Bill Text: CA SB775 | 2017-2018 | Regular Session | Amended


Bill Title: California Global Warming Solutions Act of 2006: market-based compliance mechanisms.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2017-05-08 - May 10 hearing postponed by committee. [SB775 Detail]

Download: California-2017-SB775-Amended.html

Amended  IN  Senate  May 01, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 775


Introduced by Senator Wieckowski

February 17, 2017


An act to amend Section 38564 of the Health and Safety Code, relating to greenhouse gases. An act to amend Section 12894 of, and to add Section 16428.87 to, the Government Code, and to amend Section 38505 of, to add Section 38574.5 to, and to add Part 5.5 (commencing with Section 38575) and Part 5.6 (commencing with Section 38577) to Division 25.5 of, the Health and Safety Code, relating to greenhouse gases, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 775, as amended, Wieckowski. California Global Warming Solutions Act of 2006: greenhouse gas emissions reduction. California Global Warming Solutions Act of 2006: market-based compliance mechanisms.
(1) The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act authorizes the state board to include use of market-based compliance mechanisms. Existing law prohibits a state agency from linking 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 add to the findings required to be issued by the Governor and provided to the Legislature in those circumstances.
(2) The California Global Warming Solutions Act of 2006 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.
This bill would require the state board to adopt a regulation establishing as a market-based compliance mechanism a market-based program of emissions limits, applicable on and after January 1, 2021, for covered entities, as defined. The bill would require the program to set an initial minimum reserve price of $20 per allowance, as defined, and an initial auction offer price of $30 per allowance when auctioning allowances. The bill would require the program to increase the minimum reserve price each quarter by $1.25 plus any increase in the Consumer Price Index, and the auction offer price each quarter by $2.50 plus any increase in the Consumer Price Index, as specified. The bill would authorize the state board to revise the definition of a covered entity, as specified.
The bill would establish the Economic Competitive Assurance Program, to be administered by the state board, to ensure that importers that sell, supply, or offer for sale in the state a greenhouse gas emission intensive product have economically fair and competitive conditions and to maintain economic parity between producers that are subject to the market-based program of emissions limits and those who sell like goods instate that are not subject to that program, as specified.
This bill would establish the California Climate Infrastructure Fund, the California Climate Dividend Fund, and the California Climate and Clean Energy Research Fund in the State Treasury. The bill would require the Franchise Tax Board, in consultation with the Climate Dividend Access Board, which the bill would establish, to develop and implement a program to deliver quarterly per capita dividends to all residents of the state that would maximize the ease with which residents of the state may enroll in the program, as specified.
(3) This bill would declare that it is to take effect immediately as an urgency statute.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act requires the state board to consult with other states, the federal government, and other nations to identify the most effective strategies and methods to reduce greenhouse gases, manage greenhouse gas control programs, and facilitate the development of integrated and cost-effective regional, national, and international greenhouse gas reduction programs.

This bill would require the state board also to consult with local agencies for these purposes.

