BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD LOS ANGELES AIRPORT SHERATON GATEWAY HOTEL 6101 WEST CENTURY BOULEVARD LOS ANGELES, CALIFORNIA THURSDAY, SEPTEMBER 23, 2004 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Ms. Sandra Berg Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Dr. Henry Gong Ms. Barbara Patrick Ms. Patricia Salas Pineda Mrs. Barbara Riordan Supervisor Ron Roberts STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Diane Johnston, General Counsel Ms. Kathleen Tschogl, Ombudsman Mr. Steve Albu, Mobile Source Control Division Mr. Richard Corey, Chief, Research and Economic Studies Branch, Research Division Mr. Bart Croes, Chief, Research Division Mr. Fereidun Feizollahi, Air Resources Supervisor I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF CONTINUED Mr. Paul Hughes, Manager, Low Emission Vehicle Implementation Section, Mobile Source Control Division Mr. Aron Livingston, Staff Counsel Mr. Nic Lutsey, Graduate Student Assistant, Mobile Source Control Division Mr. Chuck Shulock, Vehicle Program Specialist Dr. Barbara Weller, Manager, Population Studies Section, Research Division ALSO PRESENT Mr. Larry Allen, CAPCOA Mr. Tom Austin, Alliance of Automobile Manufacturers Mr. James Boyd, Commissioner, California Energy Commission Mr. John Cabaniss, AIAM Mr. Tim Carmichael, Coalition for Clean Air Mr. Dan Cayan, Scripps Institution Dr. Henry Clark, West County Toxics Coalition Ms. Coralie Cooper, NESCCAF/Nescaum Mr. John DeCicco, Environmental Defense Mr. David Doniger, Natural Resources Defense Council Mr. Bob Epstein, Environmental Entrepreneurs Mr. Michel Gelobter, Redefining Progress Ms. Sujatha Jahagirdar, Environment California Mr. Felix Kramer, California Cars Initiative Mr. Russel Long, Bluewater Network PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Bob Lucas, CCEEB Mr. David Modisette, California Electric Trans Coalition Ms. Fran Pavley, Assembly Member Mr. Matt Peak, CalSTART Ms. Cynthia Rojas, Bus Riders Union Dr. Trisha Roth, American Academy of Pediatrics CA District IX and Health Network for Clean Air Mr. Michael Prather, UC Irvine Mr. Bob Roberts, California Ski Industry Association Ms. Dorothy Rothrock, California Manufacturers and Technology Association Dr. Benjamin Santer Mr. David Shaw, New York State Department of Environmental Conservation Mr. Fred Webber, Alliance of Automobile Manufacturers Mr. Paul Wuebben, South Coast Air Quality Management District PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX PAGE Opening 1 Pledge of Allegiance 1 Roll Call 1 Item 04-8-1 6 Chairperson Lloyd 6 Executive Officer Witherspoon 8 Staff Presentation 8 Board Discussion and Q&A 15 Item 04-8-3 17 Chairperson Lloyd 17 Executive Officer Witherspoon 18 Dr. Santer 19 Board Discussion and Q&A 35 Item 04-8-2 45 Chairperson Lloyd 45 Executive Officer Witherspoon 49 Assemblywoman Fran Pavley 53 Staff Presentation 59 Board Discussion and Q&A 144 Ombudsman Tschogl 158 Dr. Henry Clark 160 Afternoon Session 163 Mr. Rob Roberts 163 Mr. James Boyd 166 Mr. Coralie Cooper 178 Mr. David Shaw 183 Mr. David Doniger 188 Mr. Fred Webber 194 Mr. Tom Austin 213 Mr. John Cabaniss 248 Ms. Dorothy Rothrock 266 Mr. Bob Lucas 274 Mr. Michael Prather 280 Mr. Michel Gelobter 282 Mr. Matt Peak 294 Mr. Dan Cayan 298 Mr. Bob Epstein 304 Mr. Cynthia Rojas 309 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX CONTINUED PAGE Item 04-8-2(continued) Mr. David Modisette 311 Mr. John DeCicco 314 Mr. Felix Kramer 319 Mr. Paul Wuebben 324 Mr. Russel Long 331 Mr. Larry Allen 337 Ms. Sujatha Jahagirdar 343 Mr. Tim Carmichael 352 Dr. Trisha Roth 356 Board Comments 359 Recess 361 Reporter's Certificate 362 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The September 3 23rd public meeting of the Air Resources Board will now 4 come to order. 5 Mrs. Riordan, would you please lead us in the 6 Pledge of Allegiance. 7 BOARD MEMBER RIORDAN: Would you join me and 8 stand and salute our flag. 9 (Thereupon the Pledge of Allegiance was 10 Recited in unison.) 11 CHAIRPERSON LLOYD: Thank you very much. 12 Would the clerk of the Board call the roll. 13 BOARD CLERK ANDREONI: Ms. Berg? 14 BOARD MEMBER BERG: Here. 15 BOARD CLERK ANDREONI: Ms. D'Adamo? 16 BOARD MEMBER D'ADAMO: Here. 17 BOARD CLERK ANDREONI: Supervisor DeSaulnier? 18 BOARD MEMBER DeSAULNIER: Here. 19 BOARD CLERK ANDREONI: Dr. Gong? 20 BOARD MEMBER GONG: Here. 21 BOARD CLERK ANDREONI: Ms. Kennard? 22 Supervisor Patrick? 23 BOARD MEMBER PATRICK: Here. 24 BOARD CLERK ANDREONI: Mrs. Riordan? 25 BOARD MEMBER RIORDAN: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD CLERK ANDREONI: Supervisor Roberts? 2 Ms. Pineda? 3 BOARD MEMBER PINEDA: Here. 4 BOARD CLERK ANDREONI: Mr. Loveridge? 5 Chairman Lloyd? 6 CHAIRPERSON LLOYD: Here. 7 BOARD CLERK ANDREONI: Thank you. 8 CHAIRPERSON LLOYD: Thank you very much indeed. 9 I'd like to welcome our new Board members. As 10 you probably read from the press, we have five new Board 11 members: Ms. Sandra Berg, Dr. Henry Gong, Ms. Lydia 12 Kennard, Dr. Ron Loveridge, Ms. Pat Pineda. Two of them 13 unfortunately will not be here today, with prior 14 engagements. But why I'd like to welcome them. If you 15 looked at their resumes, wonderful resumes, wonderful 16 background. And I congratulate the Governor and his staff 17 in these great appointments to the Board. 18 I would like to ask them to say a few words, 19 introduce themselves. But before I do that I'd also like 20 to express my great appreciation for the three Board 21 members we've lost since the last meeting. Mr. Joe 22 Calhoun, Dr. Bill Friedman, and Professor Hugh Friedman. 23 They were great colleagues. We'll really miss them. 24 Great service to the State of California. But obviously 25 we move on. So we will certainly keep in touch with them PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 and we wish them the very best. I know we will definitely 2 keep in touch. 3 So with that I would like to introduce my new 4 colleagues to see if they'd like to say a few words, 5 starting off alphabetically with Ms. Sandra Berg and then 6 Dr. Henry Gong and then Ms. Pat Pineda. 7 BOARD MEMBER BERG: Good morning. Thank you very 8 much, Chairman Lloyd. 9 It's a pleasure for me to be here with the ARB. 10 I'm very grateful that the Governor appointed me as an 11 outstanding appointment, and I appreciate that. 12 I really look forward today. I feel like I've 13 jumped into the fire with this being my first Board 14 meeting. But I certainly look forward to the interaction, 15 the work with my esteemed colleagues and their fabulous 16 staff. 17 So thank you very much for having me. 18 CHAIRPERSON LLOYD: Thank you. 19 Dr. Gong. 20 BOARD MEMBER GONG: Thank you, Dr. Lloyd. 21 I'm very pleased and appreciative to be appointed 22 to the Board by the Governor. The Governor has affirmed a 23 bold and promising and positive air quality program for 24 California. And I'm delighted to support that and serve 25 as a public servant. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 Indeed the role of public servant is rather new 2 for me. But I believe that my medical and research 3 expertise and experiences will bring important insights to 4 the table. 5 I'm enjoying -- actually enjoying this process of 6 the ARB and its environment and its facilities and all the 7 issues that come with it. I have been trying to prepare 8 myself for this day, thanks to staff and others whom I 9 talked to. And I believe that this should be a very 10 interesting two days that we have here together. 11 I'd also recommend for those in the audience who 12 would like to survive the two days to purchase a seat 13 cushion. 14 (Laughter.) 15 BOARD MEMBER GONG: This is what I always bring. 16 Thank you. 17 CHAIRPERSON LLOYD: Thank you, Dr. Gong. 18 Ms. Pineda. 19 BOARD MEMBER GONG: It's a bit of medical advice. 20 (Laughter.) 21 BOARD MEMBER PINEDA: I just want to say that I'm 22 truly honored to have been appointed by the Governor to 23 this fine board. 24 As of business person and as an individual who 25 cares deeply about the environment, I do hope to bring a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 balanced view to the Board. And I know that my colleagues 2 also share a balanced view. But perhaps with my business 3 background, I will bring additional views to the Board. 4 I would like to make one comment, Mr. Chairman. 5 Today's meeting of the Board is the first public meeting 6 since my appointment by the Governor. And knowing the 7 importance of today's Board item relating to climate 8 change, I'm here to listen to the presentations and 9 staff's regulatory proposal. However, I want to be clear 10 that as an officer of Toyota Motor Corporation of North 11 America, I would like to disclose that I do have an 12 economic interest that is being evaluated by the Fair 13 Political Practices Commission as a potential conflict of 14 interest. And because I have not yet received an opinion 15 from the FPPC, I will be listening to the proceedings; but 16 I want to make very clear that I will not participate in 17 the deliberations or the vote on this matter. 18 Thank you. 19 CHAIRPERSON LLOYD: Thank you very much. 20 And, again, you will note that again Governor 21 Schwarzenegger has continued this strong tradition of a 22 bipartisan board, reflecting the true support of all 23 Californians for environmental issues. So I'm really 24 delighted to be part of the Board continuing and also with 25 new colleagues. And we start with a tough item today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 I would say, Dr. Gong, one of the things you 2 recognize that now you're in the public spotlight, I'm 3 already getting questions as to whether that foam cushion 4 was developed using VOC's, hydrofluorocarbons. And so you 5 will recognize you are going to be held with different 6 standards. 