Posts Tagged ‘Climate Change’


On November 27, 2017, the Governor’s Office of Planning and Research (OPR) presented the California Natural Resources Agency with proposed amendments to the CEQA Guidelines. As Director Ken Alex noted in his transmittal letter, this is the most comprehensive update to the Guidelines since the late 1990s. Among other changes, OPR’s amendments affect the analysis of energy impacts, promote the use of vehicle miles traveled (VMT) as the primary metric for transportation impacts, and clarify Guidelines section 15126.2 to specify that an agency must analyze hazards that a project may risk exacerbating.

The amendments to the CEQA Guidelines have been shaped by several years of discussion and public comment. OPR began discussions with stakeholders in 2013 and released a preliminary discussion draft of the comprehensive changes to the Guidelines in August 2015. OPR received hundreds of comments on the proposed updates and has provided a document with Thematic Responses to Comments.

One of the most highly-anticipated and impactful changes is the switch from the level of service (LOS) to VMT as the primary metric in analysis of transportation impacts. These updates were required by Senate Bill 743, which directed OPR to develop alternative methods for measuring transportation impacts. Due to the complexity of these changes, OPR has provided a Technical Advisory on Evaluating Transportation Impacts in CEQA to assist public agencies.

Some highlights from the proposed updates include:

  1. Appendix G: adds new questions related to Energy, VMT, and Wildfire;
  2. Guidelines section 15064.3 (SB 743): establishes VMT as the primary metric for analyzing transportation impacts, with agencies having a two-year opt-in period to make the transition easier;
  3. Energy impacts: includes changes to Appendix G and makes clear that analysis must include energy use for all project phases and include transportation-related energy;
  4. Guidelines section 15126.2, subdivision (a): adds the phrase “or risks exacerbating” to implement the California Supreme Court’s holding in California Building Industry Association v. Bay Area Air Quality Management District (2015) 62 Cal.4th 369, requiring an EIR to analyze existing hazards that a project may make worse; and
  5. Guidelines section 15064.4: includes clarifications related to the analysis of greenhouse gas (GHG) emissions to reflect the Supreme Court’s decisions in Cleveland National Forest Foundation v. San Diego Association of Governments (2017) 3 Cal.5th 497 and Center for Biological Diversity v. Department of Fish & Wildlife (2015) 62 Cal.4th 204 (“Newhall Ranch”).

On January 25, 2018 the Natural Resources Agency initiated the formal rulemaking process. From the Agency: The Natural Resources Agency’s proposed updates to the Guidelines Implementing the California Environmental Quality Act are now available.  The proposed changes to the Guidelines and related rulemaking materials are available on the Agency’s website at http://resources.ca.gov/ceqa/.  Public hearings will be held in Los Angeles on March 14, 2018 and in Sacramento on March 15, 2018.  Written comments must be submitted by 5:00pm on March 15, 2018.  Hearing locations, instructions for submitting comments and related information regarding the rulemaking process is contained in the Notice of Proposed Rulemaking.

 

 

 

 

On November 11, 2017, the Fourth District, Division One in Cleveland National Forest Foundation v. San Diego Association of Governments (2017) 17 Cal.App.5th 413 (Cleveland II), resolved the remaining issues on remand from California Supreme Court’s decision earlier this year.

SANDAG certified a programmatic EIR for its 2050 Regional Transportation Plan/Sustainable Communities Strategy in 2011. Petitioners challenged that EIR, alleging multiple deficiencies under CEQA, including the EIR’s analysis of greenhouse gas (GHG) impacts, mitigation measures, alternatives, and impacts to air quality and agricultural land. The Court of Appeal held that the EIR failed to comply with CEQA in all identified respects.  The Supreme Court granted review on the sole issue of whether SANDAG was required to use the GHG emission reduction goals in Governor Schwarzenegger’s Executive Order S-3-05 as a threshold of significance. Finding for SANDAG, the Court left all other issues to be resolved on remand.

First, the Court of Appeal ruled that the case was not moot, although the 2011 EIR had been superseded by a new EIR certified in 2015, because the 2011 version had never been decertified and thus could be relied upon. The court also found that petitioners did not forfeit arguments from their original cross-appeal by not seeking a ruling on them. And, even if failing to raise the arguments was a basis for forfeiture, the rule is not automatic, and the court has discretion to resolve important legal issues, including compliance with CEQA.

