Tag Archives: AB32

California’s cap and trade program leads the way on US climate action

November 28, 2017 | and

 

In recent weeks, California has continued to cement its leadership role in American climate policy – most recently at the COP23 climate conference in Bonn, Germany. In partnership with other states, cities, indigenous communities, businesses and investors, faith organizations, and numerous other institutions, California has led the U.S. “We Are Still In” coalition representing more than 130 million Americans and more than $6.2 trillion of the U.S. economy.

California Governor Jerry Brown recently announced plans to boost technical and political cooperation on carbon markets with the leaders of the EU and China. This announcement follows enormous legislative progress, compromise, and policy innovation in recent years in California to provide long-term certainty and stability to California’s cap and trade program and broader climate policy regime. This legislative progress includes:

  • SB 350, which strengthens energy efficiency standards for buildings and increases California’s renewable portfolio standard to 50% by 2030
  • SB 32, which legislatively reiterates and extends previous emissions goals to 40% below 1990 levels by 2030
  • AB 398, which legislatively extends the cap and trade program to 2030

AB 398 – the extension of cap and trade through 2030 – is an enormous boon to one of the world’s most effective, large-scale, economy-wide carbon pricing regimes, and an important fortification of California’s climate policy infrastructure.

Prior to the extension, cap and trade revenues were used for high-speed rail and numerous other climate finance projects throughout the state, with 25% of revenues specifically earmarked to support projects in disadvantaged communities. However, California Air Resources Board (CARB) allowance auctions in early 2017 reflected legal and policy uncertainty about the future of cap and trade, and failed to sell out.

The passage of AB 398, with a legislative supermajority, puts to rest past concerns about legal challenges from the fossil fuel industry on the basis of California’s Proposition 13 or Proposition 26 rules regarding new taxes or fees. This decisive victory for carbon-pricing prompted record-breaking sellouts of allowances in the recent August and November auctions, totaling close to $2 billion in revenue generated, sold at clearing prices well above the price floor in both auctions. Analysis from Energy Innovation suggests that the cap and trade extension will generate at least an additional $1.3 billion in revenue for the Greenhous Gas Reduction Fund between now and 2020, and an additional $26 billion in new revenue from 2021-2030.

To achieve this level of support, AB 398 involved key compromises on compliance measures and on how revenues are spent, to assuage concerns from both environmental justice advocates and from traditional industry opponents of cap and trade policy. The key agreements of AB 398 are:

  • It increases the allocation for local climate finance for investments in disadvantaged communities to 35%.
  • It decreases the fraction of compliance that can come from offsets.
  • A companion measure AB 617 increases regulation of local air quality to prevent pollution hotspots in vulnerable communities.
  • And statewide ballot measure ACA1 goes before voters in 2018 proposing a constitutional amendment that would set a higher (two-thirds) legislative threshold for how future cap and trade revenues are spent.

California’s cap and trade extension is not a panacea, and no legislation in an economy and a political landscape as large and complex as California can be perfect. Future challenges to reaching 2030 goals (like allowance oversupply) remain. And California’s climate policy regime will have to remain dynamic and innovative in order to continue to lead, and to make good on stated goals.

But the extension of California’s cap and trade program remains an important legislative step forward, giving markets the stability they need to function while achieving success in pursuit of aggressive emissions reductions.

Climate Policy Initiative’s California Carbon Dashboard continues to provide the latest news, prices, and information to understand California’s cap and trade program and suite of climate policies. You can learn more at www.calcarbondash.org.

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California’s New 2030 Climate Target Aims to Reduce Emissions by 40%

May 1, 2015 |

 

This week, California Governor Jerry Brown issued an ambitious new emissions reduction target of 40% below 1990 levels by 2030. It’s being lauded as one of the most aggressive climate targets in North America.

The new target is as an important step between California’s goal of reducing emissions to 80% below 1990 levels by 2050, set in an earlier executive order, and the interim target of 1990 levels by 2020, set under California law AB32 in 2006.

In 2013, AB32 launched one of its key policies to reduce greenhouse gas emissions and meet these targets – the Cap and Trade program. Unlike many such programs around the world, California’s Cap and Trade program acts as a backstop to a series of complementary policies that cover major emitting sectors in the state with the goal of returning California emissions to 1990 levels by 2020.

CPI’s California Carbon Dashboard continues to offer the latest on AB32 and California’s Cap and Trade program, including current and historic carbon prices in California, emissions caps and history by sector, and relevant updates from the California Air Resources Board. It also provides a comprehensive overview of AB32 and complementary policies, as well as the role of the Cap and Trade program in meeting the emissions reduction target.

