) The United Nations’ Intergovernmental Panel on Climate Change (IPCC) has recognized that limiting global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) over preindustrial times will require not only large reductions in global carbon dioxide emissions from human sources but also carbon dioxide removal (CDR) from the atmosphere. “Climate Change 2022: Mitigation of Climate Change,” a report by the IPCC released in early 2022, states, “[t]he deployment of CDR to counterbalance hard-to-abate residual emissions is unavoidable if net zero CO2 or GHG emissions are to be achieved.”
(2) Assembly Bill 1279 (Muratsuchi, Chapter 337 of the Statutes of 2022) established a target for reducing greenhouse gas (GHG) emissions by at least 85 percent from 1990 levels by 2045 as part of achieving net zero GHG emissions. California will need to employ CDR to balance out the remaining up to 15 percent GHG emissions to achieve the net zero target.
(3) The State Air Resources Board’s “2022 Scoping Plan for Achieving Carbon Neutrality,” dated November 16, 2022, stated, “[t]he modeling shows that emissions from the AB 32 GHG Inventory sources will continue to persist even if all fossil related combustion emissions are phased out. These residual emissions must be compensated for to achieve carbon neutrality.”
(4) The 2022 Scoping Plan estimated that the state would need approximately 75 million metric tons (MMT) of CDR in 2045 in order to achieve net zero GHG emissions. It further identified a target of 7 MMT per year of CDR by 2030 as “an ambitious, but achievable, goal” that “can serve as an important marker for progress in deploying CDR to support California’s carbon neutrality goal.”
(5) Therefore, although CDR should not be seen as a reason to prolong the state’s reliance on fossil fuels or as an excuse for not reducing GHG emissions as quickly as is feasible, CDR is widely predicted to be an important and necessary part of achieving the state’s net zero target.
(6) A diversity of approaches can be used to remove carbon dioxide from the atmosphere and sequester it, including natural processes, engineered mechanical and chemical processes, or a combination of these approaches.
(7) Once carbon dioxide is released into the atmosphere from previously inert sources, such as fossil fuels, it “causes increases in atmospheric concentrations of CO2 that will last thousands of years,” according to the United States Environmental Protection Agency.
(8) CDR that is intended to balance out continued emissions of greenhouse gases in order to achieve net zero GHG emissions by 2045 should therefore result in long-lasting reductions in carbon dioxide in the atmosphere on a similar time scale to that of the released carbon dioxide.
(9) Very little capacity exists currently to provide CDR that can meet these criteria for long-lasting reductions in carbon dioxide in the atmosphere, and this capacity, along with the supporting infrastructure for transporting and sequestering the removed carbon, will need to be scaled up enormously in order to meet the needs estimated for the state’s target of achieving net zero GHG emissions by 2045.
(10) CDR approaches that can reduce atmospheric carbon dioxide for shorter periods of time can also provide valuable services in reducing climate change, but they eventually must be coupled with more durable sequestration of carbon in order to truly balance the impact of residual emissions of greenhouse gases.
(11) In order to be counted for the purpose of balancing continued residual emissions of greenhouse gases, CDR processes must be quantifiable and must include scientifically rigorous approaches to monitor and verify the sequestration of removed carbon in order to ensure that the reduction in atmospheric carbon dioxide is maintained over long periods of time.
(12) CDR that is intended to balance the impact of residual emissions of greenhouse gases in order to achieve net zero GHG emissions by 2045 should represent true removals of carbon dioxide from the atmosphere and not just the avoidance of emissions that might otherwise have occurred, as is sometimes allowed in carbon offset programs.
(13) Consistent with the “polluter pays principle,” the entities responsible for GHG emissions should be responsible for paying for CDR sufficient to balance the impact on climate change of those GHG emissions.
(14) Developing and manufacturing the technologies needed to capture and sequester carbon dioxide and building and operating the facilities and supporting infrastructure used for CDR can be a source of jobs, economic development, and tax revenues for the state and can establish the state as a leader in exporting these products to help the rest of the world achieve reductions in net GHG emissions.
(b) It is the intent of the Legislature to implement a program to grow the CDR capacity and supporting infrastructure that is necessary to achieve carbon dioxide removal in sufficient volume to attain the state’s target for net zero greenhouse gas emissions, as set forth in Section 38562.2 of the Health and Safety Code.

SEC. 2.