Second, the court reiterated the Supreme Court’s holding, that SANDAG’s choice of GHG thresholds of significance was adequate for this EIR, but may not be sufficient going forward. Turning to SANDAG’s selection of GHG mitigation measures, the court found that SANDAG’s analysis was not supported by substantial evidence, because the measures selected were either ineffective (“assuring little to no concrete steps toward emissions reductions”) or infeasible and thus “illusory.”

Third, also under the substantial evidence standard of review, the court determined that the EIR failed to describe a reasonable range of alternatives that would plan for the region’s transportation needs, while lessening the plan’s impacts to climate change. The EIR was deficient because none of the alternatives would have reduced regional vehicles miles traveled (VMT). This deficiency was particularly inexplicable given that SANDAG’s Climate Action Strategy expressly calls for VMT reduction. The measures, policies, and strategies in the Climate Action Strategy could have formed an acceptable basis for identifying project alternatives in this EIR.

Fourth, the EIR’s description of the environmental baseline, description of adverse health impacts, and analysis of mitigation measures for air quality, improperly deferred analysis from the programmatic EIR to later environmental review, and were not based on substantial evidence.  Despite acknowledging potential impacts from particulate matter and toxic air contaminants on sensitive receptors (children, the elderly, and certain communities), the EIR did not provide a “reasoned estimate” of pollutant levels or the location and population of sensitive receptors. The EIR’s discussion of the project’s adverse health impacts was impermissibly generalized. The court explained that a programmatic EIR improperly defers mitigation measures when it does not formulate them or fails to specify the performance criteria to be met in the later environmental review. Because this issue was at least partially moot given the court’s conclusions regarding defects in the EIR’s air quality analysis, the court simply concurred with the petitioners’ contention that all but one of EIR’s mitigation measures had been improperly deferred.

The court made two rulings regarding impacts to agricultural land. In finding for the petitioners, the court held that SANDAG impermissibly relied on a methodology with “known data gaps” to describe the agricultural baseline, as the database did not contain records of agricultural parcels of less than 10 acres nor was there any record of agricultural land that was taken out of production in the last twenty years.  This resulted in unreliable estimates of both the baseline and impacts. However, under de novo review, the court found that the petitioners had failed to exhaust their remedies as to impacts on small farms and the EIR’s assumption that land converted to rural residential zoning would remain farmland. While the petitioners’ comment letter generally discussed impacts to agriculture, it was not sufficiently specific so as to “fairly apprise” SANDAG of their concerns.

Justice Benke made a detailed dissent. Under Benke’s view, the superseded 2011 EIR is “most likely moot” and in any event, that determination should have been left to the trial court on remand. This conclusion is strengthened, when, as here, the remaining issues concern factual contentions. As a court of review, their record is insufficient to resolve those issues.

Mission Bay Alliance v. Office of Community Investment and Infrastructure (2016) 6 Cal.App.5th 160

The First District Court of Appeal upheld the city’s approval of a new arena in the Mission Bay neighborhood of San Francisco. The arena will serve as the home of the Golden State Warriors’ basketball team. The Court held the environmental impact report certified by the city was adequate, finding among other things that (1) the city had properly “tiered” the EIR off an earlier program EIR covering redevelopment of Mission Bay, (2) the city could rely on the project’s consistency with the city’s adopted climate action plan, and (3) the city could rely on implementation of various transit improvements to address traffic traveling to and from the arena. Whit Manley argued the case for the Warriors.

In January 2017, the California Air Resources Board (CARB) released the Draft 2017 Climate Change Scoping Plan Update. The Proposed Scoping Plan identifies the overall strategy to reduce greenhouse gas (GHG) emissions by 40 percent below 1990 levels by 2030—the target codified in SB 32. The strategy requires contributions from all economic sectors and includes a combination of extending key reduction programs and new actions that would prioritize direct emissions reductions.

