California’s Global Warming Solutions Act: Bold Action on Greenhouse Gases

Summary:  California’s Global Warming Solutions Act of 2006 represents an ambitious initiative to curtail emissions of global warming gases by the state in the U. S. having the largest economy.  The Act is especially significant in the present political environment, since the U. S. Congress has been unable to pass any legislation regulating emissions of greenhouse gases that exacerbate global warming.  It establishes the level of greenhouse gas emissions that occurred in 1990 as the goal, and mandates reducing the use of fossil fuels sufficiently to attain that level by the year 2020, a 15% decrease.  Implementation of the Act is exceptionally broad, affecting the greenhouse gas emissions of practically all aspects of California’s economy.

Introduction. A previous post on this blog reported that California voted to maintain in effect the state’s Global Warming Solutions Act of 2006 in a November 2010 referendum.  A notable feature of this law is recognition  that “national and international actions are necessary to fully address the issue of global warming. However, action taken by California to reduce emissions of greenhouse gases will have far-reaching effects by encouraging other states, the federal government, and other countries to act.” (Chapter 2, section (d)).  California thus recognizes that many countries of the world, including the U. S. federal government, have failed for more than one decade to act decisively to curb greenhouse gas emissions and the resulting detrimental effects of worldwide global warming. 

The Global Warming Solutions Act.  In more detail, the Global Warming Solutions Act requires in part

(1)  complete and verifiable monitoring and annual reporting of all major sources of greenhouse gas emissions in the state;

(2)  accounting for greenhouse gas emissions arising in particular from the generation of electricity used in the state, whether generated within or outside the state;

(3)  establishing the level of greenhouse gas emissions that occurred in 1990 by January 1, 2008, and developing regulations to assure that greenhouse gas emissions be lowered to that level by 2020;

(4)  by January 1, 2011 adopting a greenhouse gas emission limit, as well as  measures to reduce emissions sufficiently to achieve that limit by 2020, by establishing regulations by January 1, 2012; the measures set up taking into account technological feasibility and cost-effectiveness in order to achieve the Act’s objectives, for electricity generation, petroleum refining and fuel supplies, subject to exclusions for small businesses whose emissions fall below a level to be determined; and

(5)  affording the option of adopting regulations that establish a market-based system with successively lower annual limits to greenhouse gas emissions in order to achieve the objectives of the Act.

The state Air Resources Board is mandated to implement the Act.  Current progress and the status of implementing the Act may be accessed here.  It’s generally understood that a market-based system in item (5) will be a cap-and-trade market mechanism, in which successively lower maximum limits for emissions are established periodically, and rights to emit those levels are traded on an open market.

Climate Change Scoping Plan. Under the requirements of the Act, the Air Resources Board issued its final Climate Change Scoping Plan in December 2008.  The Executive Summary notes that reductions of greenhouse gas emissions by the mandated amount of 15% of present levels to achieve 1990 levels by 2020 would actually correspond to a reduction of 30% of the level of emissions envisioned for 2020 if emissions growth would proceed until then according “business-as-usual”. 

Although the Act extends only to 2020, an Executive Order mandates a further reduction from the levels of 1990 by 80%, to be achieved by 2050.  The Scoping Plan envisions the bold, innovative initiatives required to meet this extended objective:

“Reducing our greenhouse gas emissions by 80 percent will require California to develop new technologies that dramatically reduce dependence on fossil fuels, and shift into a landscape of new ideas, clean energy, and green technology. The measures and approaches in this plan are designed to accelerate this necessary transition, promote the rapid development of a cleaner, low carbon economy, create vibrant livable communities, and improve the ways we travel and move goods throughout the state. This transition will require close coordination of California’s climate change and energy policies, and represents a concerted and deliberate shift away from fossil fuels toward a more secure and sustainable future. This is the firm commitment that California is making to the world, to its children and to future generations.”

As mentioned above, the Scoping Plan’s objectives for 2020 include expanding existing energy efficiency programs already in place prior to enactment of the Act, including residential and appliance standards; achieving use of renewable sources for electricity generation to one third of the total; a state-wide, economy-wide cap-and-trade program; lowering transportation-derived emissions including California’s existing clean car mandate and a Low Carbon Fuel Standard; and setting up a fee structure for various activities including use of manmade industrial chemicals having high global warming potential.

The Scoping Plan discusses most areas of California’s economic activity, which in addition to those just mentioned include lowering transportation-related greenhouse gases, a “million solar roofs” program, addressing medium- and heavy-duty vehicles, a high speed rail system in the state, environmental standards in construction, and agriculture.

Carbon Emissions Allowances.  Most recently, on December 16, 2010 the Air Resources Board released the regulations for California’s emissions trading program (see the news release), using a cap-and-trade regime. According to the news release, 80% of California’s greenhouse gas emissions are limited by the program.  The program is complemented by California’s initiatives in standards for energy-efficient vehicles, low-carbon fuel standards, and energy efficiency programs.

The regulation extends to 360 businesses representing 600 facilities.  It will unfold in two broad phases: the first, beginning in 2012, includes all major industrial sources along with utilities; and, a second phase that starts in 2015 and brings in distributors of transportation fuels, natural gas and other fuels. Initially over 2012-2014, allowances, each covering the equivalent of one ton of carbon dioxide emissions, are free to industrial sources.  Companies needing more may purchase them at state-run auctions.  For the electricity generation industry, allowances are also granted, and must be sold with the proceeds assigned to the benefit of ratepayers and used to promote the reduction objectives of the Act.  In subsequent years fewer allowances are distributed so that sources have incentives to optimize their operations to reduce emissions of greenhouse gases.  Compared to the present, by 2020 California should have lowered overall emissions by 15%. 

In addition to direct reduction of allowances leading to reductions in emissions, entities may also offset up to 8% of its emissions by purchasing allowances from state-qualified offset programs.  These programs include reforestation and forest development, dairy industry methane reductions (methane is powerful greenhouse gas), and destruction of ozone-depleting refrigerants under an older worldwide agreement.  California has already put in place contractual agreements with two tropical forest locales to participate in offsets.

California’s Important Role in Reducing Greenhouse Gas Emissions.  With an economy that represents about 17% of all the United States, California plays an exceptional role in any efforts to lessen the effects of global warming.  Implementation of its Global Warming Solutions Act with its interim goal set for 2020, and with the additional policy goal set for 2050, places California at the forefront of non-federal actions to reduce global warming arising from manmade greenhouse gases.  Some other states and regions in the U. S. have analogous programs in place with varying levels of goals to achieve.  California’s program, together with those of the other states, demonstrates what can be achieved by dedicated assertion of forward-looking programs.  These necessarily take into account the economic effects of the changing energy landscape that these efforts entail.  They clearly demonstrate that economic factors no longer provide a viable reason by which some people oppose greenhouse gas reduction programs.

Conclusion. Nevertheless, with several different plans arising across the country, energy policy is developing into a checkerboard on the regulatory and economic landscape.  Enactment of a single national energy policy directed to minimizing greenhouse gas emissions, leading hopefully to a stabilization of atmospheric greenhouse gas levels, would be far more preferable for economic policy on the national level, as well as working toward an important environmental objective nationally and on the international stage.  Ultimately, since this is a global problem, it requires a global approach.  Sound, concerted national policy by the U. S. would benefit all concerned interests.

© 2011 Henry Auer