 Article 3 (commencing with Section 39742) is added to Chapter 4.3 of Part 2 of Division 26 of the Health and Safety Code, to read:
Article  3. Carbon Dioxide Removal Market Development Act

39742.
 This article shall be known, and may be cited, as the Carbon Dioxide Removal Market Development Act.

39742.1.
 For purposes of this article, the following definitions apply:
(a) “Carbon dioxide equivalent” has the same meaning as defined in Section 38505.
(b) “Carbon dioxide removal process” means a process using biological means, chemical means, physical means, or any combination of these means, including the use of CDR technology as defined in Section 39741, that results in a net reduction in atmospheric carbon dioxide and puts carbon atoms into a form of carbon sequestration.
(c) “Carbon sequestration” means storing carbon atoms in a geological location or in a stable chemical form so that the geological location or the stable chemical form keeps the carbon atoms from entering the atmosphere as carbon dioxide for a period of time.
(d) “Direct climate mitigation benefits to the state” means a local reduction in atmospheric carbon dioxide concentration within the state caused by removing carbon dioxide from the atmosphere within or sufficiently close to that area.
(e) “Durable carbon sequestration method” means a method of carbon sequestration that can reasonably be projected to retain a large majority of the carbon atoms out of the atmosphere for 1,000 years and for which the responsible entity provides a guarantee period of at least 100 years.
(f) “Emitting entity” means an entity that is responsible for greenhouse gas emissions included within the state’s inventory and has an obligation to balance the impact of some or all of those greenhouse gas emissions through the purchase of negative emissions credits pursuant to Section 39742.4.
(g) “Guarantee period” means the period of time during which the responsible entity is required to ensure that the carbon remains sequestered and to replace any carbon that is lost.
(h) “Negative emissions credit” means a tradeable environmental attribute representing one metric ton of net carbon dioxide removed by a carbon dioxide removal process.
(i) “Negative emissions obligation” means the amount of negative emissions credits an emitting entity is required to purchase and retire each year in order to partially or fully balance the impact of the greenhouse gas emissions for which the emitting entity is responsible.
(j) “Neighboring communities” means the local government, residents, and other private entities in areas that are in close proximity to facilities used in a carbon dioxide removal process.
(k) “Net carbon dioxide removed” means the net amount of carbon dioxide, by mass, that is removed by a carbon dioxide removal process per ton of carbon put into carbon sequestration, as measured over the full lifecycle of the process, including any greenhouse gas emissions caused by the use of energy or fuels to drive the process, transport the captured carbon, or sequester the carbon.
(l) “Responsible entity” means a business, organization, or other entity that is responsible for ensuring that sequestered carbon is monitored and verified during the guarantee period and is responsible for replacing any losses to the sequestered carbon during the guarantee period.
(m) “Temporary carbon sequestration method” means any method of carbon sequestration that does not meet the criteria for a durable carbon sequestration method.

39742.2.
 (a) No later than December 31, 2027, the state board shall establish rules and processes for certifying carbon dioxide removal processes that may be used to create negative emissions credits and for tracking negative emissions credits. In establishing these rules and processes, the state board shall consider all of the following:
(1) Criteria to ensure that certified carbon dioxide removal processes result in reductions in atmospheric carbon dioxide that are real, quantifiable, verifiable, and enforceable by the state board and are in addition to any carbon dioxide removals that are otherwise required by law or regulation. Only processes that result in removals of carbon dioxide from the atmosphere, not avoidance of or reduction of greenhouse gas emissions, may be certified for the purpose of creating negative emissions credits.
(2) A method to determine the net carbon dioxide removed by each certified carbon dioxide removal process.
(3) Criteria to determine whether each certified carbon dioxide removal process qualifies as using a durable carbon sequestration method.
(4) Requirements for scientifically rigorous and transparent methods for monitoring, reporting, and verification by responsible entities.
(5) Requirements for responsible entities to replace any losses in sequestered carbon during the guarantee period with newly sequestered carbon representing an equal amount of net carbon dioxide removed.
(6) Financial responsibility requirements for responsible entities to demonstrate that they, or another entity on their behalf, has the financial ability to meet their obligations during the guarantee period, such as through the use of surety bonds or other insurance products.
(7) A method of tracking the creation, transfer of ownership, and retirement of negative emissions credits based on certified carbon dioxide removal processes so that the environmental attributes of each negative emissions credit will be counted only once for the purpose of meeting any regulatory or voluntary carbon dioxide removal targets or net greenhouse gas emissions targets.
(b) (1) The state board may develop rules to create two-phase negative emissions credits that can meet the requirements of subdivision (e) of Section 39742.4 for durable carbon sequestration, such as a combination of the following:
(A) A negative emissions credit using a temporary carbon sequestration method.
(B) A legally binding commitment to purchase another negative emissions credit using a durable carbon sequestration method at the end of the guarantee period of the original temporary negative emissions credit.
(2) For any two-phase negative emissions credits created pursuant to this section, the state board shall do all of the following:
(A) Establish a method for tracking compliance with future negative emission credit purchase commitments.
(B) Establish financial responsibility requirements to ensure that the responsible entity can demonstrate that they, or another entity on their behalf, has the financial ability to meet their obligations, such as through the use of surety bonds or other insurance products.