CPI analysis shows that the carbon price is making a difference. A 2014 study explored how industrial firms, which are responsible for 20% of statewide greenhouse gas emissions and are required to buy allowances to cover some of their emissions, are making decisions under the Cap and Trade Program. We focused on the cement industry, which is the largest consumer of coal in California, and found that the carbon price is making a difference in how cement firms approach business decisions about actions that would reduce emissions, such as investing in energy efficiency or switching to cleaner fuel.

It’s clear that California is well on its way to achieving the 2020 target, but meeting the 2050 target would require reducing emissions five times faster than the current pace. Governor Brown’s new 2030 target will put pressure on the state to pick up the pace. The next step is for California’s legislature to put in place a legal framework for post-2020 emissions reductions. CPI will update the California Carbon Dashboard once a post-2020 framework is in place.

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Paving the way for emissions reductions in California

July 1, 2014 |

 

California’s budget for the next fiscal year, signed by Governor Brown on June 20, includes $832 million in auction revenues from the Cap and Trade Program, which will go toward high-speed rail, public transportation, energy efficiency, and other projects to support low-carbon, sustainable communities. Where did that money come from? In some cases, from industrial firms like cement producers and food processors, which are responsible for 20% of statewide greenhouse gas emissions and are required to buy allowances to cover some of their emissions.

Our new study, Cap and Trade in Practice: Barriers and Opportunities for Industrial Emissions Reductions in California, explores how those industrial firms are making decisions under the Cap and Trade Program. More specifically, we wanted to know if industrial firms, given their typical decision-making processes, would invest in the emissions reductions options that are most cost-effective on paper — and if not, what are the barriers? We focus on the cement industry, which is a major player in the industrial sector and is also the largest consumer of coal in California.

The carbon price is making a difference

We find that the carbon price is making a difference in how cement firms approach business decisions about actions that would reduce emissions, such as investing in energy efficiency or switching to cleaner fuel. Firms are considering the carbon price when they make investment decisions, and our modeling shows that the carbon price significantly changes the financial attractiveness of several abatement options.

As an example, this graph shows how the carbon price adds to the value of an investment in energy efficiency. The additional savings from reducing the firm’s obligations under the Cap and Trade Program would add around 50% to the value of the investment if the carbon price is near the price floor — or could more than triple the value of the investment if the carbon price is at the top of its target range.

Cap and Trade - Lifetime Value of Energy Efficiency Investment

The Cap and Trade Program magnifies the value of an energy efficiency investment

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The Clean Power Plan means changes for coal, but not the ones you might expect

June 18, 2014 |

 

Under President Obama’s recently announced Clean Power Plan, the Environmental Protection Agency (EPA) proposed that states cut greenhouse gas emissions from existing power plants by 30 percent from 2005 levels.

Commenters on both sides of the aisle say this rule means big changes for the coal industry.

But before we get fired up about the changes, it’s important to take a look at the facts: While states will need to retire coal plants at the end of their useful lives to meet the proposed limits, EPA’s rule would give states a great amount of flexibility to avoid coal asset stranding and still meet emissions reduction targets. In fact, valuing the right services from coal plants will prove the more important question for a low-cost, low-carbon electricity system.

Let’s look at why.

First, we need to understand what the rule really means for coal asset stranding. An asset is “stranded” if a reduction in its value (that is, value to investors) is clearly attributable to a policy change that was not foreseeable by investors at the time of investment.

In our upcoming analysis of stranded assets, Climate Policy Initiative finds that if no new investments are made in coal power plants and existing plants retire as planned (typically, 60 years for plants with pollution control technology investments and 40 years for plants without), the U.S. coal power sector stands to experience approximately $28 billion of value stranding from plants that are shut down. While that’s a big sounding number at first glance, it’s very small relative to the size of coal power sector. As the figure shows, that retirement schedule puts the U.S. coal power sector on track to come close to the coal power capacity reductions called for in the IEA 450 PPM scenario to limit global temperature increase to 2°C.

U.S. Coal Power w emissions (2)

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California’s Climate Credit is Worth Watching

April 17, 2014 |

 

This month, many Californians will see something new on their electricity bills: The first bi-annual Climate Credit, a payout to customers of investor-owned utilities like PG&E and SCE through California’s Cap and Trade program. The Climate Credit is worth around $30-$40 and will recur every April and October for most customers. However, for customers of some small utilities it will reach nearly $200, while certain small businesses, schools, and hospitals will receive their credit every month.

National and international climate communities are already keeping a close eye on California’s AB32 Global Warming Solutions Act, which includes the Cap and Trade Program as part of a package of policies aimed at cost-effectively reducing California’s emissions. The impact of the Climate Credit — the first of its kind — is worth watching to determine if similar mechanisms could be used successfully elsewhere. In particular, the Credit’s impact on both energy efficiency and public support for the Cap and Trade program will be especially interesting to follow.

