The California Legislative Analyst’s Office (LAO) criticized the California Air Resources Board’s (CARB) recent and most sweeping revision of its Scoping Plan (Plan) to achieve legislatively mandated greenhouse gas (GHG) reductions. Our update on CARB’s adoption of Scoping Plan 2022 may be found here. The LAO concludes that CARB’s failure to specify policy options, alternatives and cost-benefit analyses for reaching critical milestone reduction targets leaves the Plan fatally lacking.
State law requires that by 2030 California reduce GHG emissions by 40 percent relative to 1990 levels. CARB is charged with developing, implementing and updating a plan to achieve this objective, and the LAO is required to provide an independent assessment of each plan, including whether the plan is likely to result in the required emissions reductions by 2030. CARB purports that implementing the new Plan will result in a 48 percent reduction in emissions by 2030, exceeding the 40 percent requirement. The LAO disagrees, concluding that the Plan offers no new policies to help achieve the state’s target. Instead, the Plan relies on three far-reaching, unjustified and highly optimistic “assumptions” that California’s population and business sector will significantly change their behavior in coming years and that these changes will ensure the state achieves the 48 percent reduction. According to the LAO, the assumptions are:
- Vehicle Miles Traveled (VMT). The plan assumes a 25 percent reduction in per capita VMT by 2030. In contrast, CARB assumes continuing with current policies would lead to a 4 percent reduction in VMT by 2045.
- Carbon Capture and Sequestration (CCS). The plan assumes CCS will be installed on 70 percent of refineries by 2030. Under current policy, CARB assumes no CCS will be installed on refinery operations.
- Building Electrification. The plan assumes 80 percent of the sales of new heating, ventilation, air-conditioning and water heater equipment will be electric by 2030, in both residential and commercial buildings. Under current policy, CARB assumes 15 percent of equipment bought will be electric.
The LAO also takes issue with the Plan’s failure to address the status of cap and trade, its future role in accomplishing the 2030 reduction mandate (whether 40 percent or 48 percent) and how the quantity of already amassed emission allowances would hinder, if at all, realization of those targets. Specifically, the LAO calls on the Legislature to “consider changes to the cap‑and‑trade program to address concerns about program stringency. Potential modification options include: reducing the supply of allowances issued in future years, limiting the use of offsets (credits generated from GHG reductions taken by entities not covered by cap‑and‑trade), and extending the program beyond 2030.”
California’s cap-and-trade program is world renowned but has recently come under vigorous scrutiny for its failure to achieve the emission reduction benchmarks necessary to accomplish the state’s statutory goals. At hearings focused on potential revisions to the cap-and-trade system in 2021, some legislators called for a strict accounting of outstanding allowances amassed by existing emitters and the price at auctions for such allowances. Opponents argued that the storehouse of already issued allowances would permit existing emitters to continue conducting business as usual sufficient to thwart reduction imperatives necessary to accomplish the statutory reductions CARB is tasked with realizing.
CARB has resisted calls for immediate scrutiny and revision of cap and trade until after adoption of the Plan revisions.
While not contesting the LAO’s critique of the latest Plan’s lack of detail and implementation direction, critics of the LAO fault these recommendations for ignoring timing imperatives and political realities in Sacramento. Such critics contend that if the LAO is primarily concerned about the looming 2030 deadline, one of the worst approaches is to send the entire program into a legislative bureaucracy that could delay study for a year or more, postponing responsible agencies’ consideration and adoption of regulations (a time-consuming process unto itself) until after such a report and revision of the Plan. They also assert that the LAO cannot turn a blind eye to the well-known political price sensitivity of the cap-and-trade market.
For the regulated community, regulatory mandates in all sectors to accomplish the Plan’s bold objectives are a certainty, regardless of regulatory and legislative quibbling. The community needs policy specifics to be able to plan and thereby help the state achieve its reduction target. The LAO is correct in calling on CARB to provide that direction soon.
Manatt will continue to monitor evolving enactments. Please contact David Smith with any questions regarding these matters.