Vote: MAJORITY2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


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 and countries by the State Air Resources Board or other state agencies for the purposes of implementing Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code, 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 any such linkages and related activities undertaken in relation to Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code Code) by the executive agencies in order to ensure consistency with applicable laws.
(b) (1) The California membership of the board of directors of the Western Climate Initiative, Incorporated, shall be modified as follows:
(A) One appointee or his or her designee who shall serve as an ex officio nonvoting member shall be appointed by the Senate Committee on Rules.
(B) One appointee or his or her designee who shall serve as an ex officio nonvoting member shall be appointed by the Speaker of the Assembly.
(C) The Chairperson Chair of the State Air Resources Board or her or his designee.
(D) The Secretary for Environmental Protection or his or her designee.
(2) Sections 11120 through 11132 do The Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1) does not apply to the Western Climate Initiative, Incorporated, or to appointees specified in subparagraphs (C) and (D) of paragraph (1) when performing their duties under this section.
(c) The State Air Resources Board shall provide notice to the Joint Legislative Budget Committee, consistent with that 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 Chairperson Chair of the State Air Resources Board and the Secretary for Environmental Protection, as the California voting representatives 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 California state government or entities located within the state.
(e) 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 California 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 mechanism established pursuant to Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code Code) and specified in Sections 95801 to 96022, inclusive, of Title 17 of the California Code of Regulations.
(f) A state agency, including, but not limited to, the State Air Resources Board, shall not link a market-based compliance mechanism established pursuant to Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code 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 that the agency intends to take such action and the Governor, acting in his or her 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 Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code. Code).
(2) Under the proposed linkage, the State of California is able to enforce Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code Code) and related statutes, against any entity subject to regulation under those statutes, and against any entity located within the linking jurisdiction to the maximum extent permitted under the United States and California Constitutions.
(3) The proposed linkage provides for 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 Division the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code. Code).
(4) The proposed linkage and any related participation of the State of California in Western Climate Initiative, Incorporated, shall not impose any significant liability on the state or any state agency for any failure associated with the linkage.
(5) The jurisdiction with which the state agency proposes to link has adopted legally binding program requirements for greenhouse gases that include minimum carbon prices, including auction reserve prices, that are equivalent to or greater 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).
(6) The prospective link does not threaten the uninterrupted performance and purpose of the California Climate Dividend Program, established by Part 5.6 (commencing with Section 38577) of Division 25.5 of the Health and Safety Code, with a finding made in consultation with the Franchise Tax Board.
(g) The Governor shall issue findings pursuant to subdivision (f) within 45 days of receiving a notice from a state agency, 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.

SEC. 2.

 Section 16428.87 is added to the Government Code, to read:

16428.87.
 (a) The California Climate Infrastructure Fund is hereby created in the State Treasury.
(b) The California Climate Dividend Fund is hereby created in the State Treasury. Moneys in the fund shall be allocated, upon appropriation, pursuant to Part 5.6 (commencing with Section 38577) of Division 25.5 of the Health and Safety Code.
(c) The California Climate and Clean Energy Research Fund is hereby created in the State Treasury.

SEC. 3.

 Section 38505 of the Health and Safety Code is amended to read:

38505.
 For the purposes of this division, the following terms have the following meanings:
(a) “Allowance” means an authorization to emit, during a specified year, up to one ton of carbon dioxide equivalent.
(b) “Alternative compliance mechanism” means an action undertaken by a greenhouse gas emission source that achieves the equivalent reduction of greenhouse gas emissions over the same time period as a direct emission reduction, and that is approved by the state board. “Alternative compliance mechanism” includes, but is not limited to, a flexible compliance schedule, alternative control technology, a process change, or a product substitution.
(c) (1) “Carbon dioxide equivalent” means the amount of carbon dioxide by weight mass that would produce the same global warming impact as a given weight mass of another greenhouse gas, based on the best available science, including from the Intergovernmental Panel on Climate Change. gas over a specified time horizon.
(2) In calculating the carbon dioxide equivalent of any greenhouse gas emission pursuant to this subdivision, the state board shall use the best available scientific information, including the most recent findings from the Intergovernmental Panel on Climate Change. Where other jurisdictions use different methods for calculating the carbon dioxide equivalent of any greenhouse gas emissions, the state board may in parallel report carbon dioxide equivalents using these alternative methods, but the state board shall not use the existence of alternative methods in other jurisdictions as a basis for selecting methods other than the best available scientific information, including the most recent findings from the Intergovernmental Panel on Climate Change, for regulations developed pursuant to this division. The state board shall select consistent methods in calculating carbon dioxide equivalents across all regulations developed pursuant to this division.
(d) “Cost-effective” or “cost-effectiveness” means the cost per unit of reduced emissions of greenhouse gases adjusted for its global warming potential.
(e) “Direct emission reduction” means a greenhouse gas emission reduction action made by a greenhouse gas emission source at that source.
(f) “Emissions reduction measure” means programs, measures, standards, and alternative compliance mechanisms authorized pursuant to this division, applicable to sources or categories of sources, that are designed to reduce emissions of greenhouse gases.
(g) “Greenhouse gas” or “greenhouse gases” includes all of the following gases:
(1) Carbon dioxide.
(2) Methane.
(3) Nitrous oxide.
(4) Hydrofluorocarbons.
(5) Perfluorocarbons.
(6) Sulfur hexafluoride.
(7) Nitrogen trifluoride.
(h) “Greenhouse gas emissions limit” means an authorization, during a specified year, to emit up to a level of greenhouse gases specified by the state board, expressed in tons of carbon dioxide equivalents.
(i) “Greenhouse gas emission source” or “source” means any source, or category of sources, of greenhouse gas emissions whose emissions are at a level of significance, as determined by the state board, that its participation in the program established under this division will enable the state board to effectively reduce greenhouse gas emissions and monitor compliance with the statewide greenhouse gas emissions limit.
(j) “Leakage” means a reduction in emissions of greenhouse gases within the state that is offset by an increase in emissions of greenhouse gases outside the state.
(k) “Market-based compliance mechanism” means either of the following:
(1) A system of market-based declining annual aggregate emissions limitations for sources or categories of sources that emit greenhouse gases.
(2) Greenhouse gas emissions exchanges, banking, credits, and other transactions, governed by rules and protocols established by the state board, that result in the same greenhouse gas emission reduction, over the same time period, as direct compliance with a greenhouse gas emission limit or emission emissions reduction measure adopted by the state board pursuant to this division.
(l) “State board” means the State Air Resources Board.
(m) “Statewide greenhouse gas emissions” means the total annual emissions of greenhouse gases in the state, including all emissions of greenhouse gases from the generation of electricity delivered to and consumed in California, accounting for transmission and distribution line losses, whether the electricity is generated in state or imported. Statewide emissions shall be expressed in tons of carbon dioxide equivalents.
(n) “Statewide greenhouse gas emissions limit” or “statewide emissions limit” means the maximum allowable level of statewide greenhouse gas emissions in 2020, as determined by the state board pursuant to Part 3 (commencing with Section 38550).

