Governor Jerry Brown Signs Renewal of California’s Cap and Trade Legislation

On July 25, 2017 California’s Governor Jerry Brown signed the renewal of the state’s cap and trade greenhouse gas legislation passed by the state’s legislature last week. AB 398 extends the cap and trade program through 2030 and modifies the marketplace. AB 617 increases regulations on large stationary sources. AB 398’s goal is to achieve greenhouse gas emissions that are 40% below the 1990 level by 2030.

California Governor Jerry Brown signed AB 398 and AB 617, which extends California’s cap and trade program through 2030. The program was previously authorized to exist through at least 2020.

AB 398

The California Air Resources Board (ARB) now has the authority to set a ceiling on the price of carbon. At certain price points, ARB must offer some allowances to protect against rising costs. California will also provide some allowances to companies to maintain competitiveness and minimize the risk that companies will relocate to other states without cap and trade programs. AB 398 modifies the ways in which entities can meet their compliance requirements. Currently, entities may use both allowances and offset credits, subject to a maximum of 8 percent of the total coming from offset credits. AB 398 reduces the percentage of offset credits that may be used to comply with the program and requires more credits to be used in California.

ARB is required to implement a scoping plan for achieving the maximum technologically feasible and cost effective reductions in greenhouse gas emissions. This plan must be updated every 5 years.

AB 398 also creates the Compliance Offsets Protocol Task Force to provide guidance to ARB in approving offset protocols with the intention of increasing offset projects in the state. AB 398 also creates the Independent Emissions Market Advisory Committee which will hold annual public meetings and report on the performance of the cap and trade program and related policies.

The California Workforce Development Board, in consultation with ARB, is to report, no later than January 1, 2019, on increasing workforce development resources to help industry, labor, and communities’ transition through the reduction in greenhouse gas emissions.

Until the cap and trade program expires in 2030, air districts cannot adopt carbon dioxide emission reduction rules from stationary sources subject to the cap and trade program. ARB will develop allowance banking rules to discourage speculation, financial windfalls, and consider the impact on complying entities and market volatility.

AB 617

ARB will develop a statewide system for annual reporting of emissions of criteria air pollutants and toxic air contaminants from certain stationary sources. By October 1, 2018, ARB will also prepare a monitoring plan regarding technologies for monitoring criteria air pollutants and toxic air contaminants and the need for and benefits of additional community air monitoring systems. Based on the monitoring plan, the highest priority locations in the state will be selected for community air monitoring systems. Stationary sources that emit air pollutants in, or will materially affect, the priority locations will be required to deploy a fence-line monitoring system or other real-time on-site monitoring system.

Air districts in nonattainment areas must adopt an expedited schedule for the implementation of best available retrofit control technology. High priority permitted units will be prioritized for implementation of the best available retrofit control technology.

The maximum criminal and civil penalties for air pollution laws from non-vehicular sources will be increased from $1,000 to $5,000, and will be adjusted annually according to the California Consumer Price Index.



AB-398 California Global Warming Solutions Act of 2006: market-based compliance mechanisms: fire prevention fees: sales and use tax manufacturing exemption

AB-617 Non-vehicular air pollution: criteria air pollutants and toxic air contaminants