7 (Laughter.) 8 CHAIRPERSON LLOYD: In all seriousness, we really 9 have some serious items before us today. We'll start off 10 by saying all the agenda items before the Board relate to 11 the consideration of the proposed regulations and test 12 procedures to control greenhouse gas emissions from motor 13 vehicles. That's Agenda Item 04-8-2. For this reason, 14 I'm opening the record now for item 04-8-2. In this way 15 all of the presentations and related public testimony will 16 be part of the record for the regulations. 17 We will be begin with the Agenda Item 04-8-1, 18 public health update, impact of climate change on public 19 health. 20 As we enter this item I'd like to remind anyone 21 in the audience who wishes to testify on today's agenda 22 items to please sign up with the clerk of the Board. And 23 if you have written comments, please provide 30 copies to 24 the Board clerk. 25 As I mentioned, the first item is the Public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 Health Update. So the normal monthly health update. 2 Again, for the past several years we've started 3 every Board meeting with a topic that drives our entire 4 mission, that is, public health, public health for the 5 citizens of California. 6 The Air Resources Board conducts its own primary 7 research into air pollution health effects; as you will 8 have seen some of the work we supported with the recent 9 landmark studies at USC. We also collaborate with and 10 follow the findings of air pollution researchers around 11 the globe. These findings are published in academic and 12 other peer-reviewed journals and can be found through 13 various websites. 14 But the Board health updates serve as direct 15 briefings on major health findings and gives us all 16 opportunity to ask questions about what the findings mean 17 and how they affect our regulatory efforts and other 18 programs, since I indicated our responsibility is to 19 protect public health. 20 Today's health update is on the topic that is the 21 focus of today's Board hearing, global climate change and 22 the impacts it could have on public health. 23 So with that I'd like to turn it over to our 24 Executive Officer, Ms. Witherspoon to begin staff 25 presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 EXECUTIVE OFFICER WITHERSPOON: Good morning, 2 Chairman Lloyd and members of the Board. 3 Global climate change is of increasing concern to 4 the scientific community and the public. Today we will 5 hear two presentations on climate change, followed by a 6 proposed regulation to control greenhouse gases. 7 The first presentation is a Board health update 8 that highlights a recent report by Harvard University on 9 the human health impact of climate change due to increased 10 levels of carbon dioxide and other greenhouse gases. 11 Dr. Barbara Weller from our Research Division 12 will make today's presentation. 13 Dr. Weller. 14 (Thereupon an overhead presentation was 15 Presented as follows.) 16 POPULATION STUDIES SECTION MANAGER WELLER: To 17 align our health update with the focus of today's Board 18 meeting, I will discuss recent findings on the potential 19 health impacts of climate change. Drs. Paul Epstein and 20 Christine Rogers of Harvard Medical School have recently 21 published a report on the health impacts from climate 22 change and how the effects of climate change may have a 23 disproportionate impact on the poor and minority groups in 24 U.S. cities. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 POPULATION STUDIES SECTION MANAGER WELLER: The 2 Combustion of fossil fuels by motor vehicles and 3 industrial plants contribute to air pollution, as well as 4 contributing to greenhouse gas emissions and, therefore, 5 climate change. The effects of combustion pollution on 6 our population include increases in asthma attacks, other 7 respiratory illnesses, and premature death, especially 8 among those with preexisting heart and lung diseases. 9 Climate change can lead to death from heat waves and 10 injuries from other extreme weather events. Climate 11 change may also contribute to increases in allergens and 12 infectious diseases. 13 --o0o-- 14 POPULATION STUDIES SECTION MANAGER WELLER: The 15 Intergovernmental Panel on Climate Change projects a 2.5 16 to 10.4 ° Fahrenheit increase in earth's surface 17 temperature by the end of this century. Climate change 18 will result in not only warmer average temperatures, but 19 also in unstable weather patterns and more episodes of 20 extreme weather. 21 Although it is uncertain whether long-term 22 climate change was responsible for the event, temperature 23 during last year's heat wave in Europe were the hottest on 24 record, an 18 ° Fahrenheit above the 30-year average. 25 These extreme temperatures resulted in 23,000 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 excess deaths in six western European countries. Studies 2 in England, Wales and The Netherlands attributed 20 to 40 3 percent of the deaths to increased PM10 and ozone levels. 4 For example, average June to August ozone levels in The 5 Netherlands were 43 percent above the same months in 2000, 6 the most recent year with average summer weather; and PM10 7 levels were 13 percent higher. 8 --o0o-- 9 POPULATION STUDIES SECTION MANAGER WELLER: A 10 group of university and national laboratory scientists 11 project major increases in the frequency, length and 12 intensity of heat waves for several California cities due 13 to climate change. They assumed an idealized situation in 14 each situation for people to become acclimated to heat 15 over the course of a summer or during a heat wave. 16 However, population growth and possible public 17 intervention programs were not accounted for. 18 For an optimistic future, where clean energy 19 technologies cause emissions to peak in 2050 and decline 20 below current levels by 2100, most cities are projected to 21 see a two to threefold increase in the number of 22 heat-related deaths from the 1990's to the 2090's. For 23 the business-as-usual situation, which results in higher 24 emissions, the deaths double. 25 The coastal communities of Los Angeles and San PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 Francisco are most affected because the generally cool 2 conditions and the infrequent nature of heat waves make 3 acclimation to hot weather more unlikely than in places 4 like Fresno. 5 These mortality estimates do not include the 6 effect of increased temperature on air pollution. In a 7 recent study Columbia University and the NASA scientists 8 projected a 4.5 percent increase in ozone-related 9 mortality in the New York metropolitan area for the 10 2050's, under a high emissions scenario from greenhouse 11 gases. 12 Heat waves are a particularly dangerous event for 13 the elderly, in part because they are more prone to 14 dehydration. Increased use of air-conditioners and early 15 warning systems will help alleviate the impact of heat 16 waves. But death's are still seen in cities with a high 17 percentage of air-conditioned homes. 18 --o0o-- 19 POPULATION STUDIES SECTION MANAGER WELLER: The 20 rate of asthma in the U.S. has increased two to threefold 21 since the 1980's. And the single greatest cause of 22 hospitalization for young children is asthma. 23 There are genetic and environmental contributors 24 to asthma onset. And the causes of the asthma increase 25 are not known. However, climate change can have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 negative impact on those with existing asthma, as 2 increases in allergens, air pollution and smoke affect 3 asthmatics more than the general population. 4 --o0o-- 5 POPULATION STUDIES SECTION MANAGER WELLER: 6 Allergic diseases affect 17 percent of the U.S. 7 population, and are the sixth leading cause of chronic 8 illness. Drought conditions from climate change may favor 9 the increased colonization by weeds of open areas. 10 Experiments have shown that ragweed pollen production is 11 increased when plants are grown in an atmosphere that is 12 two times greater in carbon dioxide than the present. 13 Other experiments have shown that ragweed grown in 14 conditions that simulate an early spring have more flowers 15 and produce more pollen. 16 Ragweed is a very common allergen, often found in 17 open fields in the eastern U.S. Although there is a 18 variety of ragweed called Western Ragweed found in the 19 eastern part of California. Experiments with the 20 allergenic Western Ragweed grown under increased 21 temperature found an increase in pollen production with 22 warmer temperatures. 23 --o0o-- 24 POPULATION STUDIES SECTION MANAGER WELLER: 25 Climate affects the geographical range of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 infectious diseases. For example, mosquitos, which carry 2 a number of infectious diseases, are highly sensitive to 3 temperature. And warmer global temperatures will allow 4 the expansion of both the insect itself an the diseases 5 that it carries. 6 One example of how climate may have played a role 7 in the spread of disease is the West Nile Virus, since 8 droughts seem to be a common weather pattern associated 9 with large outbreaks of this virus. This disease affects 10 the human population, but also causes a dramatic decline 11 in birds of prey, which in turn will affect the rodent 12 population and increase the spread of infectious disease. 