SEC. 4.

 Section 38574.5 is added to the Health and Safety Code, to read:

38574.5.
 (a) For purposes of this section, the following terms have the following meanings:
(1) “Allowance” means a tradeable compliance instrument that is equal to one metric ton of carbon dioxide equivalent and is issued by the state board as part of the regulation adopted pursuant to this section or is issued by the appropriate governing body of an external market-based compliance mechanism to which the program established pursuant to this section has been linked pursuant to Section 12894 of the Government Code.
(2) “Annual compliance event” means an annual process to demonstrate compliance with the program established pursuant to this section in which covered entities submit allowances to the state board equal to a minimum specified proportion of their verified emissions of greenhouse gases for the prior year, as reported to the state board pursuant to Section 38530.
(3) “Carbon offset credits” means credits awarded to projects or programs for voluntary greenhouse gas emissions reductions that occur outside of the scope of covered entities’ greenhouse gas emissions, including all credits issued by the state board pursuant to Section 38562.
(4) “Consumer Price Index” means the California Consumer Price Index, All Urban Consumers, published by the Department of Industrial Relations.
(5) “Covered entity” means a source of emissions of greenhouse gases that is within a source category that is subject to compliance obligations pursuant to subdivision (c) of Section 38562 as of January 1, 2017. For a new source of emissions of greenhouse gases commencing operation after January 1, 2017, “covered entity” means a source that would have been within a source category subject to compliance obligations under subdivision (c) of Section 38562 if it had began emitting greenhouse gases on or before January 1, 2017. If, after January 1, 2018, the state board determines that a future adjustment to the definition of “covered entity” is warranted, the adjustment shall result in at least an equal percentage of statewide greenhouse gas emissions remaining subject to the program established pursuant to this section as if the initial definition of “covered entity” developed under this subdivision were to apply.
(6) “Covered imported product” has the some meaning as in Section 38575.
(b) The state board shall adopt a regulation establishing as a compliance mechanism program of market-based emissions limits, applicable on and after January 1, 2021, to covered entities. The regulation shall do all of the following:
(1) Set annual aggregate emissions limits for greenhouse gas emissions from covered entities that the state board determines in conjunction with other policies applicable to statewide greenhouse gas emissions are sufficient to ensure the emissions target specified in Section 38566.
(2) Require, beginning January 1, 2021, the state board to conduct quarterly allowance auctions that are open to participation from covered entities, importers or sellers of covered imported products, and any other participants who register with the state board for the purposes of participating in quarterly allowance auctions.
(3) Offer at each auction a number of allowances equal to the auction’s quarterly share of the annual aggregate emissions limit established in paragraph (1).
(4) Require a covered entity to submit allowances equal to at least 90 percent of its annual carbon dioxide equivalent emissions at each annual compliance event, with the option to submit additional allowances without penalty to account for the remainder of its annual emissions, if any, at the subsequent year’s annual compliance event. The state board shall determine the timing of the annual compliance event taking into account the availability of covered entities’ verified emissions data as reported to the state board pursuant to Section 38530.
(5) Require that all allowances created pursuant to this section be offered for sale at auction and not allocated to covered entities either for free or for consignment sale, unless subsequent events trigger the creation of a free allowance allocation program pursuant to Section 38575.
(6) Require an initial minimum auction reserve price equal to twenty dollars ($20) per allowance. The state board shall not auction allowances to bidders at a price less than the currently applicable auction reserve price.
(7) Require an initial auction offer price equal to thirty dollars ($30) per allowance. At each auction, the state board shall make an unlimited number of allowances available at the currently applicable auction offer price.