The Proposed Scoping Plan continues the cap-and-trade program through 2030. The analysis in the plan finds that cap-and-trade is the lowest cost, most efficient policy approach to meeting the 2030 goal. According to the analysis, even if other measures fall short, cap-and-trade provides certainty that California will meet the 2030 target emissions reduction. The agency is also evaluating potential changes to the cap-and-trade program to “support greater direct GHG emissions reductions.” Under evaluation are measures which include reducing the offset usage limit, redesigning the allocation strategy to support increased technology and energy investments to reduce GHG emissions, and reducing allocation for entities with criteria or toxic emissions that exceed a predetermined baseline.

Other key components of the overall approach include: a 20 percent reduction in GHG emissions from the refinery sector; continued investment in renewable energy; efforts to reduce emissions of short-lived climate pollutants; and increased focus on zero- and near-zero emission vehicle technologies.

CARB is currently seeking comments on the Proposed Scoping Plan. The comment period was recently extended until April 10, 2017. A public board meeting on the Final Proposed Scoping Plan is scheduled for June 22-23, 2017.

Governor Brown recently signed Senate Bill 32 and Assembly Bill 197 continuing California’s leadership on climate change. SB 32 and AB 197 were inextricably linked—each bill requiring the passage of the other.

SB 32 significantly increases the state’s targets for greenhouse gas emissions reductions. It calls for a reduction in greenhouse gas emissions of at least 40 percent below the statewide limit by 2030.

AB 197 requires CARB to prioritize direct emission reductions and consider social costs when adopting regulations to reduce greenhouse gas emissions as a means to protect the state’s “most impacted and disadvantaged communities.” Social costs are defined as “an estimate of the economic damages, including, but not limited to, changes in net agricultural productivity; impacts to public health; climate adaptation impacts, such as property damages from increased flood risk; and changes in energy system costs, per metric ton of greenhouse gas emission per year.” The legislation requires CARB to prioritize those rules and regulations that would result in direct emissions reductions at large stationary and mobile sources. AB 197 also creates oversight of future CARB greenhouse gas emissions reductions strategies by adding two legislators to the state board as ex-officio nonvoting members and creating a joint legislative committee that will make recommendations to the legislature concerning the state’s programs, policies, and investments related to climate change.

 

The Council on Environmental Quality (“CEQ”) released final guidance providing a framework for federal agencies to quantify greenhouse gas (“GHG”) emissions for projects subject to the National Environmental Policy Act (“NEPA”). When addressing climate change, agencies should consider both the potential effects of a proposed action on climate change as well as the effects of climate change on a proposed action and its environmental impacts.

CEQ recommends using projected GHG emissions as a proxy to quantify impacts—along with providing a qualitative discussion of the relationship between GHG emissions and climate change—to assist federal agencies in making “a reasoned choice among alternatives and mitigation actions.” Both direct and indirect effects should be analyzed in comparison to the no-action alternative—amounting to cumulative effects analysis. The guidance expressly provides that a separate cumulative effects analysis for GHG emissions is not necessary. The preference is for a quantitative analysis of GHG emissions based on available tools and information. Where agencies do not quantify projected GHG emissions, a qualitative analysis should be included along with an explanation of why quantification was not reasonably available. Simply stating that the proposed project represents only a small fraction of GHG emissions globally is insufficient. Finally, proposed mitigation of GHG emissions should be evaluated to ensure they are “verifiable, durable, enforceable, and will be implemented.”

In analyzing how climate change will affect a proposed project, CEQ does not expect agencies to undertake original research or analysis; rather the expectation is that agencies will rely on existing, relevant scientific literature, incorporating such research by reference into an environmental document. Accounting for climate change during the planning process allows agencies to consider a project’s vulnerability to climate change, in addition to particular impacts of climate change on vulnerable communities, allowing agencies to explore opportunities to increase a project’s resilience to climate change as part of the initial design.

Overall, CEQ would have agencies treat the analysis of GHG emissions and climate change like any other environmental impact under NEPA. The guidance acknowledges that the “rule of reason” and proportionality play a role in determining the extent of analysis, which should be commensurate with the quantity of projected GHG emissions “as it would not be consistent with the rule of reason to require the preparation of an EIS for every federal action that may cause GHG emissions regardless of the magnitude of those emissions.”

This guidance does not carry the force and effect of law. Nevertheless, it does provide a common approach to be used by federal agencies in analyzing climate change, and is bound to be persuasive in determining whether an EIS adequately addresses climate change impacts.