13 California, Arizona and Colorado account for the 14 majority of all human cases of the mosquito-carried West 15 Nile Virus calculated through August, although the 16 mosquito season extends to October. 17 As of mid-September of this year about one-third 18 of all deaths from this virus in the U.S. occurred in 19 California. 20 --o0o-- 21 POPULATION STUDIES SECTION MANAGER WELLER: Poor 22 and minority populations may be at greater risk from the 23 effects of climate change. Heat waves pose a greater 24 mortality risk for the poor due to the lack of 25 air-conditioning and other resources. The majority of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 those affected during the 1995 heat wave in Chicago were 2 African Americans living in substandard housing. 3 The poor and minority groups are also at a 4 greater risk from asthma attacks. Low-income families and 5 African Americans have higher rates of asthma prevalence 6 and increased morbidity and mortality from asthma. As we 7 have seen, asthmatics may be more sensitive to the effects 8 of climate change than the rest of the population. 9 --o0o-- 10 POPULATION STUDIES SECTION MANAGER WELLER: 11 Increased greenhouse gas emissions lead to not 12 only higher average temperatures but also increased 13 frequency of extreme conditions such as heat waves and 14 droughts. Scientists project increases of thousands of 15 heat-wave-related deaths over the next century for 16 Californians. Harvard scientists conclude that climate 17 change will lead to increased impacts on asthmatics and 18 will lead to increases in allergens an infectious disease. 19 As climate change continues, increased stress will be 20 placed on the ecosystem and the human population. And the 21 most sensitive, including low-income and minority 22 communities, will be less able to adapt. 23 Thank you for your attention. And I'll be glad 24 to answer any questions. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 My colleagues have any questions? 2 Dr. Gong. 3 BOARD MEMBER GONG: I just wanted to thank you 4 very much for that excellent summary. 5 I just have a commentary I guess, that I always 6 like to: What message are you trying to give us here? 7 And I think the message very plainly is that there are 8 health effects from green gas house -- green gas 9 emissions. And basically the health effects are both in 10 terms of symptoms, illnesses and deaths. I think that's 11 the bottom line of your message. 12 Two other sub-comments is that one thing I always 13 learned is that I always learn something from what other 14 people tell me. And I think the fact that pollen growth 15 seems to be stimulated by increased CO2 is of concern to 16 me as a physician, respiratory physician, and also a 17 public health person in the sense that this probably is 18 the fertile soil for increasing and worsening asthma 19 wherever these pollen may be around. 20 I think you centered on ragweed. But I think it 21 could also be generalized perhaps to other allergens, 22 plant allergens that may also be proliferating as a result 23 of the CO2 emissions. I don't have evidence of that 24 offhand. But if it happens for ragweed, it probably can 25 happen for other allergens as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 And, lastly, the environmental justice aspect I 2 think is very important to this concept of greenhouse gas 3 emissions. And I think we'll probably get into that more 4 later. 5 Thank you. 6 CHAIRPERSON LLOYD: Thank you, Dr. Gong. And, 7 again, it's great to have an M.D. comment really with 8 in-depth knowledge of these issues. So thank you for your 9 insightful comments. 10 Ms. D'Adamo. 11 BOARD MEMBER D'ADAMO: Yes. On slide 7, the case 12 study: West Nile Virus, just a question. I don't know if 13 you'd have this information. Perhaps someone else in the 14 audience does as they come forward on the regulation. But 15 I'm assuming that with the increased case of West Nile 16 Virus that we're also seeing an increase in the spray 17 program for in mosquito abatement districts. And that is 18 a concern to me and to many in the public, in that people 19 don't like their communities to be sprayed unless it's 20 absolutely necessary. Clearly in this case it's going to 21 be absolutely necessary as those numbers increase. 22 POPULATION STUDIES SECTION MANAGER WELLER: I 23 actually don't have information on the spray program. I 24 do know that there has been a tremendous program for 25 trying to increase immunizations such as equine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 immunizations, because this is a devastating disease, as I 2 say, not only in the human population but in a number of 3 animal populations and bird populations, and horses are 4 particularly hit by this. So I know that there is a 5 program for that. But I don't have the information on the 6 spray program. 7 EXECUTIVE OFFICER WITHERSPOON: Ms. D'Adamo, 8 there have been emergency appropriations to increase the 9 budgets of infectious disease parties. And we can check 10 during the break on some of the latest news about that. 11 But you're quite right, there is more spraying 12 going on than in previous years to combat the West Nile 13 Virus. 14 BOARD MEMBER D'ADAMO: Thank you. 15 CHAIRPERSON LLOYD: Other comments from the 16 Board? 17 Thank you very much indeed. 18 Thank you, staff. 19 Now move on to the next agenda item, 04-8-3, a 20 presentation from Dr. Benjamin Santer from the Lawrence 21 Livermore National Lab. 22 Dr. Santer will discuss his work that has been 23 highly regarded by the scientific community with respect 24 to the better understanding of the relationship between 25 human activities and public health. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 Dr. Santer's credentials on this topic of 2 subjecting climate change theories to rigorous statistical 3 analysis are exceptional, as we will hear. Further, his 4 expertise and insight contributed to the historic 5 conclusion by the Intergovernmental Panel on Climate 6 Change in its 1995 report human activities are impacting 7 climate change. 8 I believe Dr. Santer's observations will provide 9 insights that we will find helpful with respect to the 10 climate change regulatory item that we will consider next. 11 With that I'll turn this over to Ms. Witherspoon. 12 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 13 Lloyd. 14 As a prelude to the staff proposal for regulating 15 greenhouse gases from motor vehicles we've invited a 16 renowned scientist to provide his perspective on the state 17 of the science with respect to climate change. 18 Dr. Benjamin is a physicist and atmospheric 19 scientist with the Lawrence Livermore National Laboratory 20 program for climate model diagnosis and intercomparison. 21 Dr. Santer holds a doctorate in climatology from the 22 University of Anglia in England. I hope I said that 23 right. His awards include a MacArthur Fellowship in the 24 Department of Energy's E.O. Lawrence Award. His recent 25 work indicates that observed changes in the lower PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 atmosphere are largely driven by human activities. 2 With that, I'm very pleased to introduce Dr. 3 Santer. 4 DR. SANTER: Thank you very much. 5 Good morning, ladies and gentlemen. Thank you 6 for giving me the opportunity to brief you about the 7 science of climate change. 8 (Thereupon an overhead presentation was 9 Presented as follows.) 10 DR. SANTER: Before I start out I just want to 11 give the punch line up front: Climate change is real. 12 It's incontrovertible that we have changed the chemical 13 composition of the atmosphere. We know that. The issue 14 of scientific debate is not whether humans have affected 15 climate. Rather it's by how much we are affecting 16 climate. 17 Next slide please. 18 --o0o-- 19 DR. SANTER: I've been involved with the 20 so-called Intergovernmental Panel on Climate Change, or 21 IPCC, for a number of years. The IPCC was set up by the 22 World Meteorological Organization and the United Nations 23 Environment Program in 1988. And its role was to advise 24 the governments of the world what we know and what we 25 don't know about the nature and causes of climate change. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 Back in 1996, in the second assessment report of 2 the IPCC we came to the considered conclusion that the 3 balance of the scientific evidence suggests a discernible 4 human influence on global climate. That's a, we thought, 5 rather cautious statement. It generated a lot of healthy 6 ripples in the ponds of science, politics, public opinion. 7 More recently, in 2001, in the third assessment 8 of the IPCC, they came up with an even stronger statement, 9 that there is new and stronger evidence that most of the 10 warming observed over the last 50 years is attributable to 11 human activities. 12 My job today is to give you some sense of the 13 scientific underpinning of those conclusions. 14 Next slide please. 15 --o0o-- 16 DR. SANTER: Well, first of all, a brief primer 17 about the factors that can influence climate, both natural 18 and human. It's important to get across the point that 19 climate would change even if there were no humans on the 20 planet. 