(8) Require, beginning April 1, 2022, a quarterly increase in the auction reserve price on April 1, July 1, October 1, and January 1 of each year equal to one dollar and twenty-five cents ($1.25) plus a quarterly share of the percentage, if any, by which the Consumer Price Index increased for the preceding calendar year.
(9) Require, beginning April 1, 2021, a quarterly increase in the auction offer price on April 1, July 1, October 1, and January 1 of each year equal to two dollars and fifty cents ($2.50) plus a quarterly share of the percentage, if any, by which the Consumer Price Index increased for the preceding calendar year.
(10) Require allowances to be valid for compliance purposes only in the calendar year in which they are introduced into circulation by the state board or for covering any remaining compliance obligations from the prior year pursuant to paragraph (4).
(11) Prohibit carbon offset credits from being used to meet a covered entity’s compliance obligation required pursuant to paragraph (4).
(12) Prohibit an allowance or any other compliance instrument issued pursuant to a regulation adopted pursuant to Section 38562 from being used to meet a covered entity’s compliance obligation required pursuant to paragraph (4).
(13) Prohibit compliance instruments issued by external market-based compliance mechanisms that have been linked pursuant to Section 12894 of the Government Code to a regulation adopted pursuant to Section 38562 from being used to meet a covered entity’s compliance obligation required pursuant to paragraph (4).
(14) Allow for the use of compliance instruments issued by external market-based compliance mechanisms that have been linked pursuant to Section 12894 of the Government Code to the program established pursuant to this section to satisfy a covered entity’s compliance obligation required pursuant to paragraph (4).
(c) All moneys collected pursuant to this section shall be deposited in the California Climate Dividend Fund, the California Climate and Clean Energy Research Fund, and the California Climate Infrastructure Fund, which are all created pursuant to Section 16428.87 of the Government Code, as follows:
(1) The first ____ per year shall be deposited into the California Climate and Clean Energy Research Fund.
(2) The next ____ per year shall be deposited into the California Climate Dividend Fund.
(3) All other remaining moneys shall be deposited into the California Climate Infrastructure Fund.
(d) On a quarterly and annual basis, the state board shall determine the net amount of moneys collected from covered entities pursuant to this section and Part 5.5 (commencing with Section 38575).
(e) (1) The state board, in consultation with the Franchise Tax Board, shall prepare an annual report summarizing the collection and disposition of all moneys collected pursuant to this section and Part 5.5 (commencing with Section 38575). The state board shall make the report publicly available by posting the report on its Internet Web site.
(2) In addition to any other reporting requested by the Joint Legislative Committee on Climate Change Policies, the state board shall provide quarterly summary statistics of the moneys collected pursuant to this section and Part 5.5 (commencing with Section 38575) and make that summary publicly available by posting the summary on its Internet Web site.
(f) The state board, in consultation with the Franchise Tax Board, shall project and analyze the expected emissions of greenhouse gases and future revenue collection, taking into account uncertainty over future economic growth, energy consumption, and other relevant factors that affect the emissions of greenhouse gases. The projections shall include at least one-year and five-year emissions of greenhouse gases and revenue outlooks and shall be included in the annual report required pursuant to paragraph (1) of subdivision (e).
(g) In administering the collection and disposition of the moneys collected pursuant to this section and Part 5.5 (commencing with Section 38575), the state board and the Franchise Tax Board shall use conservative accounting management practices to maintain sufficient reserves in each of the funds established pursuant to Section 16428.87 of the Government Code. The appropriate accounting management practices may include reasonable projections determined on an annual basis of expected revenue collection to achieve the money collection and disposition requirements of this section, Part 5.5 (commencing with Section 38575), and Part 5.6 (commencing with Section 38577).

