Introduction
On August 31, the California State Assembly passed the Global Warming Solutions Act of 2006 (AB 32) by a vote of 46-31. On August 30 the California Senate passed the Act 23-14, and California Governor Arnold Schwarzenegger has said he plans to sign it into law. The Act imposes a mandatory cap on greenhouse gas emissions (GHGs) in California and is the first of its kind in the United States. AB 32 was cosponsored by Assembly Speaker Fabian Nunez and Assembly member Fran Pavley.

The Act would set a statewide GHG emissions limit equivalent to reducing statewide GHG emissions levels to 1990 levels by 2020. This equates to a 25% reduction relative to business as usual levels. Industries would be required to begin making reductions on January 1, 2012. The Act would also require mandatory GHG emissions reporting.

The California Air Resources Board (ARB) is provided the authority to undertake the majority of the regulatory development and enforcement of the statewide emissions limit and mandatory reporting. However, the Governor's Climate Action Team is recognized by the Act as serving the overall function of statewide climate change planning.

Also, in the event of extraordinary circumstances, catastrophic events, or threat of significant economic harm, the Governor may adjust the applicable deadlines for individual regulations, or for the state in the aggregate. The adjustment period may not exceed one year unless the Governor makes an additional adjustment.

More specifically, the Act would do all of the following:

• require ARB to adopt regulations by January 1, 2008 to require the reporting and verification of statewide GHG emissions and to monitor and enforce compliance;


• require ARB to adopt a statewide GHG emissions limit by January 1, 2008 equivalent to GHG emissions levels in 1990 to be achieved by 2020;


• require ARB to adopt rules and regulations by January 1, 2011 to achieve the maximum technologically feasible and cost-effective GHG emission reductions;


• authorize ARB to adopt market-based compliance mechanisms;


• require ARB to monitor compliance with and enforce any rule, regulation, order, emission limitation, emissions reduction measure, or market-based compliance mechanism they adopted; and


• authorize ARB to adopt a schedule of fees to be paid by regulated sources of GHG emissions, as specified.

On or before January 1, 2008, ARB must adopt regulations to require the reporting and verification of statewide GHG emissions. The Act stipulates that the ARB regulations must do all of the following:

• Require the monitoring and annual reporting of GHG emissions beginning with the categories of sources that contribute the most to statewide emissions.
• Account for GHG emissions from all electricity consumed in the state, including transmission and distribution line losses from electricity generated within the state or imported from outside the state.
• Incorporate the standards and protocols developed by the California Climate Action Registry.
• Entities that voluntarily participated in the California Climate Action Registry prior to December 31, 2006 will not be required to significantly alter their reporting.
• Ensure rigorous and consistent accounting of emissions, and provide reporting tools and formats to ensure collection of necessary data.
• Ensure that GHG emission sources maintain comprehensive records of all reported GHG emissions.

The Act also directs ARB to:

1. periodically review and update its emission reporting requirements, as necessary, and


2. review existing and proposed international, federal, and state GHG emission reporting programs and make reasonable efforts to promote consistency among the programs and to streamline reporting requirements on GHG emission sources.

The Act directs ARB to determine what the statewide GHG emissions level was in 1990, and approve in a public hearing, a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020. This also must be completed by January 1, 2008.

This statewide GHG emissions limit will remain in effect unless otherwise amended or repealed. ARB is directed to make recommendations to the Governor and the Legislature on how to continue reductions of GHG emissions beyond 2020-but no date is provided for these recommendations.

On or before January 1, 2011, ARB must adopt rules and regulations to achieve the maximum technologically feasible and cost-effective GHG emission reductions from sources or categories of sources, to become operative beginning on January 1, 2012.

On or before June 30, 2007, ARB shall publish a list of discrete early action GHG emission reduction measures that can be implemented prior to the start of the program in 2012. On or before January 1, 2010, ARB shall adopt regulations to implement the measures identified on the list.

On or before January 1, 2009, ARB shall prepare and approve a scoping plan for achieving reductions in GHG emissions by 2020. The plan must identify and make recommendations on direct emission reduction measures, alternative compliance mechanisms, market-based compliance mechanisms, and potential monetary and nonmonetary incentives for sources and categories of sources that ARB finds are necessary or desirable. ARB must update its plan at least once every five years.

ARB must also identify opportunities for emission reductions measures from all verifiable and enforceable voluntary actions, including, but not limited to, carbon sequestration projects and best management practices.

