California’s Blueprint For A Clean Energy Economy

By Kristin Eberhard

Moments ago the Air Resources Board voted 9-0 to re-adopt and move ahead with the AB32 Scoping Plan — California’s blueprint for transitioning to a clean energy economy. The new analysis will supersede the original study that the San Francisco County Superior Court found lacking earlier this year.

In today’s monthly Board meeting, the ARB considered the findings of its evaluation of alternatives to the Scoping Plan for achieving the goals of AB32. The Revised Alternatives Analysis evaluated possible options for reaching the clean energy goals established under AB 32. The plan that ARB staff put forward reflects years of work with input from business, labor, and environmental groups to design a program that meets environmental concerns while it provides business the confidence that they can invest in the clean energy future of California.

What the expanded alternatives analysis confirms is that the Scoping Plan – the blueprint ARB put forward in 2008 – provides California’s best way to ensure pollution reductions at least cost and spur economic growth. In a nutshell, the Scoping Plan recognizes that there is no single “silver bullet” to solve the climate crisis – it requires an interlocking set of policies.  Despite this comprehensive approach that includes over 70 different policies, much has been made of the inclusion of one particular policy in the Scoping Plan, ARB’s proposed cap and trade regulation.  From all the press coverage one would think, incorrectly, that the cap and trade regulation is the only (or at least predominant) policy ARB is pursuing under the Scoping Plan.

Cap and trade is just one part of the AB 32 program

The cap-and-trade program is projected to account for less than one fifth of the emission reductions required to meet the AB 32 target.  The vast majority of emission reductions will come from a suite of direct regulations, which are targeted at California’s largest sources of emissions:

SectorPercent of Emissions(2008)Selected AB 32 Scoping Plan Solutions
Transportation37%Cleaner vehicles (Clean Cars Standards), cleaner fuels (LCFS), reduce the need to drive through smart growth development (SB 375)
Utilities(Electricity and

Natural Gas)

34%Improve energy efficiency through minimum standards and utility programs, increase renewable energy (33% RPS), incentivize low carbon generation, avoid further investments in high carbon generation (SB 1368)
Industrial Operations20%Improve industrial energy efficiency (Industrial Audit Measure), incentivize low carbon industrial processes and products
High Global Warming Potential (GWP) Gases3%Phase out high GWP gases across multiple sectors, including consumer products and refrigerants
Source: CARB, Emissions Reductions from Scoping Plan Measures; 2020 GHG Emissions Forecast
Source: CARB, California GHG Inventory for 2000-2008

 

A well-designed cap and trade program is critical to ensuring pollution reductions and spurring innovation

As part of the larger AB 32 package of policies, however, the cap and trade program is critical for a number of reasons:

  • It provides absolute emission limits on polluters,
  • It is enforceable against individual emitters,
  • It sends a stable market signal to drive innovation and investment in low carbon solutions (secured by ARB’s firm commitment to establish an escalating auction reserve price that begins at $10/tonne), and
  • It provides a backstop for all the other intensity-based regulations under the Scoping Plan (i.e., in case the reductions from other direct measures do not fully materialize as ARB expects, the cap and trade program will pick up the slack).

Without this hard limit on pollution as a backstop, the state will be less likely to achieve all the required reductions by 2020, and less likely to stimulate the innovation and investment needed to achieve even greater reductions by 2050.

The cap is necessary, but not sufficient

What the cap and trade program will not do is dictate where emission reductions occur within capped sectors (roughly 85% of the economy).  By design, cap and trade will look to achieve emission reductions at least-cost, wherever they are available, but will not guarantee that emissions reductions occur in certain sectors or regions.  For this reason, NRDC has never supported relying exclusively on a cap and trade program to comply with AB 32. Indeed, we argued against the alternative in ARB’s revised alternative analysis that relies exclusively on cap and trade.  Instead we continue to advocate and support the Scoping Plan because it encompasses a comprehensive package of targeted direct measures backed up with a hard cap.

For instance, NRDC’s top priority for building on the success of AB 32 has been to secure additional direct reduction measures from the industrial sector, which accounts for roughly one fifth of California’s total GHG emissions but is not currently subject to any mandatory reduction requirements.   In June, ARB announced that it would close this gap by building on an existing regulation (the Industrial Audit Measure) to require California’s 60 largest industrial polluters to implement all cost-effective and feasible reduction measures identified through an energy efficiency audit.   ARB’s commitment to revamp the rule will simultaneously reduce GHG emissions and improve air quality in local communities already adversely impacted by air pollution, furthering a key objective of AB 32.

ARB should move forward with an AB 32 program that includes direct regulations and a hard cap on pollution

In short, if the question is how can California best achieve the goals set out in AB 32, the choice is not between direct regulations and a market-based solution – the answer is that we need both.  As designed, the Scoping Plan strikes this balance appropriately, and the Board must keep California on track to achieve full and timely implementation of all of the policies outlined in the Scoping Plan.

[Photo By  jvh33]

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