SEC. 5.

 Part 5.5 (commencing with Section 38575) is added to Division 25.5 of the Health and Safety Code, to read:

PART 5.5. Economic Competitiveness Assurance Program

38575.
 (a) For purposes of this part, the following terms have the following meanings:
(1) “Allowance” has the same meaning as set forth in Section 38574.5.
(2) “Annual compliance event” has the same meaning as set forth in Section 38574.5.
(3) “Covered entity” has the same meaning as set forth in Section 38574.5.
(4) “Covered imported product” means a product or category of imported product that the state board has determined, after an evaluation of relevant market prices and associated lifecycle greenhouse gas emissions to exhibit a material price difference.
(5) (A) “Material price difference” means a substantial difference in the price of a covered imported product or prospective covered imported product that arises solely as a result of whether or not a substantial component of the product’s lifecycle greenhouse gas emissions is not subject to the program established pursuant to Section 38574.5.
(B) In determining whether a material price difference exists, the state board shall consider only the economic consequences of the program established pursuant to Section 38574.5 and not other factors that are merely coincident with the program. The state board, at its discretion and based upon the availability of sufficient data, may evaluate whether a material price difference exists with respect to the retail or wholesale prices of the product.
(b) The Economic Competitiveness Assurance Program is hereby established, to be administered by the state board to ensure that importers that sell, supply, or offer for sale in the state a greenhouse gas emission intensive product have economically fair and competitive conditions. The purpose of the Economic Competitiveness Assurance Program is to maintain economic parity between producers, the prices of whose goods are materially impacted by the implementation of the program established pursuant to Section 38574.5, and those who sell like goods instate that are not subject to the program established pursuant to Section 38574.5. The state board shall adopt a regulation implementing this part that does all of the following:
(1) Applies to all covered imported products.
(2) Establishes a process for evaluating the prices and greenhouse gas emission intensities of major categories of products manufactured, sold, or consumed in the state. The state board shall use its expert discretion, emissions inventory data, state economic and trade data, and any other supplemental data sources necessary to conduct a thorough analysis of the flow of greenhouse gas emission intensive products through the state economy.
(3) Establishes, and periodically updates, a list, based on analysis conducted pursuant to paragraph (2), of covered imported products and their associated greenhouse gas emissions intensities. The list shall include estimates of the lifecycle greenhouse gas emissions of covered imported products that the state board calculates by product type, production process, or any other aggregated category that the state board deems relevant, with lifecycle greenhouse gas emissions reported on a per product unit basis at the aggregated category level for each covered imported product.
(4) Creates a process for private parties involved in the sale of greenhouse gas emission intensive products manufactured instate to petition the state board to have a product listed as a covered imported product as a result of a material price difference. The state board shall evaluate private party petitions using consistent criteria for establishing the presence of a material price difference. The state board may prioritize the order in which it addresses the petitions according to reasonable factors, including the relative quantity of potentially affected greenhouse gas emissions and the relative impact of any economic disparities petitioners claim are created by the program established pursuant to Section 38574.5. To the maximum extent practicable, the state board shall be consistent across the evaluation of private party petitions and between the evaluation of private petitions and the state board’s own determinations of covered imported products pursuant to paragraph (3).
(5) Creates a process for removing a covered imported product from the list of covered imported products created pursuant to paragraph (3) if at any time the state board concludes the program adopted pursuant to Section 38574.5 does not result in a material price difference for a listed product or covered imported product.