On April 29, 2015, Governor Brown issued Executive Order B-30-15 setting an interim target to cut California’s greenhouse gas emissions to 40 percent below 1990 levels by 2030. According to the Governor’s announcement, California is on track to meet or exceed its current target of reducing GHG emissions to 1990 levels by 2020, as required by the California Global Warming Solutions Act of 2006 (AB 32). The new goal of reducing emissions to 40 percent below 1990 levels by 2030 is intended to help the state achieve its ultimate goal of reducing emissions 90 percent under 1990 levels by 2050, a target established by Governor Schwarzenegger’s Executive Order S-3-05. The new interim target is consistent with the recommendation of the California Air Resources Board, in its First Update to the Climate Change Scoping Plan (May 2014).

The new executive order requires the Air Resources Board to update the Climate Change Scoping Plan to express the 2030 target in terms of million metric tons of carbon dioxide equivalent. All state agencies with jurisdiction over GHG emission sources must implement measures to achieve the 2030 and 2050 targets.

In addition, the Natural Resources Agency is to update the state’s climate adaptation strategy, Safeguarding California,  every three years and ensure that its provisions are fully implemented. The Safeguarding California plan will help California adapt to climate change by identifying vulnerabilities by sector (e.g., vulnerabilities to the water supply, the energy grid, the transportation network, etc.); outlining primary risks of these vulnerabilities to people, property, and natural resources; specifying priority actions needed to reduce the risks; and identifying lead agencies to spearhead the adaption efforts for each sector. Each sector will then be responsible to prepare an implementation plan by September of this year outlining adaptation actions and report back to the Natural Resources Agency by June 2016 on the actions taken.

Brown’s executive order also requires state agencies to take climate change into account of their planning and investment decisions, and employ full life-cycle cost accounting to evaluate investments and alternatives. The order establishes principles that state agencies must use in making planning and investing decisions. These principles include: prioritizing actions that both help the state prepare for climate change and reduce GHG emissions; implementing flexible and adaptive approaches, where possible, to prepare for uncertain climate change impacts; protecting the state’s most vulnerable populations; and prioritizing natural infrastructure solutions.

Executive Order B-30-15 follows relatively swiftly on the heels of Executive Order B-29-15, issued earlier this month, which imposes a 25-percent mandatory water reduction in 2015 over 2013 usage for urban areas, commercial, industrial, and institutional properties, along with other restrictions.

Division One of the Fourth District Court of Appeal granted Sierra Club’s petition to enforce a climate change mitigation measure adopted by the County of San Diego. The court affirmed the decision below. Sierra Club v. County of San Diego (2014) 231 Cal.App.4th 1152.

Mitigation measure CC-1.2, which was included in a program EIR for the County’s 2011 general plan update, committed the County to preparing a climate change action plan (CAP) with more detailed greenhouse gas (GHG) emissions reduction targets and deadlines, and comprehensive and enforceable GHG emissions reductions measures that would achieve specified GHG reductions by 2020. Sierra Club alleged that, contrary to this commitment, the County prepared a CAP that expressly did not ensure reductions. The County also developed associated guidelines for determining significance thresholds. Sierra Club alleged that CEQA review of the CAP and thresholds was performed after the fact, using an addendum to the EIR, which did not address the concept of tiering or the County’s failure to comply with the express language in CC-1.2, and contained no meaningful analysis of the impacts of the CAP and thresholds.

The court first rejected the County’s contention that Sierra Club’s mitigation-related claim was barred by the statute of limitations because it could have been brought with the challenge to the general plan update. The court found that Sierra Club did not challenge the validity of the general plan update EIR or the enforceability of the mitigation measures provided therein, but instead challenged the County’s separate approval of the CAP.

Next, the court held that with respect to the CAP as mitigation for a plan-level document, the County failed to proceed in a manner required by law by going forward with the CAP and thresholds project in spite of the express language of CC-1.2 that the CAP include more detailed GHG emissions reduction targets and deadlines. The County described the CAP’s strategies as recommendations, rather than requirements. It also relied on unfunded programs to support the required emissions reductions. The CAP’s transportation section did not include an analysis of the County’s own operations and the record contained contradictions surrounding programs over which the County had exclusive control. The County did not bind itself to implementation of its programs, and did not cite to any evidence supporting its belief that people would participate in the programs to the extent necessary to achieve the asserted reductions. In fact, the CAP expressly stated that it did not ensure reductions. Quantifying GHG reduction measures, the court stated, was not synonymous with implementing them.

