ASSEMBLY BILL 32 OF 2006 (AB 32)

AB 32 requires the State Air Resources Board to adopt regulations to require the reporting and verification of statewide greenhouse gas emissions and to monitor and enforce compliance with the program as specified. The Air Resources Board is required to: 1) adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emission levels in 1990 to be achieved by 2020; 2) adopt rules and regulations to achieve the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions; 3) adopt market-based compliance mechanisms meeting specified requirements; 4) monitor compliance with and enforce any rule, regulation, order, emission limitation, emissions reduction measure, or market–based compliance mechanism adopted by the Air Resources Board, pursuant to specified provisions of existing law; and, 5) adopt a schedule of fees to be paid by regulated sources of greenhouse gas emissions.

In 2008 the Air Resources Board released a Scoping Plan on how AB 32’s greenhouse gas emissions reduction target would be met. 

DEFINITIONS

Cap-And-Trade: A regulatory system that is meant to reduce certain kinds of emissions and to provide companies with a profit incentive to reduce their pollution levels faster. Under a cap-and-trade program, a limit (or “cap”) on certain types of emissions is set and companies that produce fewer emissions than allowed by the cap are permitted to sell (or “trade”) the unused portion of their emissions allowances to companies that are unable to reduce their emissions below the cap.

Scoping Plan: Developed under AB 32 for reaching its greenhouse gas reduction goals.

Greenhouse Gases: Gases in the earth’s atmosphere that cause the “greenhouse gas effect,” i.e., an increase in global average temperatures. The definition of greenhouse gases under AB 32 includes such gases as carbon dioxide, methane, nitrous oxide and hydro fluorocarbons. 

EFFECTS OF PROPOSITION 23

According to the Legislative Analyst, “more than one-half of the emission reductions intended from implementing the scoping plan are scheduled to come from programs that derive authority outside of AB 32.” Programs to be suspended are likely to include the proposed cap-and-trade system; a low carbon fuel standard that would require a significant reduction in the carbon intensity (and thus the greenhouse gas emissions) of the state’s transportation fuels; a fee to recover the state’s cost of administering AB 32 and a requirement that all retail sellers of electricity procure at least 33 percent of their power from renewable sources such as solar or wind power by 2020. 

LAWSUIT OVER BALLOT TITLE AND SUMMARY

Proponents of Prop 23 filed a legal challenge to the Secretary of State’s Ballot Label and Title and Summary, complaining that the label implied that all air pollution control laws would be suspended, when Prop 23 would suspend only the AB 32 law. Proponents also objected to the use of the term “major polluters” in the title. The court amended the wording of the ballot label from “Suspends Air Pollution Control Laws Requiring Major Polluters to Report and Reduce Greenhouse Gas Emissions....” to “Suspends Implementation of Air Pollution Control Law (AB 32) Requiring Major Sources of Emissions to Report and Reduce Greenhouse Gas Emissions....” The wording of the Summary was amended accordingly. 

POTENTIAL FISCAL IMPACT OF PROPOSITION 23

The Legislative Analyst wrote that the suspension of AB 32 would have various economic impacts. Suspension of regulatory activities under AB 32 would mean businesses would avoid the costs required to comply, including the costs of investments in new energy technologies that they might otherwise be mandated to make. This could potentially lead to larger net profits and increased tax revenue for state and local governments. Suspension of the cap-and-trade regulations could result in lower energy costs for consumers. However, suspension of AB 32 could dampen additional investment in green technologies. The AB 32 Scoping Plan provides for the auction of at least some emission allowances initially, with this proportion increasing over time. The resulting state revenues could be in the billions of dollars annually. If Prop 23 suspends implementation of cap-and-trade, the state would forego these revenues.