21 There are purely natural factors that influence 22 climate: 23 Changes in the sun's energy output on time scales 24 of 11 years, 22 years, even longer than that. 25 Then there are changes in the amount of volcanic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 dust in the atmosphere after massive volcanic eruptions. 2 This, for example, a satellite imagery of the eruption of 3 Mt. Pinatubo in the Philippines in June 1991. And we know 4 very well that after these big eruptions that get dust 5 into the upper atmosphere, you can have climate effects 6 that last several years or even longer. 7 Then there are purely natural modes of 8 variability like El Nino, which we know and love here in 9 California. You can think of these as -- well, think of a 10 bell. A bell rings or oscillates in a certain way. The 11 climate system has preferred ways in which it likes to 12 ring too. El Nino is one of them. And, as we know, it 13 can have very large impacts on temperature and rainfall, 14 not only here in California but throughout the world. 15 So these are purely natural things that affect 16 climate on a range of different time scales. And the 17 trick is to try and identify human-induced changes in 18 climate against the background noise that these natural 19 phenomena generate. 20 Next slide please. 21 --o0o-- 22 DR. SANTER: Then there are things that we do to 23 modify the chemical composition of the atmosphere. You've 24 probably all seen this curve. It's been referred to by a 25 number of people as the most famous curve in the history PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 of science. What it shows in the orange are direct 2 measurements of atmospheric CO2 levels at the Mauna Loa 3 Observatory that have been made since 1958. 4 Going further back in time we actually try and 5 infer levels of atmospheric CO2 by studying bubble of air 6 trapped in glacial ice. 7 And from these direct measurements and from these 8 more indirect measurements, scientists are in general 9 agreement that levels of atmospheric CO2 have increased by 10 about a third over the last century and a half or so. And 11 carbon dioxide is an important greenhouse gas with 12 well-understood heat trapping properties. 13 Then there are other things that we do to modify 14 the chemistry of the atmosphere. We produce aerosol 15 particles from burning fossil fuels and biomass. These 16 are not figments of some mad scientist's imagination. You 17 can see these things again in satellite imagery. These, 18 for example, are smoke -- the smoke and aerosols from 19 forest fires in Oregon in the summer of 2002. 20 We also modified the surface of the earth. This 21 shows you logging tracks, logging roads in Rondonia in 22 Brazil in the rain forests. And, again, you can see these 23 things from space. We have modified in a large way the 24 properties of the earth's surface. That affects things 25 like the amount of sunlight that's absorbed or reflected PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 by the earth's surface, evapotranspiration, release of 2 moisture from the surface. So, again, this is another 3 thing that we do to at least locally change climate. 4 Next slide please. 5 --o0o-- 6 DR. SANTER: Well, why should we care about all 7 of this stuff? Why does this matter to us? 8 This gives you the answer to that question. 9 These are projections by the Intergovernmental Panel on 10 Climate Change made in 2001 of plausible changes in the 11 earth's surface temperature over the next hundred years. 12 And what you see is a range of uncertainty here. And this 13 range of uncertainty is dictated by two things: 14 First of all, it's dictated by inherent 15 uncertainties in the computer models that were used to 16 make these projections. It's driven by uncertainties in 17 the emissions pathways that we're going to follow. Some 18 are, more or less, business-as-usual pathways. Others 19 assume some emissions reductions over time. 20 The important thing to note here is that even at 21 the low end of the range here we're talking about fairly 22 substantial projected increases in the average temperature 23 of the earth, of order of one and a half to two degrees. 24 At the upper end, those changes are higher, up to nearly 25 six degrees. So it really does behoove us to try and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 understand these changes as best as we can. 2 Next slide please. 3 --o0o-- 4 DR. SANTER: This is from our colleagues at the 5 MIT joint program on the science and policy of climate 6 change. And for those of you who watch Wheel of 7 Fortunate, you might call this the Wheel of Misfortune I 8 suppose. But it's a nice way to get across the point that 9 we're performing an experiment, a grand geophysical 10 experiment. And we don't have a control. Unlike, you 11 know, Dr. Gong, when you perform experiments in medicine, 12 you have a control. We have no control here. There's no 13 parallel earth on which we're not disturbing greenhouse 14 gas concentrations. 15 What you see here are projected changes in one 16 climate model where you perturb uncertain physical 17 parameters in the model and you also perturb uncertain 18 inputs about future emissions' pathways. And this shows 19 you the projected temperature changes in this model world 20 from 1990 to 2100. And each slice of the pie is 21 proportional to the probability of a certain change 22 occurring. 23 So you can see that there's a small but non-zero 24 probability of a very large temperature change in this 25 model. And a very large probability of changes between 4 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 degrees Celsius and 2 degrees Celsius. 2 The important thing to note is there is no 3 present day on this wheel. The status quo is not there. 4 We are changing climate. And by 2100 we will be somewhere 5 here on the wheel. We don't know where. But we will not 6 be at the present day. 7 Next slide please. 8 --o0o-- 9 DR. SANTER: Well, now my job is to give you some 10 of the scientific evidence that led to the IPCC's 11 discernible human influence conclusions. And it's 12 important to partition the different types of evidence. 13 Some evidence is purely qualitative. For 14 example, if you look at glaciers, we know that worldwide 15 there's been a fairly pervasive retreat of glaciers over 16 the last century or so. You can see here in California 17 the glacier has retreated by roughly 50 percent over this 18 time period. And in Argentina, in some of the ice caps 19 there, you can see even much larger changes in glacial 20 ice. So this is kind of qualitative evidence that 21 something is really happening. The earth surface is 22 warming, glaciers are retreating, sea level is rising. 23 But we're not interested in purely qualitative 24 comparisons, say, of models and data. We want to look at 25 quantitative comparisons. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 Next slide please. 2 --o0o-- 3 DR. SANTER: It turns out that climate models 4 offer very powerful tools for studying cause/effect 5 relationships. You know, it would be very nice if we 6 could go back to some period in geological history and 7 say, "Uh-huh, this is an exact analog for the changes 8 we're going to experience over the next century." 9 Unfortunately there ain't no such beast. So what we use 10 are computer models of the climate system to try and 11 understand the changes that might be coming down the 12 pipeline. 13 Now, the beauty of these models is that you can 14 perform controlled experiments within them. You can vary 15 only one thing at a time. What you see here are 16 model-projected changes in temperature from the earth's 17 surface right up into the stratosphere and from the North 18 Pole to the South Pole. And you can see that these yellow 19 to red colors indicate a temperature increase, mean colors 20 indicate a temperature decrease. 21 And the important thing to note here without 22 getting into the details is the different mechanisms that 23 influence climate: The sun, volcanoes, ozone depletion, 24 increases in greenhouse gases, sulfate aerosols. Each of 25 those has a different characteristic fingerprint or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 pattern of temperature response in the free atmosphere. 2 So what we try and do is exploit this kind of 3 information to disentangle observed climate records and 4 figure out how much each one of these influences has 5 contributed to observed climate change. 6 Next slide please. 7 --o0o-- 8 DR. SANTER: One thing that I've been looking at 9 and my colleagues at Lawrence Livermore over the last 10 three or four years is the increase in the height of the 11 tropopause. Now, about a century ago or so people thought 12 that when you went higher and higher up from the earth's 13 surface, temperature would just decrease with increasing 14 elevation. It would just get continuously colder. Then 15 we sent up the first weather balloons and found out that 16 that wasn't the case. And in part because of the heating 17 of the atmosphere by ozone when you got above the 18 tropopause, temperatures started to increase with 19 increasing elevation. 20 Here you can actually see the tropopause in the 21 tropics and how big thunderstorm anvil clouds flatten 22 against the tropopause here in the tropics. 23 What we've done is studied the tropopause and 24 tried to see whether it provides us information about the 25 causes of climate change. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 Next slide please. 