In adopting regulations, ARB shall do all of the following:

• Design the regulations, including distribution of emissions allowances where appropriate, in a manner that is equitable, seeks to minimize costs and maximize the total benefits to California, and encourages early action to reduce GHG emissions.


• Ensure that activities undertaken to comply with the regulations do not disproportionately impact low-income communities.


• Ensure that entities that have voluntarily reduced their GHG emissions prior to the implementation of this section receive appropriate credit for early voluntary reductions.


• Ensure that activities undertaken pursuant to the regulations complement, and do not interfere with, efforts to achieve and maintain federal and state ambient air quality standards and to reduce toxic air contaminant emissions.
• Consider cost-effectiveness of these regulations.


• Consider overall societal benefits, including reductions in other air pollutants, diversification of energy sources, and other benefits to the economy, environment, and public health.


• Minimize the administrative burden of implementing and complying with these regulations.


• Minimize leakage.


• Consider the significance of the contribution of each source or category of sources to statewide emissions of GHGs.

ARB may adopt a regulation that establishes a system of market-based declining annual aggregate emission limits for sources or categories of sources that emit GHG emissions, applicable from January 1, 2012, to December 31, 2020. Any regulation adopted by ARB shall ensure all of the following:

• the GHG emission reductions achieved are real, permanent, quantifiable, verifiable, and enforceable by ARB.


• the reduction is in addition to any GHG emission reduction otherwise required by law or regulation, and any other GHG emission reduction that otherwise would occur.


• if applicable, the GHG emission reduction occurs over the same time period and is equivalent in amount to any direct emission reduction required pursuant to this division.

ARB shall consult with the Public Utilities Commission in the development of the regulations as they affect electricity and natural gas providers in order to minimize duplicative or inconsistent regulatory requirements.

Finally, ARB shall consult with other states, and the federal government, and other nations to identify the most effective strategies and methods to reduce GHGs, manage GHG control programs, and to facilitate the development of integrated and cost-effective regional, national, and international GHG reduction programs.

ARB may include the use of market-based compliance mechanisms to comply with the regulations. Prior to the inclusion of any market-based compliance mechanism must do all of the following:

1. consider the potential for direct, indirect, and cumulative emission impacts from these mechanisms, including localized impacts in communities that are already adversely impacted by air pollution;


2. design any market-based compliance mechanism to prevent any increase in the emissions of toxic air contaminants or criteria air pollutants; and


3. maximize additional environmental and economic benefits for California, as appropriate.

ARB shall adopt methodologies for the quantification of voluntary GHG emission reductions. ARB shall adopt regulations to verify and enforce any voluntary GHG emission reductions that are authorized by ARB for use to comply with GHG emission limits established by ARB. The adoption of methodologies is exempt from the rulemaking provisions of the Administrative Procedure Act.

California GHG Program for Cars
If the regulations adopted pursuant to Section 43018.5 (CA GHG Automobile Standards) do not remain in effect, ARB shall implement alternative regulations to control mobile sources of GHG emissions to achieve equivalent or greater reductions.

Environmental Justice Committee
By July 1, 2007, ARB shall convene an environmental justice advisory committee, of at least three members, to advise it in developing the scoping plan and any other pertinent matter in implementing this division. The advisory committee shall be comprised of representatives from communities in the state with the most significant exposure to air pollution, including, but not limited to, communities with minority populations or low-income populations, or both. ARB shall appoint the advisory committee members from nominations received from environmental justice organizations and community groups.

Economic and Technology Advancement Advisory Committee
ARB shall appoint an Economic and Technology Advancement Advisory Committee to advise ARB on activities that will facilitate investment in and implementation of technological research and development opportunities, including, but not limited to, identifying new technologies, research, demonstration projects, funding opportunities, developing state, national, and international partnerships and technology transfer opportunities, and identifying and assessing research and advanced technology investment and incentive opportunities that will assist in the reduction of greenhouse gas emissions. The committee may also advise ARB on state, regional, national, and international economic and technological developments related to GHG emission reductions.

Schedule of Fees
ARB may adopt by regulation a schedule of fees to be paid by the sources of GHG emissions regulated. The revenues collected pursuant to this section, shall be deposited into the Air Pollution Control Fund and are available upon appropriation, by the Legislature, for purposes of carrying out this division.