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The promise and pitfalls of shareholder incentives: Lessons from California’s high-stakes test

February 19, 2014 |

 

This post originally appeared on Intelligent Utility.

How many millions of dollars does it take to change a state’s light bulbs?

This sounds like the start of a joke, but for the last seven years, it’s been anything but to California utilities and regulators. The crux of the dispute, which has had stakes in the hundreds of millions of dollars, has been an ambitious—but controversial—shareholder incentive designed to motivate California utilities toward greater energy efficiency.

The policy, called the Risk/Reward Incentive Mechanism, or RRIM, targeted California utilities. However, the concept of a shareholder incentive is one that 20 other states have adopted in recent years. It’s also under discussion at the federal level as part of President Obama’s proposed Race to the Top Energy Efficiency Initiative.

So what can utilities in other states learn from California’s experience? Climate Policy Initiative’s recent analysis, “Raising the Stakes for Energy Efficiency: California’s Risk/Reward Incentive Mechanism,” draws a few lessons that stand out.

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Will California’s AB327 help or hinder renewable energy? The devil is in the details

November 18, 2013 |

 

California Assembly Bill 327 (AB327), signed into law October 7th, 2013, drew fire from solar and energy efficiency proponents, The Sierra Club, and other environmental groups over the rate-setting powers it would give the California Public Utilities Commission (CPUC). These opponents worry that the bill allows changes in rate and regulatory structure that could discourage renewable energy investment in California. However, local governments, industry groups, utilities and some consumer groups argue these same powers could, used wisely, make electricity rates more equitable, protect consumers and help utilities adapt to an increasingly renewable and distributed grid. Climate Policy Initiative’s analysis suggests they could also create a very fertile and cost-effective environment for renewable energy for years to come.

AB327 allows the extension of the Renewable Portfolio Standard (RPS) and requires the extension of the Net Energy Metering program, both of which Climate Policy Initiative analysis has shown to be significant drivers of renewable energy growth in California. Many of the details of their implementation are left to the CPUC, though, and these details will decide the ultimate impact of AB327 on renewable energy in California.

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Introducing California Carbon Dashboard: All your questions about AB32 answered in one place

October 24, 2013 |

 

This blog was co-authored by Andrew Hobbs and Karen Laughlin.

This week CPI is pleased to launch our new beta California Carbon Dashboard—a one-stop site for information on California’s portfolio of climate policies, current carbon prices, and news aggregation.

The California Global Warming Solutions Act of 2006 (AB32) set into motion a suite of policies to reduce California’s economy-wide greenhouse gas emissions to 1990 levels by 2020—and set California, again, out in front as a climate policy test bed for the United States. AB32 established a cap and trade program for California as well as many sector-specific complementary policies to achieve the 2020 state target.

California’s climate package is leading edge, so there is plenty of information out there on AB32’s policies and processes. Locating the quick or in-depth information you want or need, however, can be a challenge. So, as we gathered information for our more in-depth analyses on California’s climate policy effectiveness, CPI decided to build a one-stop dashboard to provide policymakers, stakeholders, and the public—in California, in the U.S., and the world—a user-friendly tool to learn about how California’s climate policies fit together and to get current updates.

Let us give you a quick tour to highlight the Dashboard features that you might find useful:

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Obama’s climate plan and what it means for states

June 28, 2013 |

 

This post originally appeared on The Huffington Post.

In his climate speech this week, President Obama gave the go ahead for the U.S. Environmental Protection Agency (EPA) to develop national greenhouse gas standards for both new and existing power plants — making carbon regulation under the Clean Air Act the primary action of his broader plan to reduce U.S. carbon emissions.

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Renewable energy in California: What has policy brought us?

September 21, 2012 |

 

Government support for renewable energy is a subject of national debate. In particular, many are scrutinizing the Federal Production Tax Credit for wind energy – absent legislative action, it expires in December.

Policymakers across the political spectrum are asking questions like “has government support of renewable projects been effective?” and “should government support be continued or scrapped?” Investors in renewable energy are similarly interested in how policies can best provide stable support to help the industry mature.

With those questions in mind, our team looked back at what state and federal renewable energy policies have meant for California’s renewable energy deployment up to now.

A brief history of California renewable energy policies

As this graphic shows, renewable energy deployment in California has been concentrated in two waves. The first, in the 1980s, was due to a combination of the Public Utilities Regulatory Policies Act (PURPA), high natural gas prices, and new technologies. The second, which started around 2001, coincided with California’s renewable portfolio standard as well as state and federal incentives.

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