California Global Warming Solutions Act of 2006

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CA AB 32

Climate Change Draft Scoping Plan
California made history by passing AB 32, the Global Warming Solutions Act of 2006—a landmark commitment to cut global warming pollution 30 percent by 2020. Now, the California Air Resources Board (CARB) is drafting the Scoping Plan to implement AB 32. This detailed plan will determine the specific actions that California will take to achieve the pollution reductions we need. The Union of Concerned Scientists is calling on CARB to produce a strong plan that cleans up our biggest sources of global warming pollution: vehicles and electricity. The plan must include these three critical items:

A request to the California legislature to give CARB the authority to implement a vehicle feebates program.
A request to the California legislature to increase the state’s Renewable Portfolio Standard to 33 percent by 2020.
A commitment to strictly limit the use of offsets in any future cap and trade system or as part of other global warming policies.

The Scoping Plan must include a request to the California legislature to give CARB the authority to implement a vehicle feebates program.
Feebates: Making Cleaner Cars More Affordable
California can achieve substantial progress in reducing global warming pollution by establishing an innovative program to make cleaner cars and trucks more affordable. A “feebates” program does that by providing one-time rebates and one-time surcharges on the purchase of new cars based on each vehicle's emissions of global warming pollution. A feebates program is similar to legislation under consideration by the state legislature to create a California Clean Car Discount program.

California's Transportation Sector and Global Warming
Transportation is by far the largest source of global warming pollution in California, accounting for more than 40 percent of the state's heat-trapping emissions. There are more than 20 million passenger vehicles on the road in California, and more than 1.7 million new passenger cars and light-duty trucks are purchased each year. Even with existing vehicle regulations, the bulk of global warming pollution in California is expected to continue to come from cars and trucks.

If we fail to significantly reduce our emissions, global warming's impact on our health, economy, and environment will likely be devastating. Fortunately, the most severe consequences of global warming can be avoided if emissions are reduced in time. California can continue to lead the way toward effective global warming solutions by adopting cost-effective programs, such as a “feebates” program, that will not only reduce harmful pollution, but will also deliver important economic and environmental health benefits.

How Feebates Works
Feebates are a market-based solution that will provide one-time rebates on purchases of cleaner new vehicles, funded by one-time surcharges on new vehicles with higher global warming emissions. The program will affect new vehicle purchases only; used cars are not part of this program. The program is self-financing, with all the surcharges going to fund the rebates and administrative costs associated with the program. Emission reductions under this program are expected to be significant and larger than those that could be achieved merely through fees or tax credits alone. UCS engineers calculate that a Clean Car Discount program, in conjunction with California's global warming standards for vehicles, can reduce global warming pollution from the tailpipe of new vehicles by an additional 21 percent.

This program also acts as an indirect incentive for automakers to do a better job in making the cleaner cars that consumers throughout California want.

The maximum rebate or surcharge would be capped at $2,500, with the average rebate or surcharge likely to fall somewhere between $900 and $1,400. Many family-oriented vehicles, including a number of minivans and smaller SUVs, will continue to be available without a surcharge.

Consumer Choice and Public Support
Consumer Action, a national consumer education and advocacy organization based in California, supports the the concept of a feebates program because it is a "creative approach to vehicle emission reductions that protects consumer choice." Under the program, consumers will have the opportunity to buy a vehicle from among virtually all vehicle types, including SUVs, vans, and trucks that either receive a rebate or are not affected by the program.

Californians have demonstrated widespread and consistent enthusiasm for clean vehicle solutions, such as feebates, to reduce global warming pollution. According to a 2006 poll,¹ 82 percent of California voters support giving rebates for the purchase of clean vehicles and 62 percent support placing a one-time surcharge on high-polluting new vehicles. Overall, 60 percent of registered voters supported a feebates program in 2006, with an overwhelming majority from every region, income level, and political affiliation indicating support. A 2008 survey found that support had increased, with 65 percent of Californians in favor of a feebates program.²

¹ Fairbanks, Maslin, Maullin, and Associates poll, February 2006
² Mineta Transportation Institute, 2008

The AB 32 Scoping Plan must include a request to the California legislature to increase the state’s Renewable Portfolio Standard to 33 percent by 2020.
California needs to increase its use of clean, renewable sources of electricity. One vital tool to enable this to happen is increasing the state’s Renewable Portfolio Standard (RPS) percentage requirement to at least 33 percent by 2020. The current RPS statute requires regulated electric utilities to increase their use of wind, solar and other eligible renewable electricity sources by at least one percent per year of retail sales, reaching at least 20 percent by 2010. While municipal utilities are required to adopt their own RPS, they are not bound by the same statutory requirements and oversight as the investor-owned utilities.

