An AB 32 Primer

An AB 32 Primer

Gary Gero
President, California Climate Action Registry (CCAR)

• AB 32 is California’s ground breaking “Global Warming Solutions Act that established mandates to reduce statewide greenhouse gas emissions (GHGs) back to 1990 levels by 2020, an estimated 30% reduction from forecasted emissions.
  
  
• The California Air Resources Board (CARB) has been charged with conducting a rulemaking process for implementing AB 32 starting in January 2012^[1] that “Ensure(s) that entities that have voluntarily reduced their greenhouse gas emissions prior to the implementation of this section receive appropriate credit for early voluntary reductions.” [AB 32, Sec. 38562(b)(3)]
  
  
• On January 1, 2008, sectors identified as significant GHG emitters (electricity producers, petroleum refiners, and cement processors) are required to start tracking 2008 emissions.
  
  
• “Early action” refers to regulatory measures that CARB may decide to impose prior to the mandatory effective date of January 1, 2012. While it sometimes also refers to actions that GHG emitters take prior to the statutory deadline for AB 32 implementation, these actions are more properly deemed “voluntary actions” (see "credit" below).
  
  
• “Credit” under AB 32 refers to recognition by CARB of voluntary actions that entities take to reduce their GHG emissions. This recognition is in the form of recognizing an entitity’s baseline inventory in the period preceding the voluntary actions. [AB 32, Sec. 38562(b)(3)] “Credit” in this instance does not refer to tradeable assets, which can only be created by “emissions offsets”.
  
  
• Since carbon “cap and trade” markets are strictly voluntary and unregulated at this time, the nature and characteristics of carbon offsets vary significantly at present, as agreed to between willing buyers and sellers (although offsets generated using credible, transparent, and rigorous protocols and that are verified by an independent third party are more likely to be recognized in both the marketplace and possibly in future regulatory trading schemes). The Air Resources Board is preparing to endorse the CCAR’s Forestry Project Protocol for generating voluntary offsets, thereby providing a "seal of approval" for offsets generated using this protocol.
  
  
• Energy efficiency does not currently qualify for tradeable voluntary emissions offsets in California, although several organizations are seeking to develop a project protocol for energy efficiency.
  
  
  • To qualify for greenhouse gas emission offsets, a reduction in GHG emissions must be deemed “real, permanent, measurable, verifiable, and additional”. “Additional” (similar to the concept of "surplus") means that the reduction in emissions reflect a deliberateness of purpose with regard to reducing GHG emissions and are clearly above and beyond "business as usual". That is, the GHG emission reduction activity would not have taken place in the absence of offsets. Since energy efficiency is mandated by policy and subsidized by Public Goods Charge funds, any GHG reductions achieved through energy efficiency in CA is unlikely to meet the criteria of “additionality”.
    
    
  • In addition, AB 32’s mandatory reporting rule as currently drafted only applies to direct emissions. For electricity, the direct emitter is the electricity producer. However, AB 32 implementation for the electricity sector has not yet been definitively decided^[2].
    
    
• AB 32 encouraged CARB to “incorporate the standards and protocols developed by the California Climate Action Registry …” [AB 32, Sec. 38530(b)(3)] While registering entity-wide inventories with CCAR does not create tradeable offsets, it can establish an entity’s baseline and demonstrate reductions from that baseline over time. The Air Resources Board is directed to consider these baselines when establishing its regulatory requirements.
  
  
  • “Registering” means conducting an inventory of emissions using established protocols and having that inventory verified by a qualified independent party.
    
    
  • The advantage of registering is to create a strong record of existing emissions from which progress can be measured, and “credit” can be earned for recognition of “voluntary early reductions” in GHG.