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California Moves Forward With Aggressive Greenhouse Gas Emission Targets – Governor Brown Signs Into Law SB 32 and AB 197

9/9/2016 Articles

On September 8, California's Governor Brown signed companion bills from the Senate and Assembly, Senate Bill 32 (SB 32) and Assembly Bill 197 (AB 197), continuing California on a path to cut greenhouse gas (GHG) emissions – now, under this new legislation, by at least 40 percent below 1990 levels by 2030. The reductions have been identified by the Governor's office as the most ambitious reduction goals in North America and follow the state's passage of the landmark California Global Warming Solutions Act of 1986, Assembly Bill 32 (AB 32), which was signed into law by then-Governor Arnold Schwarzenegger.

AB 32 called for the state to cut GHGs to 1990 levels, by 2020, a timetable officials say the state is on target to meet. In April 2015, Governor Brown issued Executive Order B-30-15, which provided for a new interim statewide GHG emission target to reduce GHG emissions to 40 percent below 1990 levels by 2030. SB 32 now codifies that reduction target.

The path towards passage was not an easy one, with legislative resistance to simply rubber-stamp the Governor's Executive Order taking place last year, when SB 32 failed in the final days of the legislative session in the Assembly. As a result, Eduardo Garcia, D-Coachella (Riverside County) authored AB 197, which led to support from some of the moderate Democrats in the Assembly, who sought stricter legislative oversight over the climate change fight, including the appointment of two members of the legislature to the Air Resources Board (ARB), and requiring ARB to publish emission data for power companies and certain other operating facilities. SB 32 could only take effect if the companion AB 197 was also passed; once that occurred the Governor was able to sign the two bills into law. Among other objectives, AB 197 seeks to ensure that disadvantaged communities throughout the State also see the benefits of the California's climate change laws and policies.

So, what can we look forward to with the passage now of SB 32 and AB 197? A wide array of sources of GHG will be impacted, including industrial facilities, commercial and residential developments, public utilities and private energy producers. With these impacts, however, will come opportunities to promote project development consistent with the targeted reduction of GHGs and provide sources of alternative energy – such as solar, geothermal, landfill gas to energy, biomass, wind and other technologies – and energy storage systems to support the State's Renewables Portfolio Standard. There will also be continued focus on, and likely a boost to, the low-carbon fuel standard and accompanying low-carbon fuel industry – providing incentives for innovation and support for new technologies, in fuel sources as well as spurring advancements in reducing mobile source emissions from automobiles, trucks, heavy equipment and locomotives.

Less clear is the future of the State's cap-and-trade program, which complements other regulatory efforts, and which the State has come to rely upon as a significant source of revenue. Under AB 32, cap-and-trade is only authorized through 2020. SB 32 and AB 197 did not clarify the post-2020 status of cap and trade, and Governor Brown has suggested that his office would pursue a ballot initiative in 2018 if the legislature fails to act. In the meantime, the volume of allowances sold has decreased, and money raised through the state-run auction process has suffered. Whether this portends a shift to a command-and-control regulatory scheme, rather than the current cap-and-trade, remains to be seen. For the regulated community, this may represent a "Hobson's choice" and the uncertainty certainly frustrates long-term planning.

Despite the uncertainty of cap and trade, California, led by Governor Brown, Senator Pavley, Assemblymember Garcia and others, continues to lead with respect to climate change laws and policies, and the corresponding effort to reduce emissions of GHGs. So far, the effort has not unleashed the dire economic predictions that preceded AB 32. To the contrary, the State's economic growth has been twice the national rate, with significant creation of "green jobs," and the legacy of both Governor Schwarzenegger and Governor Brown as leading advocates of measures to control climate change seems assured.

We will continue to follow SB 32 and AB 197 closely and apprise our clients, friends and colleagues of regulatory developments, ARB implementation and community efforts to shape climate change benefits towards a more local perspective.

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