The County also made the erroneous assumption the CAP and thresholds project was the same project as the general plan update, despite the fact that no component of the CAP or thresholds had been created at the time of the general plan update. Thus, the general plan update EIR did not analyze the CAP as a plan-level document that itself would facilitate further development. As a result, the County failed to render a written determination of environmental impact before approving the CAP and thresholds. By failing to consider the environmental impacts of the CAP and thresholds, the court noted, the County effectively abdicated its responsibility to meaningfully consider public comments and incorporate mitigating conditions. The project acknowledged it did not comply with Executive Order No. S-3-05, and would therefore have significant impacts that had not previously been addressed in the general plan update EIR.

The Governor’s Office of Planning and Research released a preliminary discussion draft of revisions to the CEQA Guidelines implementing Senate Bill 743 on August 6, 2014. Currently, transportation impacts are typically evaluated based on the delay in traffic flows that vehicles experience at intersections and roadway segments. Delay is measured by the “level of service” or LOS. Mitigation for these impacts often takes the form of traffic improvements focused on increasing roadway capacity such as adding lanes. Recognizing that this practice may actually be counter to public policy by encouraging auto use and emissions, and discouraging alternative forms of transportation, OPR has proposed changes to how transportation impacts are evaluated. Specifically, OPR’s draft revisions to the CEQA Guidelines propose analysis of vehicle miles traveled (VMT), in lieu of LOS, for evaluating transportation impacts.

Most notably, OPR proposes to add Section 15064.3, a new section of the CEQA Guidelines that addresses new methods of measuring transportation impacts. Because Section 15064.3 would be added to Article 5 of the CEQA Guidelines, which relates to the “preliminary review of projects and conduct of initial study,” the new section would apply in the context of negative declarations and EIRs. To conform to the proposed Section 15064.3, OPR has also proposed amendments to the questions in Section XVI, Transportation and Traffic, of Appendix G.

Draft Section 15064.3 includes four subdivisions. Subdivision (a) discusses the purpose of the new section, stating that the primary considerations of a project’s transportation impacts are the amount and distance of vehicle travel associated with a project. Subdivision (a) expressly states that “[a] project’s effect on automobile delay does not constitute a significant environmental impact.” The draft section does not modify CEQA’s general rules regarding the determination of a project’s significant impacts, including the need to consider substantial evidence of a project’s environmental impacts.

Subdivision (b) specifies the criteria for determining the significance of transportation impacts. As stated in subdivision (b), VMT is “generally” the best measurement of transportation impacts, thus allowing agencies room to tailor their analyses to include other measures if appropriate. The draft section describes factors that might indicate whether a project’s VMT is less than significant or not, and gives examples of projects that might have less-than-significant impacts with respect to VMT, such as projects that would result in decreased VMT. Subdivision (b) recognizes that not all transportation projects will induce vehicle travel, such as projects improving transit operations, and thus would not result in a significant transportation impact. In addition to a project’s impact on VMT, “a lead agency may also consider localized effects of project-related transportation on safety.” Finally, subdivision (b) states that a lead agency’s evaluation of a project’s VMT “is subject to a rule of reason,” but also states that “a lead agency generally should not confine its evaluation to its own political boundaries.”

Subdivision (c) refers to proposed amendments in Appendix F, which addresses energy impacts. The proposed amendments to Appendix F acknowledge that VMT may be relevant to the analysis and mitigation of energy impacts. The proposed amendments to Appendix F include examples of mitigation measures and alternatives that may reduce VMT. Examples include improving the jobs/housing balance and improving access to transit. Subdivision (c) clarifies that the proposed revisions in the CEQA Guidelines and Appendix F do not limit an agency’s ability to condition a project pursuant to other laws. For example, agencies may continue to require projects to meet LOS designations set out in applicable general plans or zoning codes. Nor do the proposed revisions prevent an agency from enforcing previously adopted mitigation measures.

Finally, subdivision (d) proposes a phased approach to implementing Section 15064.3. OPR proposes that Section 15064.3 shall apply prospectively to new projects that have not started environmental review. Section 15064.3 shall apply immediately upon the filing of Section 15064.3 with the Secretary of State. After January 1, 2016, Section 15064.3 shall apply statewide.