(6) Imposes an obligation on any person who sells, supplies, or offers for sale instate a covered imported product to surrender allowances equal to the lifecycle greenhouse gas emissions associated with each covered imported product sold or supplied for consumption in the state and that would have been subject to the program established pursuant to Section 38574.5 if the product had been manufactured instate. The person shall submit to the state board allowances equal to at least 70 percent of the annual lifecycle greenhouse gas emissions obligated under this paragraph at the time of the annual compliance event established pursuant to Section 38574.5, with an option to submit additional allowances without penalty to account for the remainder, if any, at the subsequent year’s annual compliance event. The obligation to surrender allowances established by this paragraph does not apply to individual products for which covered entities face compliance obligations for all substantial components of the covered imported product’s lifecycle greenhouse gas emissions. If one or more covered entities are subject to compliance obligations for one or more substantial components, but not all substantial components, of the covered imported product’s lifecycle greenhouse gas emissions, the state board, to the maximum extent practicable, shall reduce the obligation imposed by this paragraph on importers of those covered imported products to account only for the proportion of total lifecycle greenhouse gas emissions for which covered entities do not already face compliance obligations.
(7) Develops, to the maximum extent practicable, a process to exempt covered entities from the obligation to surrender allowances pursuant to Section 38574.5 for the production of covered imported products for which a covered entity faces a compliance obligation for a substantial component of the lifecycle greenhouse gas emissions of a covered imported product that is exported for final sale outside of the state or, at the state board’s discretion, to instead develop a process for returning or issuing to covered entities the same number of valid allowances that the covered entity submitted to the state board to account for a substantial component of the lifecycle greenhouse gas emissions from covered imported products that are exported for final sale outside the state.
(8) Reduces, to the maximum extent practicable, the obligation to surrender allowances at the annual compliance event pursuant to paragraph (6) to account for any legally binding carbon pricing policies that apply in the place of origin of a covered imported product. For the purposes of this paragraph, carbon pricing policies may include carbon fees, carbon taxes, emissions limits programs, and other market-based compliance mechanisms that impose an explicit cost on greenhouse gas emissions. If a carbon pricing policy exists in the place or places of origin of a covered imported product, but that policy does not impose carbon prices that are equivalent to those resulting from the program established pursuant to Section 38574.5, the state board shall use reasonable methods to account for the adjustments specified in this paragraph on a partial basis that reflect the difference between carbon pricing policies across applicable jurisdictions to the lifecycle greenhouse gas emissions of the covered imported product.
(9) Creates a process for a manufacturer or importer of a covered imported product to petition for an entity-specific lifecycle greenhouse gas emissions factor if it can provide credible documentation supporting the claim.
(10) Creates, if at any time a judicial opinion, settlement, or other legally binding decision reduces or eliminates the state board’s authority to implement the Economic Competitiveness Assurance Program, a system that freely allocates allowances to the manufacturers subject to Section 38574.5 whose products the state board is no longer able to include as covered imported products in the Economic Competitiveness Assurance Program. The free allowance program is subject to all of the following:
(A) The purpose of a free allowance allocation pursuant to this paragraph is to maintain economic parity between producers of greenhouse gas intensive goods that are subject to Section 38574.5 and those who produce or sell similar products that are not.
(B) The state board shall design, to the extent feasible and subject to other conditions in this paragraph, a free allowance allocation program to treat manufacturers of greenhouse gas intensive goods that are subject to Section 38574.5 on an equal basis with respect to producers and sellers of similar goods that are not.
(C) The state board shall allocate any free allowances to covered entities according to a formula that accounts for the volumetric output of greenhouse gas intensive products produced, the greenhouse gas intensity of the product, the lifecycle greenhouse gas emissions of the average and best performing manufacturers instate, the impact of free allocation on the dividend distributed pursuant to subdivision (c) of Section 38577.2, and any other factors the state board finds appropriate.
(D) The state board, subject to the limited authority to allocate free allowances pursuant to this paragraph, shall require that the process for considering and prioritizing the eligibility of product categories to receive free allowances be governed by the decisionmaking criteria and process provisions of this section.
(c) All moneys collected pursuant to this part shall be deposited in the California Climate Dividend Fund, created pursuant to Section 16428.87 of the Government Code.