2 --o0o-- 3 DR. SANTER: Here are results from model 4 calculations and observations of changes in the height of 5 the tropopause. First of all, if you look at the black 6 line, it shows that over the last 40 years or so the 7 increase -- the tropopause has increased in height -- that 8 corresponds to a decrease in the pressure of the 9 tropopause -- by several hundred meters or so. 10 Then we performed model calculations -- I'd like 11 to call them everything-and-the-kitchen-sink 12 calculations -- where you drive a computer model with your 13 best estimates of observed changes in greenhouse gases, 14 ozone, aerosols; and natural factors, the sun and 15 volcanoes. 16 And you can perform that experiment many times, 17 starting from different possible initial conditions of the 18 climate system back in the 1850 or so, and you get an 19 envelope of solutions. That's what this orange envelope 20 indicates here. And that essentially the envelope arises 21 from the chaotic variability of the climate system. And 22 the red line is the average over a number of different 23 realizations of this everything-and-the-kitchen-sink 24 experiment. 25 And you can see that in the model world, when you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 drive the model by the best estimates of combined natural 2 and human forcings, you can actually replicate fairly well 3 this increase in the height of the tropopause. But when 4 you vary only the natural factors, only the sun and 5 volcanoes, you can't explain this rapid increase in the 6 height of the tropopause. 7 Now, what we do is actually much more 8 sophisticated than that. We don't just look at global 9 mean time series. We look at full patterns of change, in 10 observations, in models, and essentially do signal 11 processing to try and extract the anthropogenic, or human 12 caused, climate change from this natural noise. But here 13 you can see pretty clearly even without doing any fancy 14 statistics that in this model natural effects only 15 cannot -- repeat -- cannot explain that kind of change. 16 Next slide please. 17 --o0o-- 18 DR. SANTER: Well, you might say, "Climate 19 models, I don't believe in them. People never test them, 20 never compare them with observations." That's not the 21 case. The place that I work at, the Program for Climate 22 Model Diagnosis and Intercomparison at Lawrence Livermore 23 Lab essentially has the job of looking at all the world's 24 climate models and holding them up against the light, 25 trying to evaluate them, trying to identify their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 systematic errors and improve them. This is one kind of 2 test of climate models that we do. 3 Volcanoes offer natural experiments, if you will. 4 We know from observations -- that's the blue line here, 5 satellite-based measurements of temperatures in the lower 6 atmosphere -- that after massive eruptions like Pinatubo 7 in 1991 or El Chichn in 1982 the atmosphere cools and 8 then there's this slow recovery thereafter. 9 Now, the black line is a model calculation where 10 all you're driving the model with is satellite-based 11 estimates of the aerosol clouds that arose from those 12 volcanic eruptions. And you can see that the model 13 actually does a very good job in reproducing the rapid 14 cooling after the Pinatubo eruption and the slow recovery 15 thereafter. This is actually a rather challenging test, 16 because in order to get this slow recovery right you have 17 to get the ocean right and have to get how the ocean takes 18 up heat from the atmosphere. It's actually quite a 19 difficult test. 20 Next slide please. 21 --o0o-- 22 DR. SANTER: Well, I'm pretty sure that if you 23 open up your paper every couple of months or so, you'll 24 see something like this. And it's been one of the major 25 arguments that critics of climate change science have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 advanced. They've argued that satellite-based 2 measurements of temperatures in the lower atmosphere show 3 little or no warming over the last 25 years. We've been 4 measuring temperatures in the atmosphere by satellite 5 since about 1979. This is typical of that, a statement by 6 James Schlesinger made about seven or eight months ago or 7 so. And it suggests that the satellite measurements show 8 no warming and that this is an essential part of the 9 global warming theory. 10 Next slide please. 11 --o0o-- 12 DR. SANTER: Well, it turns out that it's 13 actually a tremendously difficult job to monitor 14 atmospheric temperatures from space. We did not design 15 satellites to monitor climate. We designed them to 16 monitor weather, short-term changes, but not long-term 17 changes in climate. 18 And actually the satellite record is not a record 19 from one satellite, but it's a record from 12 plus 20 satellites. These things drift. They drift in their 21 orbits. They drift in the time of day at which they see 22 earth and earth's temperature. It's very difficult to 23 splice together an homogenous record of atmospheric 24 temperatures from these satellites. 25 Up to very recently only one group, at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 University of Alabama at Huntsville, had attempted this 2 task of splicing together temperature records from 3 individual satellites. And their estimate was no change 4 in atmospheric temperatures over the last 25 years or so. 5 Recently another group here in California at the 6 Ramon Sensing Systems in Santa Rosa has independently 7 reanalyzed exactly the same data, and they've come up with 8 a rather different result. Now, actually a third group 9 shows a different result still with warming that's larger 10 than the Santa Rosa group here. 11 The message from this is there is uncertainty in 12 our satellite-based measurements of atmospheric 13 temperature even over nominally the best observed period 14 in earth's history. And just looking at one record alone 15 or one group's analysis of this data is dangerous. That's 16 not the way we work in science. Science, we build 17 confidence in the reality of the result by having multiple 18 groups involved in the analysis of the same data. 19 So the message here is that if somebody tells you 20 these satellite measurements are some monolithic thing 21 that indicate little or no warming of the atmosphere, 22 scientifically it's much more complex than that. 23 Next please. 24 --o0o-- 25 DR. SANTER: Another area of progress is that we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 are now performing climate model calculations at very high 2 resolution. When you perform such calculations you 3 essentially divide the surface of the earth up into a 4 grid. Until recently, we were performing model 5 calculations with a horizontal resolution of roughly 300 6 by 300 kilometers. You can see that California is not 7 represented by very many model grid boxes at that kind of 8 resolution. 9 This is actually wintertime precipitation in 10 California and the Western U.S. And it shows -- here are 11 observations that show the Central Valley and the 12 increased wintertime precipitation over the Sierras. And 13 you can see that as you increase the resolution at which 14 you perform the model calculations, you get a much better 15 representation of this kind of fine scale precipitation 16 structure. So this is really encouraging for many of us 17 who work with climate models, that we're now capable of 18 performing climate change experiments at these very high 19 resolutions and hopefully able to make much more 20 meaningful projections of regional scale climate change. 21 Next. 22 --o0o-- 23 DR. SANTER: Well, why is regional scale climate 24 change important? It's important because we experience 25 regional climate. The things that we're going to react to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 are the things that have already been mentioned this 2 morning: Changes in the frequency and the intensity of 3 extreme events. We don't particularly care all that much 4 about whether the global mean temperature increases by 1.8 5 or 2.5 degrees. It's the regional climate, I contend, 6 that we're going to respond to, and that ultimately will 7 drive climate-related policy decisions. And here in 8 California we're particularly concerned about the regional 9 manifestations of climate change. One general theme 10 emerging from model calculations is that they predict a 11 change in the seasonality of runoff, with more of the 12 runoff coming earlier in the year when we actually need it 13 less. That would have huge implications for water 14 resources, hydropower, agriculture. And it's those kind 15 of changes in regional scale of changes in climate that we 16 really need to address and understand. 17 Next slide please. 18 --o0o-- 19 DR. SANTER: Well, I hope I've showed you that 20 there's no debate: Human activities have changed the 21 chemical composition of the atmosphere. And we believe 22 scientifically that the climate system is telling us an 23 internally consistent story. If you read a book, when you 24 reach the end of the book, you ask, "Have all the story 25 lines been woven together in a satisfying way?" PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 And in the climate change story the answer is 2 "yes". Sea level has increased. We know that there have 3 been changes in the earth's surface temperature. The 4 Stratosphere has cooled. The Troposphere has warmed. 