Under the second part of OPR’s proposed revisions, OPR proposes amendments to Appendix F, which discusses the evaluation of energy impacts under CEQA noted above.

The draft guidelines can be viewed at:

http://opr.ca.gov/docs/Final_Preliminary_Discussion_Draft_of_Updates_Implementing_SB_743_080614.pdf

OPR is requesting that comments be submitted by October 10, 2014.

Air Resources Board Releases Proposed AB 32 Scoping Plan

February 13th, 2014 by Chris Stiles

On February 10, 2014, the California Air Resources Board released the proposed first update to the AB 32 Scoping Plan. The Scoping Plan is a key component of AB 32. It describes the strategies California will implement to reduce greenhouse gases to achieve the goal of reducing emissions to 1990 levels by 2020. The Scoping Plan was first considered by ARB in 2008 and, pursuant to AB 32, must be updated every five years.

The initial AB 32 Scoping Plan contains the main strategies used by California to reduce the greenhouse gases that cause climate change. The initial Scoping Plan has a range of GHG reduction actions which include direct regulations, alternative compliance mechanisms, monetary and non-monetary incentives, voluntary actions, market-based mechanisms such as a cap-and-trade system, and an AB 32 program implementation fee regulation to fund the program.

The proposed update highlights California’s progress toward meeting the near-term 2020 GHG emission reduction goals and builds on the initial Scoping Plan with new strategies and recommendations. It defines ARB’s climate change priorities for the next five years and sets the groundwork to reach California’s long-term climate goals, including an 80 percent reduction in GHG emissions by 2050. The new actions and strategies are intended to move the state farther along the path to a low-carbon, sustainable future.

The proposed update identifies eight key sectors for ongoing action: (1) energy; (2) transportation, fuels, land use and infrastructure; (3) agriculture; (4) water; (5) waste management; (6) natural lands (7) short-lived climate pollutants (such as methane and black carbon); and (8) green buildings. It explains that each of these sectors must play a role in supporting the statewide effort to continue reducing emissions. As steps are taken to develop a statewide target, sector targets will also be developed that reflect the opportunities for reductions that can be achieved through existing and new actions, policies, regulations and investments.

According to ARB’s press release, the proposed update incorporates the latest scientific consensus which indicates the need for accelerated emissions reductions in the coming decades to achieve climate stabilization.

The proposed update includes input from a range of key state agencies. It is also the result of extensive public and stakeholder processes designed to ensure that California’s greenhouse gas and pollution reduction efforts continue to improve public health and drive development of a more sustainable economy.

ARB is soliciting additional input before it considers the final version the update.  ARB will hold a public informational presentation on the proposed update at its February 20, 2014, meeting, that will include additional opportunities for stakeholder feedback and public input. ARB plans to hold a Board hearing in late-Spring 2014 to formally consider the Final Scoping Plan Update and environmental analysis.

The proposed Scoping Plan Update is available on the ARB website at:  http://www.arb.ca.gov/cc/scopingplan/2013_update/draft_proposed_first_update.pdf

California Releases Draft Climate Change Preparation Plan

December 12th, 2013 by Gwynne Hunter

On December 10, 2013, Governor Brown’s administration released a draft of its climate change adaption strategy, the “Safeguarding California Plan.” The plan addresses the state’s preparedness for the effects of extreme weather, rising sea levels, shifting snowpack, and other climate-related concerns. It outlines risk management options needed in sectors such as public health, energy, agriculture, and water.

The plan lists fires, floods, severe storms, and heat waves as some of the weather events California must be prepared to withstand, as those events will only become more frequent and dangerous as global temperatures rise. To combat these events, according to the plan, we must increase habitat resilience, strengthen the emergency response system, and improve coordination between local, state, and federal governments and private entities.

The plan focuses on sustainable strategies, such as local water sourcing, localized smart grids, and long-term mitigation funding, which will serve as the foundation for a clean energy economy in the state. The plan also calls for a reduced carbon footprint going forward.

The plan is an update to the 2009 California Climate Adaptation Strategy.

The Air Resources Board (ARB) has announced that California and the Quebec province are scheduled to link their cap-and-trade programs on January 1, 2014.

