Overview of California AB32 Regulations

Transcription

1 Overview of California AB32 Regulations Business Council for Sustainable Energy Seminar Washington, DC Scott Tomashefsky Northern California Power Agency January 6, 2011

2 NCPA Overview California Joint Powers Agency 15 members and 2 associate members serving 750,000 residents in communities throughout Northern California. Builds and operates jointly owned power plants and operates a power pool for members. Represents members before legislative and regulatory bodies. Established in

3 AB32 Implementation - From Concept to Complicated 2006 Assembly Bill SB375 Local Govt Stakeholders Scoping Plan Advisory Groups: Environmental Justice Econ & Tech Adv Committee Market Advisory Committee Mandatory Cap-&-Trade Regional Reporting Rulemaking Coordinatio n Program Starts January 1, 2012 Program Design & Implementation

4 Defining California s GHG Reduction Goal 174 MMT CO 2 e 427 million metric tons of GHG in 2020, equal to 1990 levels 2050 reduction goal of 80% would require major technological breakthroughs Source: California Air Resources Board. 4

5 AB32 is Much More than Cap-and-Trade Tailpipe Emissions (27.7 MM Metric Tons) Low Carbon Fuel Standard (16 MM Metric Tons) Regional Transportation Targets (5 MM Metric Tons) Advanced Clean Cars (Feb 2011) (5.1 MM Metric Tons) Renewable Portfolio Standard (21.3 MM Metric Tons) Energy Efficiency Measures (15.2 MM Metric Tons) 69 different regulatory actions designed to account for 174 million metric tons of GHG reductions by 2020 CARB claims its actions have already accounted for 60% of 2020 greenhouse gas reduction goal Cap-and-trade is one component of program Cap-and-Trade (34.4 MM Metric Tons) 5

6 Status of AB32 Implementation Proposition 23 defeated in November 2010 election AB32 moves forward More than a dozen regulations have already been adopted since CARB Scoping Plan was approved in 2008 Cap-and-trade regulations adopted last month Other state and local agencies will also be key to the effective implementation of program 6

7 CARB s Cap-and-Trade Regulations CARB adopted cap-and-trade regulations on 12/16/10 3,000 pages, 200 pages of regulation language Key components Nine year program ( only) Equitable allowance distribution across sectors Triennial compliance periods (with 30% minimum surrendered annually Limited reliance on auction Significant cost containment mechanisms Recognition for early and voluntary action Stiff penalties for non-compliance (4 to 1) Limited number of offsets available Includes framework to link to regional/federal programs An average of 4% of allowances go into strategic reserve each year Interutility allowance allocation methodology progressing 7

8 Understanding Cap-and-Trade Impacts Cap declines 15% from % per year Emissions from fuel combustion included in program beginning in 2015 Source: California Air Resources Board 8

9 Cap-and-Trade Who Is a Covered Entity? Facility Operators 1 st Deliverers of Electricity Suppliers of Natural Gas Other Suppliers Minimum Annual Threshold: 25,000 metric tons of CO 2 equivalent 9

10 Cap-and-Trade Other Participants Opt-in Covered Entity Organization that does not meet the GHG emission threshold for inclusion in the capand-trade program but wishes to participate anyway - Would potentially be eligible for free distribution of allowances Voluntarily Associated Entity Organizations with no compliance obligation that are primarily interested in purchasing and retiring allowances 10

11 Cap-and-Trade Within the Electricity Sector Electricity Sector Utility Importing Power Generation In California (Utility, Independent Energy) Marketer Bringing Power to California Cogeneration/Self-Generation Entities Opting into Program 90% of sector allowances freely distributed to distribution utilities Geothermal/Hydropower/Solar exempt from program 11

12 Distributing Allowances in the Electricity Sector Place in Limited Use Holding Account (POU Option) Place in Compliance Account Transfer to Auction Surrender Allowances to Meet Obligation Purchase allowances to cover obligation Receive proceeds from sale of allowances freely distributed Funds used for AB32 purposes at local level Electrical distribution utilities get allowances for free but do not necessarily have the obligation to surrender allowances 12

13 The Importance of Stakeholder Relationships Joint Utility Group Guidance Areas Allowance Distribution Auction Design (Structure and Market Protections) Use of Allowance Value 13

14 Distributing Allowances in the Electricity Sector A Brokered Solution No additional burden on consumers Every utility gets enough allowances distributed for free to cover expected GHG burden Added costs of AB32 are already accounted for in terms of required energy efficiency and renewable resource investments Recognize early actions to reduce GHG emissions Additional allowances freely distributed to account for investments above and beyond 20% Californiaeligible renewables for the time period Energy efficiency also recognized positively 14

15 Next Steps Implementation details being developed Numerous public workshops expected Updated cap-and-trade regulations will be released around mid-year Final language must be approved by California s Office of Administrative Law before rules become effective Many outstanding details still to address, Policies surrounding cost containment, design of auction market, how to best link with other regional programs 15

16 Questions? 16