5 Glaciers have retreated. These are all internally 6 consistent threads, story lines, if you will. 7 I think that, finally, we do particularly in 8 California need to improve our ability to predict regional 9 scale changes that will most closely and intimately 10 influence us here in virtually every endeavor: Health, 11 energy, water resources. That's what we need to 12 understand. 13 Finally, just on a personal note, it's 14 encouraging to me that California is actually taking a 15 leadership role in addressing these issues. I'm very 16 encouraged as a private citizen by that. 17 Thank you very much. 18 CHAIRPERSON LLOYD: Thank you very much, Dr. 19 Santer, for that excellent presentation, summarizing the 20 take of science and knowledge there. 21 Before I open to my colleagues on the Board, I'd 22 like to ask just one question. As we move from 1995 when 23 you participated in the IPCC, and you're continuing that 24 participation, what changes do you expect as we look, you 25 know, ten years hence to the future IPCC and upcoming PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 ones? 2 DR. SANTER: Well, the fourth assessment report 3 of the IPCC is slated to be published in 2007. And I 4 think what we're seeing is a shift in the focus of the 5 debate. In the first couple of IPCC reports, in 1990 and 6 1996, the debate was fundamentally about the science: Is 7 the science credible? Is it telling us a story that we 8 can believe? 9 I think the debate is now shifting to "What 10 should we do about it?" And I think that in 2007, the 11 debate will focus much more on potential impacts of 12 climate change and rather less on the credibility of the 13 underlying science. 14 CHAIRPERSON LLOYD: Do you have an idea from the 15 scientific community, and look globally -- and I know 16 you've traveled internationally -- in terms of the 17 international scientists, so what percentage do you feel 18 agree with your comments on this issue? 19 DR. SANTER: Well, there are a couple of ways of 20 addressing that question. The first is to note that the 21 Intergovernmental Panel on Climate Change is truly a 22 unique exercise involving thousands, quite literally 23 thousands of climate change scientists from countries 24 around the world. And the level of peer review and 25 government review that goes into these reports is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 extraordinary. There's very little parallel to this in 2 any other scientific endeavor that I can think of. 3 The other point to note is that independent of 4 IPCC conclusions, this country has on numerous occasions 5 asked its most august body, the National Academy of 6 Sciences, to come up with an independent assessment of the 7 credibility of the science. And without fail, the U.S. 8 National Academy has said this is a real problem that 9 we're going to have to address. 10 There are still people out there who would 11 probably dispute even the most basic conclusions that 12 humans have had any influence whatsoever on the 13 atmosphere. That's a -- I would contend that that's a 14 minority view. 15 CHAIRPERSON LLOYD: Thank you. And again it's 16 wonderful to have you working here in California on this 17 issue. 18 And my colleagues on the Board, any questions? 19 BOARD MEMBER RIORDAN: Excellent report. 20 CHAIRPERSON LLOYD: Dr. Gong. 21 BOARD MEMBER GONG: Could you enlighten me a 22 little bit about the interaction between the ocean and the 23 atmosphere in terms of global warming. I guess where I'm 24 heading towards is: With the change in global 25 temperature, is there also an effect on development or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 frequency of hurricanes or tropical storms, things like 2 that? I mean I read something about it and I don't quite 3 understand that. 4 DR. SANTER: Well, good question, particularly 5 given the current situation in Florida and the Caribbean. 6 And I wish I could give you a compelling answer or a 7 reliable answer to that question. 8 I guess the best answer is we don't know at the 9 moment. We know that in -- in observations the intensity 10 and frequency of hurricanes is influenced by things like 11 El Nino, which conditions sea surface temperatures and 12 regions where these things are formed. It's influenced 13 not only by sea surface temperatures, but also by wind 14 shear, what happens to winds in the upper atmosphere and 15 how they can act to sort of give hurricanes and tropical 16 storms the conditions that they need in order to 17 propagate. And it's unclear how these things will change. 18 I should add that climate models until recently 19 haven't had the horizontal resolution to be able to 20 faithfully represent hurricanes and tropical storms. But 21 as I indicated, that is now changing. And we are getting 22 models that can actually simulate the development and 23 movement of tropical storms in hurricanes. And those will 24 provide us with much better tools to address questions 25 about possible changes in the frequency and intensity of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 hurricanes and tropical storms. 2 But it is clear, just to get back to the 3 beginning of your question, that the ocean plays a major 4 role in all of this. If you put your foot on the pedal of 5 your accelerator, then you don't immediately reach the 6 final speed. Your car takes some time to reach that final 7 speed that you've committed it to. And it's the same in 8 the climate world. We've committed ourselves to a certain 9 warming 100 years down the road even if we stopped 10 emissions of greenhouse gases tomorrow. And that 11 commitment, that inertia, it's just like in the car 12 analogy, comes from the ocean. The ocean has a huge 13 capacity to store heat. And that's part of the problem 14 really that -- as I said, even if we stopped emissions of 15 greenhouse gases tomorrow, we've still committed ourselves 16 to an unrealized warming decades down the road. 17 CHAIRPERSON LLOYD: Thank you. 18 Other questions? 19 Ms. Berg. 20 BOARD MEMBER BERG: When we're looking at the 21 studies and we're looking at 100 and 150 years in data, 22 could you kind of comment on how that warming compares to 23 the age of the earth, which is tens of thousands of years 24 old, and how we kind of reconcile the different ages, of 25 the ice age and different heat ages, versus what we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 going through now. 2 DR. SANTER: Yeah, that's a good question. 3 As I mentioned at the outset, climate changes on 4 a variety of time scales. There was the long time scales, 5 ice-age time scales of a hundred thousand years and 6 longer, and then there are these very short time scales 7 that we're looking at now, what's going to happen over the 8 next few decades or next century. 9 We think we understand reasonably well what 10 happens on these long time scales. There are changes in 11 the amount of sunlight that the earth receives to do 12 perturbations in the earth's orbit. And those things 13 affect climate variability on these long time scales. 14 We think we understand from looking at indirect 15 reporters of climate: Tree rings, ice cores, sediment 16 records, those enable us to peer back in time before the 17 last 150 years of direct instrumental measurements. And 18 those indirect recorders, we call them proxy records, tell 19 us that the current period is unusual in the context of 20 our best understanding of the past 2 to 10,000 years or 21 so. 22 So, you know, the paleo-perspective is one of the 23 drivers behind the concern here, because it does seem like 24 the 20th century is unusual in the context of everything 25 we understand about the past. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 BOARD MEMBER BERG: Thank you. 2 CHAIRPERSON LLOYD: Thank you very much. 3 Ms. D'Adamo. 4 BOARD MEMBER D'ADAMO: Yes. The previous 5 presentation focused on public health impacts related to 6 global climate change. And I was wondering if you or if 7 the research staff could comment on other impacts, 8 specific to California, in particular, impact on municipal 9 and agricultural water supply related to the snow pack 10 issue and, in turn, the issue of impacts on water quality, 11 healthy oceans and rivers and how that impacts perhaps the 12 fisheries industry and then also the agricultural 13 industry. 14 I read an interesting study that came out I 15 believe within the last couple of weeks regarding 16 agricultural impacts that focused on the wine grape 17 industry. And I've heard that also that global climate 18 change can impact other agricultural commodities such as 19 dairy production and that sort of thing. 20 And then also just curious about if there's any 21 research that's been done on the impact of climate change 22 on forest health and on the forest products industry. 23 DR. SANTER: Well -- 24 BOARD MEMBER D'ADAMO: It's a long list. But 25 whatever you could comment on. And if Research staff has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 anything to add to that, I'd be curious as well. 2 Thank you. 3 DR. SANTER: Thanks for the question. I'm sure 4 that Research staff could answer that more competently 5 than I could. I'm not a specialist in impacts of climate 6 change on agriculture, energy, et cetera. 7 But it is clear from looking at model projections 8 that one robust result -- I mentioned this previously -- 9 is a change in the timing of runoff. And this arises in 10 the following way: Most of these models predict warming 11 of the Western U.S. and California. And that warming 12 leads to earlier melt of snow pack. And that means that 13 we get more water delivered earlier in the year when 14 agriculture needs it less than later in the year. And 15 that is a real concern and likely would have tremendous 16 implications for agriculture throughout the state of 17 California. 