A 33 percent Renewable Portfolio Standard will:

Result in 13 million metric tons of global warming emission reductions in 2020—equivalent to removing almost three million cars from the road, or enough to avoid 10 new large fossil fuel power plants.
Provide more than 13,000 megawatts of new renewable power—enough to meet the electricity needs of 8 million typical homes.
Stimulate clean technology investment and innovation and grow the ‘green jobs’ economy by sending a clear market signal that new renewables will be developed in our state.
Provide market certainty for developers, investors, and planners of renewables projects and transmission.
Diversify the state’s energy supply and help protect consumers from natural gas price volatility.
Help meet our greenhouse gas emissions cap under AB 32.
Promote long-term planning in the infrastructure needed to support high levels of renewable energy development.
Deliver air quality benefits in impacted communities by reducing future fossil fuel generation.
Clear the Air.

Roughly 22 percent of California’s global warming emissions result from electricity used throughout the state. Increasing the amount of electricity from clean, renewable sources would help address global warming by reducing these heat-trapping greenhouse gas emissions. Moreover, a strong Renewable Portfolio Standard will improve the air we breathe by shifting away from an over-reliance on fossil fuels toward cleaner sources that emit less air pollution.

The AB 32 Scoping Plan must include a commitment to strictly limit the use of offsets in any future cap and trade system or as part of other global warming policies.
CARB is considering whether to allow the state’s large global warming emitters to buy offsets to meet all or some of their emissions reduction obligations, instead of requiring them to make emissions cuts directly or through trading allowances with other emitters in capped sectors (if a cap and trade system is adopted).

CARB should limit the level of offsets used to comply with global warming regulations to a very small fraction of required emissions reductions. CARB should ensure that offsets occur within uncapped sectors in California or other regions that have adopted strong global warming caps.

Benefits of Limiting Offsets:

Clean technology development
Limited offsets will help to maintain a robust price of carbon. This in turn should increase the profitability of currently available low-carbon energy technologies and encourage the development of new clean technologies.

Not only will California benefit from this increased investment in green technology for the state’s highest-emitting sectors like electricity and transportation, but the entire world can also benefit as this clean technology is exported. Limiting offsets can thus help enable California businesses to capture a larger share of the rapidly growing global market for clean technologies.

The increased investment in emissions reductions efforts in the electricity and transportation sectors should also help lower the future cost of global warming solutions.

Economic Growth
AB 32 instructs CARB to design global warming emissions reduction measures in such a way as to maximize environmental and economic co-benefits for California. Recent economic models from the University of California at Berkeley suggest that allowing unlimited offsets in a California cap-and-trade program would have an economic cost because they would delay productive investments in more efficient state-based technologies that could save consumers and businesses money. The analysis also suggests that a cap-and-trade program that prohibits or limits the use of offsets increases economic growth in the state as compared with a program that allows unlimited offsets.

Limiting offsets will help ensure that capital will flow to investments in green energy and other global warming solutions technologies in California.

Co-benefits
While reducing global warming pollution has valuable benefits for our future climate, it may also provide many other important environmental co-benefits. If electricity providers, oil and gas companies, and automakers are required to directly reduce the global warming pollution they produce, Californians will reap the benefits of related decreases in conventional smog-forming and toxic air pollutants. Improved air quality will in turn lead to improved public health, lower health care costs, and improved worker productivity and student performance.

If California’s global warming emitters are allowed to keep polluting and simply buy credits for emissions reductions happening elsewhere in the world—in effect outsourcing their reductions—Californians will lose out on local air quality and other co-benefits, including the improved energy security that will follow from less reliance on imported oil and gas.

The California Climate Action Team estimates that in the process of implementing a package of state-based global warming emissions reduction policies that nearly reach the state’s 2020 target, California will save more than $6.5 billion by simultaneously reducing smog-forming and toxic air pollutants. The more global warming reductions we can make directly in California, the more we benefit from cleaner air.

Limiting offsets allow Californians to reap the benefits of decreases in smog-forming and toxic air pollutants that come with cuts in global warming emissions.

A Long-Term Climate Solution
Reaching the 2020 climate goal is only an interim step toward the state’s ultimate goal of reducing global warming pollution 80 percent below 1990 levels by 2050. In order to meet this longer-term goal, investments in clean energy and transportation infrastructure must be made as soon as possible. Limiting offsets will help keep California on the path toward realizing this long-term goal.