By Michelle Engel

The Air Resources Board (“ARB” or “Board”) finds itself at ground zero of California’s strategy to address climate change. The Climate Change Proposed Scoping Plan (“Plan”), dated October 2008, has been praised and panned and with the guiding philosophy that you haven’t done your job unless you make everyone unhappy, perhaps the Plan is close to the mark.

CALIFORNIA’S STRATEGY

We analyzed the Board’s Draft Scoping Plan released in June 2008 in “Local Government Responsible for 1% of Statewide GHG Emission Reduction According to ARB Draft Plan”.   Californians at every level provided input during the review and comment phase of the Draft Scoping Plan, and ARB responded by making several changes to the updated Plan, some of which include:

• Increased Local Government reduction goal (to 15 percent below today’s levels by 2020) and included guidelines to meet that goal.
• Added details to the Cap-and-Trade Program.
• Evaluation of the Plan under CEQA.
• Development of guidelines for implementation, tracking and enforcement of the Plan.
• Increase in the reduction targets of transportation related greenhouse gas (“GHG”) emissions for Regional Transportation from 2 to 5 million metric tons of CO₂ equivalent (MMTCO₂E).

Local Government

One area of concern during the draft phase of the Plan involved the lack of information and guidance to enable local governments to successfully meet the objectives of the Plan. To address this issue, ARB collaborated with partners from a variety of non-profit organizations, and associations, to adopt the Local Government Operations Protocol (“Protocol”). The Protocol, released in September 2008, is designed to serve as a single guidance document when developing GHG emissions inventories, which includes identifying, quantifying, and reporting emissions. 

Perhaps the most complex aspect of the Protocol is the method by which local governments will account for and report their emissions. Local governments are encouraged to follow the traditional organizational boundary approach that they typically use for financial accounting purposes. Under the organizational boundary approach, local governments will select one of two “control approach” methods: operational control or financial control, to manage their GHG emission objectives. Under both approaches, a local government accounts for 100 percent of the GHG emissions from operations over which it has control. Local governments will be responsible for determining if an operation is controlled based on the financial or operational criterion, and the measures used must remain consistent across all of the operations.

The control approach method mirrors the Greenhouse Gas Corporate Accounting Protocol (“National Protocol”) established by the World Business Council for Sustainable Development. The National Protocol was created to assist GHG projects meet the goals outlined in the Kyoto Protocol[1] agreement; essentially to provide principles, concepts, and methods for quantifying and reporting GHG reductions for climate change mitigation projects. While this method has already been utilized by various nations who have adopted the Kyoto Protocol (the Unites States not being one of them) for executing GHG projects, the control approach has been criticized by Californians mainly due to the limited options available to local governments for accounting for and reporting their emissions. 

The Local Government Operations Protocol provides a full description of the two methods including ways to select the appropriate control mechanism. While concerns remain that local governments will occasionally encounter situations in which complex relationships with special service providers are not covered under the operational or financial examples, local governments are being encouraged to use their best judgments when defining the control. As local governments begin to use the Protocol, clarifying examples of defining organizational boundaries in complex situations will become available. Revisions to the 2008 version of the National Protocol are not expected for another 12 months.

Cap-and-Trade Program

A cap and trade program is an administrative method used to control pollution by granting economic incentives for achieving reductions in the emissions of pollutants. Many may be familiar with the concept of a cap and trade program from the 1990’s when the U.S. acid rain cap and trade program was utilized to achieve compliance in reducing sulfur dioxide emissions.  

The Western Climate Initiative (“WCI”) was introduced in early 2007 with the task of identifying a regional market-based approach to reducing GHG’s. The Design Recommendations for the WCI Regional Cap-and-Trade Program (“Program”) is the current result of the efforts of the WCI Partners.   The current version of the Program, dated September 23, 2008, is outlined in the Climate Change Proposed Scoping Plan and includes additional details on the proposed cap-and-trade program which were either missing or unclear in the Draft Plan. 

Areas of concern include auctioning allowances, the role of offsets, and how to develop voluntary early action, are all briefly discussed in the Plan; however the rule-making phase of the Plan will not take place until after the Plan has been officially adopted. During the rule-making phase, ARB will elicit ongoing public participation to assist in establishing regulations to the major Program design elements including, the method of distributing both allowances and revenues, and rules for the use of offsets.   Public concern remains on approving the Plan without clear details on how the major elements of the WCI Regional Cap-and-Trade Program will affect Californians.

Compliance obligations of the Program fall within four (4) entities or facilities collectively titled the “Point of Regulation” which currently includes:

• Industrial sources with emissions above the identified threshold,
• Electricity,
• Residential, commercial and industrial fuel combustion at facilities with emissions below the threshold, and
• Transportation fuel combustion.

The scopes of the Program, including compliance obligations, thresholds, point of regulation, etc., are all capable of expanding over time. 

The success of the Program will primarily lie in the systems utilized for accurate measurements. To establish effective measurements the WCI Partners will begin reporting emissions in 2011 for emissions that occur in 2010. The first phase of the program will begin in 2012 followed by a three-year compliance period. By 2015, the program will reach phase two which will be expanded to include fuels not covered in the first phase; transportation fuels, residential and commercial and industrial fuels.

VISUALIZING CALIFORNIA’S FUTURE

The first commitment period to the Kyoto Protocol comes to an end by 2012. The efforts underway by California through AB 32 and the Climate Change Proposed Scoping Plan are designed to pave the way for California to move “the United States closer to a seat at the table among the developed countries… and lead a new international effort for an agreement to replace the Kyoto Protocol.” (Climate Change Proposed Scoping Plan, October 2008). This is a costly role for California to be playing and the gamble may not outweigh the benefits.

A public meeting with ARB will be held this Thursday, December 11, to consider the approval of the Plan. Abbott & Kindermann, LLP will continue to keep you appraised as new developments occur.

Michelle Engel is a paralegal with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.