18 These other areas, forests, health, water 19 quality, I'm not really competent to answer. But the one 20 I'm -- or the two I'm most concerned about, given my 21 knowledge of climate model projections, are water 22 resources and changes in the frequency and intensity of 23 heat stress. And that mentioned too. You know, one of 24 the things we're doing is we're changing the probabilities 25 of these extreme events. We're not just changing mean PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 temperatures. When you've changed mean temperatures, 2 you've changed the probability distributions of these 3 extreme events, like extended heat stress periods. And 4 those things worry me, particularly given Europe's 5 experience in 2003. 6 CHAIRPERSON LLOYD: Bart. 7 RESEARCH DIVISION CHIEF CROES: Bart Croes with 8 Research Division at ARB. 9 Just to add on to Dr. Santer's comments. A 10 recent report by a number of investigators that was 11 reported in the proceedings of National Academy of 12 Sciences predicts sea level rise over the next century on 13 the order of two to three feet. So obviously that will 14 have implications on water quality because of salt water 15 intrusion into the Delta. And I don't think the present 16 levees system could support that type of sea level rise. 17 There's potentially other effects on agriculture. 18 You know, the reduction in dairy production that was 19 predicted by the same study on the order of 10 to 20 20 percent with increasity may extend to, you know, reduction 21 in -- or effects on other animal groups like poultry or 22 beef cattle. And certainly the reduced water availability 23 would impact irrigation and crops. So we'll go over it 24 later in the presentation for 1493, some of the other 25 impacts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 2 BOARD MEMBER DeSAULNIER: I think you may have 3 partially answered what I was going to ask. I was going 4 to ask the near-term consequences for the Delta. Just in 5 the last six months we had a levee fail in San Joaquin 6 County. So are you going to cover that in the staff 7 presentation? Or, Doctor, if you would like to comment on 8 that. 9 RESEARCH DIVISION CHIEF CROES: In the staff 10 presentation we'll cover sea level rise. 11 BOARD MEMBER DeSAULNIER: Doctor, do you have any 12 on the impact on the Delta in the near term? 13 DR. SANTER: No. Again, sea level rise is 14 something that we think we understand reasonably well. It 15 comes primarily from two effects: One is that as you warm 16 sea water, it expands. That's one contribution to sea 17 level rise. And the other is the melting of glaciers, ice 18 sheets, and we understand that contribution pretty well 19 too. 20 The big wild card in this picture is what's going 21 to happen to some of these massive ice sheets like the 22 Greenland ice sheet and how they will behave over the next 23 century or so and whether they could indeed do things very 24 rapidly that could change sea level very rapidly. 25 BOARD MEMBER DeSAULNIER: Thank you. Thank you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 for your presentation. 2 DR. SANTER: Thank you. 3 CHAIRPERSON LLOYD: Thank you very much, Dr. 4 Santer. Appreciate it very much. 5 Thank you, staff. 6 We're ready to move on to the main event of 7 today's proceedings, Agenda Item 4-8-2, staff proposal to 8 control greenhouse gas emissions from motor vehicles? 9 As I indicated at the start of the hearing, the 10 two items the Board just heard are part of the public 11 record for this item, as will be the case for all the 12 presentations and testimony presented from this moment 13 forward. 14 As the audience is aware, the staff regulatory 15 proposal is in response to Assembly Bill 1493, authored by 16 Assemblywoman Fran Pavley in 2002, and signed into law in 17 September of that year by Governor Davis. 18 The statute directs the Air Resources Board to 19 adopt regulations that will achieve the maximum feasible 20 and cost-effective reduction in greenhouse gas emissions 21 from new motor vehicles. We must complete our work by the 22 end of this year, the end of 2004, so that the State 23 Legislature has an opportunity to review the regulation 24 before it goes into effect in 2006. 25 In the two years since the passage of AB 1493, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 the case for action has only grown more compelling. And I 2 think we've seen evidence of that. The Board just heard a 3 summary of the recent work exploring the impacts of 4 climate change on public health. And also, as indicated, 5 last month a team of researchers published in the 6 proceedings of the National Academy of Sciences a 7 comprehensive assessment of the substantial adverse 8 impacts that climate change may have on California. And 9 these are only the latest additions to an ever-growing 10 body of evidence on climate change. 11 The new responsibility to develop greenhouse gas 12 emission standards for new motor vehicles has been a 13 particularly challenging process. The rules imposed by 14 the Legislature pertaining to greenhouse gas emissions are 15 far more comprehensive than those which govern the Board's 16 determination with respect to other vehicle emissions. 17 The staff has worked hard to meet the requirements set 18 down by Assemblywoman Pavley's legislation. Our purpose 19 here is to listen to the recommendations in the staff 20 proposal and make a decision with respect to that which we 21 recommend to the Legislature in January. 22 With respect to this particular regulation we 23 need to be mindful of two tests: The test established by 24 the legislature, to which I've referred. And there's -- 25 the importance of the test established under Section 209 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 of the Clean Air Act with respect to the California 2 waivers. 3 It is important and appropriate that this hearing 4 first address the public health impacts of greenhouse gas 5 emissions. We must demonstrate the need for these 6 standards. In addition we must assure that our 7 determinations are not either arbitrary or capricious and 8 that our standards in enforcement procedures are not 9 inconsistent with the requirements applicable to the 10 so-called federal vehicles. 11 Staff has concluded that the proposed regulations 12 are technically feasible and economical to the consumer. 13 Nonetheless they represent a significant financial 14 challenge to the automobile industry. Our job as Board 15 members is to ensure that the proposed regulation 16 represents the best possible balance among the many 17 competing factors that must be taken into account. 18 Climate change is the single biggest 19 environmental challenge facing the world today. No single 20 party is responsible and no single action is enough to 21 address the enormous scope of the problem. 22 Yet those of us working on this issue truly are 23 in the right place at the right time. We have been asked 24 to add a new and groundbreaking chapter to California's 25 long history of environmental protection. And we've been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 asked to do what we do best to design technically feasible 2 and cost effective controls for motor vehicles that reduce 3 their contribution to the state's greenhouse gas emission 4 inventory. 5 Obviously, California cannot solve the problem of 6 global climate change by itself. But we can certainly do 7 our share. And we are in the position to make a unique 8 contribution toward progress in the vehicular arena. 9 There are those who would argue that California's 10 contributions to the greenhouse gas problem is not 11 significant to merit the attention that the Pavley 12 legislation requires. That same argument could have been 13 made 40 years ago when California took the lead in the 14 control of automobile air pollution because California 15 only represented a small part of the market. 16 Finally, by taking this action, California will 17 join the many nations, private citizens and corporations 18 around the globe that have already made reducing 19 greenhouse gas emissions a top priority. 20 I look forward to hearing the different 21 perspectives and arguments that will be brought before us 22 as we sort through the complex issues associated with the 23 proposed regulation. 24 Again, let me acknowledge the challenge that 25 staff's proposal poses to the automotive industry. There PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 is no question that implementation of this regulation will 2 be a difficult task for each and every automaker. 3 But California has never accepted "It can't be 4 done" as an answer. And California has proven over and 5 over again that setting the right goals and giving 6 industry the right tools, enough time and sufficient 7 flexibility to meet those goals can produce extraordinary 8 results. 9 Fortunately there is an impressive record by 10 which we can gauge the industry response and the staff's 11 expectations. I am confident that the auto industry and 12 the Air Resources Board could achieve tremendous things if 13 we work together on the climate change issue. The stakes 14 are high, as we've seen today, stakes for public health, 15 for other aspects of California's economy. And clearly 16 the Board will not, as it never has, shirk its obligation 17 to protect the health of California's children. 