SEC. 6.

 Part 5.6 (commencing with Section 38577) is added to Division 25.5 of the Health and Safety Code, to read:

PART 5.6. Funds

38577.
 For purposes of this part, “covered entity” has the same meaning as set forth in Section 38574.5.

38577.2.
 (a) The California Climate Dividend Program is hereby established to be administered by the Franchise Tax Board for allocation of the moneys in the California Climate Dividend Fund, created pursuant to Section 16428.87 of the Government Code, in the form dividends to all residents of the state on a per capita basis pursuant to subdivision (c) for the public purpose of mitigating the costs of transitioning to a low-carbon economy.
(b) (1) The Climate Dividend Access Board is hereby established and shall consist of six representatives with at least one member from each of the following groups:
(A) Nonprofit organizations working in the area of environmental justice.
(B) Nonprofit organizations working in the area of immigration reform.
(C) Nonprofit or government organizations providing direct social services to low-income or homeless communities.
(D) Organizations providing financial services and assistance to unbanked and underbanked communities.
(2) (A) The Senate Committee on Rules shall appoint two members.
(B) The Speaker of the Assembly shall appoint two members.
(C) The Governor shall appoint two members.
(3) The Climate Dividend Access Board shall conduct periodic public workshops and make recommendations to the Franchise Tax Board on how to effectively and safely distribute climate dividends to residents of communities in the state that are difficult to reach, including, but not limited to, homeless, unbanked, underbanked, and undocumented residents.
(4) The Climate Dividend Access Board, in making recommendations to the Franchise Tax Board pursuant to paragraph (3), shall consider methods to minimize the cost both to the state and to residents of alternative climate dividend distribution methods, with the goal of maximizing the degree to which climate dividend moneys benefit residents.
(c) (1) The Franchise Tax Board, in consultation with the Climate Dividend Access Board convened pursuant to subdivision (b), shall develop and implement a program to deliver quarterly per capita dividends to all residents and shall maximize the ease with which residents may enroll in the program. The program may include the automatic enrollment of residents who have filed a state income tax return in the prior year. The program shall provide per capita dividends on a quarterly basis unless the Franchise Tax Board, in consultation with the Climate Dividend Access Board, makes a finding that a quarterly dividend is impracticable for any particular category of residents. The Franchise Tax Board may determine an appropriate frequency of dividends provided to a category of residents of not less than at least once per year.
(2) If the Franchise Tax Board determines, after consultation with the Climate Dividend Access Board, that it cannot create a workable mechanism to distribute dividends to categories of residents, the Franchise Tax Board, in consultation with the Climate Access Dividend Board, may allocate dividends for those residents to nonprofit organizations providing direct services to those residents.
(3) In determining the per capita refund amount, the Franchise Tax Board shall employ reasonable estimates of expected carbon revenue collection and the projected number of residents, setting aside reasonable reserve margins from period to period to ensure that the per capita refund does not deplete available moneys in the California Climate Dividend Fund.

38577.4.
 All revenues generated pursuant to Section 38574.5 and Part 5.5 (commencing with Section 38575) constitute state funds for the purposes of the False Claims Act (Article 9 (commencing with Section 12650) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code).

38577.6.
 This part does not affect the implementation of any other requirements of this division, including regulations developed pursuant to Part 5 (commencing with Section 38570).

SEC. 7.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
It is necessary to provide for the reauthorization, extension, and reform of the state’s cap and trade program implemented pursuant to Part 5 (commencing with Section 38570) of Division 25.5 of the Health and Safety Code to provide certainty in the marketplace and to reduce the emissions of greenhouse gases in furtherance of achieving the statewide greenhouse gas emission target specified in Section 38566 of the Health and Safety Code at the earliest possible date.
SECTION 1.Section 38564 of the Health and Safety Code is amended to read:
38564.

The state board shall consult with local agencies, other states, the federal government, and other nations to identify the most effective strategies and methods to reduce greenhouse gases, manage greenhouse gas control programs, and facilitate the development of integrated and cost-effective regional, national, and international greenhouse gas reduction programs.

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