39742.3.
 (a) The state board shall not certify a carbon dioxide removal process pursuant to Section 39742.2 if the process is used for purposes of enhanced oil recovery, including the facilitation of enhanced oil recovery from another well.
(b) (1) The state board may elect not to certify a carbon dioxide removal process pursuant to Section 39742.2 if it determines the benefits generated by the carbon dioxide removal process do not outweigh the impacts caused by the carbon dioxide removal process, including, but not limited to, benefits and impacts to neighboring communities.
(2) In making the determination pursuant to paragraph (1), the state board shall consider at least all of the following:
(A) Impacts on deforestation or the displacement of agricultural land to grow dedicated biomass for carbon sequestration.
(B) Impacts on neighboring communities from increases in criteria air pollutants caused by equipment used to capture, transport, sequester, or monitor the carbon.
(C) Benefits to neighboring communities from investment, jobs, and tax revenues associated with carbon dioxide removal processes.

39742.4.
 No later than December 31, 2027, the state board shall adopt a regulation to require emitting entities to purchase negative emissions credits equal to a portion of their greenhouse gas emissions in each calendar year beginning with greenhouse gas emissions for calendar year 2028 in accordance with all of the following:
(a) Except as provided in subdivision (b), only emitting entities with an obligation to report their greenhouse gas emissions pursuant to the regulation adopted by the state board pursuant to Section 38530 and who report 25,000 metric tons or more of greenhouse gas emissions per year shall be considered emitting entities for the purposes of this article.
(b) The state board may include additional entities as emitting entities if the annual greenhouse gas emissions of those entities can be estimated with reasonable accuracy and without an unreasonable measurement burden on those entities.
(c) The regulation shall establish a negative emissions obligation that requires emitting entities to purchase negative emissions credits equal to a percentage of the carbon dioxide equivalent of their greenhouse gas emissions for each calendar year, as determined by the state board pursuant to subdivision (d).
(d) The state board shall determine the percentage required pursuant to subdivision (c) for each year, beginning with calendar year 2028, with the goal of increasing the total capacity to provide negative emissions credits over time in order to meet the state’s net zero greenhouse gas emissions policy set forth in Section 38562.2. Those percentages shall be at least the following percentages in the following years:
(1) One percent in 2030.
(2) Eight percent in 2035.
(3) Thirty-five percent in 2040.
(4) One hundred percent in 2045.
(e) Only negative emissions credits using a durable carbon sequestration method may be used to meet an emitting entity’s negative emissions obligation.
(f) If the state board develops rules to create two-phase negative emissions credits pursuant to subdivision (b) of Section 39742.2, no more than 50 percent of the negative emissions credits used by an emitting entity to meet its negative emissions obligation in any calendar year may be two-phase emissions credits.
(g) At least 50 percent of the negative emissions credits used by an emitting entity to meet its negative emissions obligation in any calendar year shall be from carbon dioxide removal processes that provide direct climate mitigation benefits to the state.
(h) The state board may adjust any of the percentages specified in subdivision (g) or in paragraphs (1) to (4), inclusive, of subdivision (d) to a lower figure if it determines that it would be infeasible for emitting entities to comply with those requirements.
(i) The state board may allow an emitting entity to reserve negative emissions credits purchased in excess of its obligation in a calendar year pursuant to subdivision (c) and to use those negative emissions credits to meet its obligation in a future calendar year.
(j) Negative emissions resulting from the use of negative emissions credits for the purpose of complying with the obligation pursuant to subdivision (c) shall be included in the calculation of the state’s net greenhouse gas emissions pursuant to Section 38562.2, even if those negative emissions occurred outside of the state.

39742.5.
 The provisions of this article are severable. If any provision of this article or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.