Integrating Environmental Justice into Climate Change Policies: AB32 and Cap-and-Trade

1. Source: David Woo Climate Change, Environmental Justice and Cap and TradeBeyond Adaptation October 31, 2008Yale FES Barbara Bamberger

2. Today’s Discussion • Environmental Justice (EJ) & Climate Change • Context of EJ and Global Warming Solutions Act (AB32) Legislation • Proposed Scoping Plan • Designing EJ into Cap and Trade

3. Environmental Justice and Climate Change • EJ Communities are effected: • Impacts to EJ communities as a result of climate change – Adaptation response • Impacts on EJ communities resulting from GHG reduction policies – Mitigation policies What are the implications to EJ communities from climate policy Who benefits? Who bears the cost?

4. Environmental Justice & Climate Change • Disproportionately impacted communities • Race, Ethnicity, low-income • Communities around Ports Sea level impacts, Rail yards, Shipyards, Goods Movement, Bulk Oil Unloading….Citing of Facilities • Urban – Power plants, refineries, shipyards, truck movement, rail yards • Rural – Agricultural bi-products, Biofuel plants • Access – health care and transit

5. EJ Definition • Federal: Exec Order 12898 (1994): • “the fair treatment of people of all races, income, and culture with respect to the development, implementation, and enforcement of environmental laws, regulations and policies.” • (EO12,898; Ca Government Code 65040.12 ( c ) and defined in statute by SB115, Chapter 690, Statutes 1999) ) • No person or group or people should shoulder a disproportionate share of the negative environmental impacts resulting from the execution of this country’s domestic and foreign policy programs.

6. The Making of AB32 • Global Warming Solutions Act (AB32) • Late 2005/2006 • Legislature – time to act • Governor – on board • Environmental NGOs – Co-sponsoring (NRDC, EDF) agnostic on C/T • EJ – concerns over C/T, holding support • Business – C/T

7. The Making of AB32 • AB32 “MUST” or “MAY” Include C/T • NGOs – held to ‘may’ due to EJ concerns • EJ – agreed to “May” with conditions, did not oppose bill, key language added to AB32 • Exec Order establishing “Market Advisory Committee” 2007 • February 2008 “EJ Declaration Against Cap/Trade”

8. AB32 EJ Language • NO Backsliding – existing emissions • NO Increases in co-pollutants locally • Ensure Co-Benefits (co-pollutants) to support public health and diversification of energy • Ensure NO Cumulative, Disparate Impacts (challenge for C/T analysis)

9. AB32 EJ Language • GHG regulation must: • NOT disproportionately impact low-income communities • Maximize additional environmental co-benefits and complement improvements in air quality • Complement efforts to achieve existing ambient air quality standards • Consider overall societal benefits including diversification of energy sources, economy, environment and public health

10. EJ Critique of Cap and Trade • Transformation to Low Carbon Economy • Too much risk to experiment, only 12 years to ‘get it right’ • Reductions first in EJ communities • Foregone benefits, Possible localized increases Offsets shift reductions elsewhere • Transparency in Trading • EIA, EIS, Community Right to Know, Participatory Justice • Existing Programs • Challenges to success: EU ETS, RECLAIM, RGGI

11. AB 32 Timeline 2007 2008 2009 2010 2011 2012 2020 Publish list of early actions Adopt Scoping Plan by 1/1/09 Adopt GHG reduction measures Reduce GHG emissions to 1990 levels Mandatory reporting & 1990 Baseline Launch Program

12. Scoping Plan • Reduce California’s GHG emissions to 1990 levels by 2020 • Protect and improve public health • Provide a model for regional, national and international programs • Grow the State’s economy and promote investment in green technology • Proposed Scoping Plan – October 2008 • Mix of strategies that combine market mechanisms, regulations, voluntary measures, and fees

13. Proposed Scoping Plan • Complementary measures • Direct Regulations: vehicle efficiency and low-carbon fuel standard, heavy-duty vehicle efficiency, high speed rail, refinery • CA Cap and Trade program linked to WCI • 33% renewable requirement on utilities • Sets a reduction goal for local governments • Fees: High GWP (refrigeration), public goods charge on water • Energy efficiency programs

14. California Cap-and-TradeReduction target 2020 Capped sector BAU: 512 MMTCO2E 1990: 365 MMTCO2E 147 MMTCO2E = Reduction target Direct measures: 112 MMTCO2E Cap-and-Trade: 35 MMTCO2E

15. Cap-and-Trade California cap-and-trade program caps emissions • industrial facilities (2012) • electricity (including imports) (2012) • commercial/residential fuel combustion (2015) • transportation fuels (2015) Begins in 2012 and declines over time to meet 2020 & 2050 targets Links to Western Climate Initiative to create regional market

16. Sector-Specific Measures CAPPED SECTORS • Transportation (Fuel Efficiency standard, LCFS, regional VMT targets) • Electricity (EEfficiency, 33% renewables, Solar Roofs and water heating) • Industry (Combustion sources, refineries, paper mills) UNCAPPED SECTORS • High Global Warming Potential Gases (New products and existing banks) • Forests (Preserve sequestration, biomass utilization) • Recycling & Waste (Landfill methane, high recycling/zero waste) • Agriculture (Methane capture at large dairies) • Industry (Fugitive emission sources)

17. Cap-and-Trade Definitions Cap: Total emissions for entire state or region Allowance: Permit to emit 1 ton CO2e per facility, based on total emissions, declines over time Compliance obligation: Requirement per facility based on total emissions (allowance + offset) Offset: A portion of total compliance obligation that can be reduced from non-capped sources. Western Climate: An alliance of 7 Western states and 4 Initiative Canadian provinces

18. Major Issues • Cap-and-Trade: Firm cap on 85 % of GHGs and cost-effective complementary measures. • Allocation: Will seek input from broad range of experts on how allowances should be distributed. Recommends: • Minimum of 10% auction in 2012 • Minimum of 25% auction in 2020 • 100% auction is a worthwhile goal • Offsets: At least half of the reductions must come from capped sources. All offsets must meet high quality standards. No geographic limits. • Use of Revenue: Many potential beneficial uses of revenue.

19. California Cap-and-TradeWhat is an Offset? • Quantification protocols would specify what reductions are real and additional for offsets to count • Examples: forests, manure management, waste management (landfill methane) • Safeguards to avoid regional and local health-based pollutants • Limited use per facility

20. Next steps: Retooling cap and trade design • Addressing EJ language in AB32 • Revenue stream generated by allowances • Co-pollutant and GHG Bifurcation (Stavins/Goulder) • Rethink cap and trade design itself and • Incorporate social elements into market mechanism • Design co-benefits into the architecture of cap and trade design • Provide economic incentives to reduce emissions in EJ communities into trading itself

21. Requires new thinking, new analysis of • cap and trade design measures: • Incorporates incentives for co-benefits utilizing economic tools • Create incentives for reductions in heavily-impacted communities • Addresses co-pollutant reductions, increases equity • Encourage reductions of GHG and associated health-based pollutants • Develop baseline data to track changes in cumulative emissions How to retool cap and trade design

22. Next steps: Retooling cap and trade design • Possible options: • Phase-in of trades amongst EJ communities • Discounting/price incentives for reductions in EJ communities • Limiting use of offsets in EJ communities • Restrict trading

23. Design Mechanisms for C/T • Next Steps: • Calling upon researchers to submit concepts on C/T Design, enforcement, transparency • Invitation will be released next week – submittals of abstracts due November 25th • Symposium in January/February 2009 • Cap and Trade Begins 2012