Quebec recently held its first auction for cap-and-trade allowances. ARB Chairman Mary Nichols praised the Canadian province for its hard work developing a cap-and-trade program and bringing about the successful auction. She stated that linking the regions’ programs will “show our respective nations, and the world, how states and provinces can work together to reduce greenhouse gases and fight climate change.”

A joint auction is expected later in 2014.

On November 13, 2013, the California Air Resources Board (ARB) announced that it had approved forest carbon offsets under the cap-and-trade program’s Forest Offset Protocol.

The protocol is designed to address the forest sector’s unique capacity to capture and store carbon dioxide. Whether forests function as net source of carbon dioxide emissions or as a net sink depends on their management as well as natural events. Sequestered carbon stays in the trees, plants, and soil for a long time, which slows the accumulation of greenhouse gases in the atmosphere and ocean. Thus, with sustainable management and protection, forests can play a significant role in addressing global climate change.

Under the forestry protocol, ARB provides offset credits for certain “Forest Projects.” These offsets may be used to comply with the cap-and-trade program. A Forest Project is a planned set of activities designed to increase removal of carbon dioxide from the atmosphere (“removal enhancement”) or reduce or prevent emissions of carbon dioxide (“emission reductions”) by increasing or conserving forest carbon stocks. To qualify for carbon offset credits, the projects must reduce greenhouse gas emissions or enhance greenhouse gas removal beyond any reductions or removals required by law or that would occur under business as usual. The forestry protocol provides methods for quantifying the net climate benefits of activities that sequester carbon on forest land.

Forest Projects eligible for offsets include reforestation, improved forest management, and avoided conversion. Offset projects using this protocol can be credited for up to 25 years after the project commences.

On November 14, 2013, Judge Timothy Frawley of the Sacramento Superior Court rejected two industry challenges to California’s cap-and-trade program.

The Air Resources Board adopted regulations in 2011 to implement AB 32, the Global Warming Solutions Act. The 2006 Act authorized ARB to implement various mechanisms, including a market-based mechanism, such as a cap-and-trade program, to reduce the state’s GHG emissions. The cap-and-trade program is based on an initial “cap” on the total amount of GHG emissions that can be released by regulated sources. That cap is lowered over time.

Under the program, regulated entities must get a permit (referred to as an “allowance”) for every ton of GHG emissions they emit. The allowances will be distributed, under ARB’s regulations, through quarterly auctions for emissions, which will each consist of one round of sealed bidding. Allowances may subsequently be banked, or bought and sold on a new auction-based carbon market. Sale proceeds will be deposited into a special fund and available for uses designated in AB 32. The Legislative Analyst’s Office estimates that auctions will raise as much as $12 to $70 billion over the life of the program for the State.

The California Chamber of Commerce and the Morning Star Packing Company both challenged the cap-and-trade program in related lawsuits. Petitioners made two main claims: (1) the cap-and-trade provisions of ARB’s regulations are invalid because the Legislature never authorized ARB to raise billions of dollars by auctioning allowances, and thus cap-and-trade exceeds ARB’s delegated scope of authority, and (2) the charges for emissions allowances constitute illegal taxes adopted in violation of Proposition 13, which requires a two-thirds vote in the Legislature to pass a tax increase.

On the first issue, the court concluded that AB 32 specifically delegated to ARB the discretion to adopt a cap-and-trade program and to design a system of emissions reductions that meets the statutory goals. Even without the express delegation of authority, the court concluded that ARB would have had to make the inevitable choice as how to allocate the allowances. The court also pointed to post-AB 32 legislation, which reflected a legislative understanding that AB 32 permitted the sale of allowances.

As to the second issue, after acknowledging the question was a close one, the court declined to find the money collected by the auction is a tax. Instead, the court concluded the proceeds are more like regulatory fees. Ultimately, the court was persuaded by the fact that the primary purpose of the fees is regulation, not revenue generation. Furthermore, the court found that Prop. 13’s goal of providing effective tax relief was not subverted by shifting the costs of environmental protection to those who seek to impact natural resources. The sale of allowances helps to achieve AB 32’s regulatory goals by gradually increasing the cost of compliance, thereby creating a financial incentive to reduce emissions.