18 With that, I'd like turn it over to Ms. 19 Witherspoon to begin staff's presentation. 20 EXECUTIVE OFFICER WITHERSPOON: Thank you, 21 Chairman Lloyd and members of the Board. 22 Staff has been hard at work since the passage of 23 AB 1493 in 2002. Our goal has been to work within the 24 general guidance provided by the bill and develop a 25 specific proposal that achieves significant emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 reductions while preserving the vehicle choices that 2 California consumers now enjoy. This has involved 3 significant effort by our engineering, research, emission 4 inventory and economics staff. 5 In recent months, as we move closer to the staff 6 proposal, the work has proceeded under constant scrutiny 7 by both the environmental community and the auto industry. 8 With this unusually high level of attention, I'd like to 9 express staff's appreciation for all of the hard work by 10 those following our efforts. We will not agree on every 11 issue, but it has been very helpful to have an ongoing 12 technical dialogue. 13 The staff presentation today is divided into 14 several sections. First, Mr. Chuck Shulock will provide 15 background on climate change from the California 16 perspective and the requirements of AB 1493. Then Mr. 17 Steve Albu from the Mobile Source Control Division will 18 describe the staff's technical evaluation of possible 19 greenhouse gas control technologies and the derivation of 20 the proposed emissions standards. Mr. Fereidun Feizollahi 21 from our Research Division will then summarize the staff 22 analysis of environmental and economic impacts of the 23 proposal. Mr. Shulock will return to outline the major 24 issues before you and present the staff's conclusion and 25 recommendation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 The overall staff presentation is approximately 2 one to two hours long, depending on the number of 3 questions from the Board. 4 And Assemblywoman Fran Pavley has arrived. And 5 so we would like to pause at this moment if she has time 6 constraints and give her an opportunity to address the 7 Board before we get into the actual staff presentation. 8 CHAIRPERSON LLOYD: I got the same message at the 9 same time. 10 Do I see Assemblywoman Pavley. 11 I think that's very appropriate. Also we're 12 going to take a break for the court reporter I think 13 around 11 o'clock. 14 EXECUTIVE OFFICER WITHERSPOON: That's correct. 15 We could also pause -- we have several natural pauses in 16 the presentation for questions. And we could pause at any 17 of those moments, if the Assemblywoman is not quite here 18 yet, to take her. 19 CHAIRPERSON LLOYD: I apologize. We don't have a 20 clock in this room. But we have a clock here showing 21 10:22. So if you want to calibrate your watches by that, 22 hopefully that's the same as everybody else's. But that's 23 what we're looking at. 24 Hopefully the Assemblywoman is -- and we'll be 25 taking lunch as well, a lunch time period. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 Oh, two minutes. Okay. 2 BOARD MEMBER DeSAULNIER: Tell a joke, Alan. 3 CHAIRPERSON LLOYD: I think that's your area of 4 specialty. 5 (Laughter.) 6 BOARD MEMBER DeSAULNIER: Yogi Berra. 7 CHAIRPERSON LLOYD: I would say to my colleagues 8 on the Board, be careful as you roll your chairs back. So 9 if the audience sees us disappear at any one time, there's 10 a rapid drop behind us here. 11 BOARD MEMBER DeSAULNIER: I thought that was 12 deliberate. 13 CHAIRPERSON LLOYD: As Chair, I have a fortunate 14 thing. I do have a refreshment table behind me, so I'm 15 prevented from going off. 16 (Laughter.) 17 CHAIRPERSON LLOYD: But, again, I would -- again, 18 I'll say I think it is important, as we've indicated, to 19 seeing the importance of Assemblywoman Fran Pavley and her 20 leadership on this and many other issues. 21 And I'd also like to endorse Ms. Witherspoon's 22 comments in terms of how many people have been involved 23 and the just outstanding work by the staff dedication, on 24 tough issues. And also to thank the industry where 25 they've been able to provide us some data. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 There was a question. The cars outside -- can 2 you comment on where they came from, et cetera? So that 3 people can take a look too in the break. 4 Well, while you're thinking of the answer, I'd 5 like to welcome -- it's a great honor to welcome 6 Assemblywoman Fran Pavley. 7 Fran, your name has been used many times this 8 morning. I must say it's been a real pleasure to have 9 worked with you on this item. I think you epitomize the 10 very best in public service in the Legislature for 11 California. We're tremendously fortunate to have you in a 12 leadership role protecting California's environment and 13 for your inspired leadership on this issue. I know it 14 wasn't easy. But your dedication, your commitment, your 15 perseverance and your toughness is just incredible. So we 16 really appreciate you coming here today. 17 And with that, thank you so much for giving us 18 the opportunity and the direction to follow what you 19 direct in your legislation. 20 Welcome. 21 ASSEMBLYWOMAN PAVLEY: Thank you very much, Mr. 22 Chairman. Very kind words coming from you. And it's been 23 a collaborative approach, as you well know. 24 And I want to congratulate the staff and the 25 Board for coming together and putting together regulations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 that I believe met the intent of the bill when I voted 2 several years ago. You've come up with cost effective 3 maximum feasible regulations to reduce greenhouse gas 4 emissions. And I know as California leads the way on 5 this, other states will soon follow, if not countries. 6 And I have some prepared statements that I'd like to read 7 please. 8 I have reviewed the draft regulations, and I 9 think you're absolutely on track. I think we're going the 10 right direction. And I want to congratulate you, 11 especially your hard working staff, on a job well done. 12 As you are aware, California has led the way 13 before in the development of new technologies to reduce 14 emissions. I saw all that elaborate display of cars 15 outside that demonstrate off-the-shelf technologies that 16 are readily available as I drove my hybrid down to this 17 hearing today. 18 From catalytic converters to unleaded gas, we 19 have not only set the standard that is often frequently 20 copied by other states and countries, but we have and we 21 continue to drive the development of the new technology 22 necessary to meet those standards. 23 This time off-the-top-shelf technologies are 24 readily available for the first phase of implementing the 25 greenhouse gas emission regulations. Unfortunately new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 regulations often meet the resistance, at least initially, 2 of automobile manufacturers. But the public is convinced 3 that American know-how will allow them to drive any car 4 they choose to drive, but in the future they will simply 5 be able to drive cars that operate more efficiently and 6 cleaner. Payback in increased costs will return to the 7 driver within just a few years. 8 Federal law, as you know, allows Californians to 9 set emission standards to meet the compelling and 10 extraordinary needs of this great state. People often ask 11 me: Why should California, just one state, adopt our own 12 greenhouse emission standards? There are many answers to 13 these questions. Of course it's the fifth biggest economy 14 in the world. And with a population of over 35 million 15 people, I'd like to remind people that California has more 16 people than all of Canada. We should and can do our fair 17 share to reduce greenhouse gas emissions. 18 California contributes more greenhouse gas 19 emissions from mobile sources than stationary sources, so 20 we're relatively unique. 21 California is a state that is and will continue 22 to be highly impacted by climate change. Documented 23 evidence has shown the earlier melt of our Sierra snow 24 pack. And you know that affects the reliability and 25 sustainability of our water supply, not only for our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 agricultural community, but our urban water uses as well. 2 Warmer temperatures bring more pollution to our 3 cities and our central valley. Respiratory problems 4 affecting our children and the elderly are dramatically 5 increasing. Did you know statistics show that one out of 6 every seven children in the Fresno public schools carry an 7 inhaler because of their asthma conditions? 8 California also has 1100 miles of beautiful 9 coastline, which is very susceptible to sea level rise. 10 Impacts to ecosystems, loss of property and salt water 11 intrusion into our Delta and coastal plains will increase 12 with climate change. 13 Several other states are looking closely at what 14 we do here today and tomorrow, and they are poised to 15 adopt these same regulations as well. And even Canada and 16 other countries are considering following our lead. 17 Well, you alluded to the hard fight. But I 18 wanted to bring this regulation to you that was signed 19 into law two years ago. But I wanted to recognize the 20 broad coalition and supporters who backed the passage of 21 this legislation. And also many more have come on board 22 just this year to support the adoption of these historic 23 regulations. 24 Of course environmental organizations are 25 supportive, from the Bluewater Network, