An Inconvenient State?

Environmental Finance

October 2006

California’s climate change legislation marks a dramatic step forward in US efforts to tackle greenhouse gas emissions. Douglas Smith considers its implications.

At the end of August, the California legislature approved a statute establishing an aggressive economy-wide cap on emissions of greenhouse gases (GHGs) for the state. governor Arnold Schwarzenegger, who agreed to Assembly Bill 32 (AB32) as it was passed by the legislature, is expected to sign the bill into law soon. The new statute will require reductions in GHG emissions to 1990 levels by 2020 – a 25% reduction against ‘business as usual.’

Given the sheer size of the California economy – it would rank sixth in the world among national economies – these emission reductions are significant. Moreover, the California initiative may encourage actions by other stats and regions, and could accelerate the debate in Washington DC, where the Bush administration remains dead set against mandatory carbon controls.

So what does AB32 require? The bill vests authority in the California Air Resources Board (CARB), an administrative agency, to develop and enforce regulations to meet the cap; the regulations must be in effect beginning in 2012, with restrictions tightening over time to reach the 2020 cap.

The bill directs the CARB to develop a “scoping plan” for its regulation by no later that 1 January 2009, and to promulgate the regulations by no later than 1 January 2011. The board’s programme must achieve “maximum technology feasibly and cost-effective” reductions to meet the 2020 limit. The cap applies to the state’s overall emissions – AB32 gives the CARB great discretion in allocating emission reduction obligations among different sources.

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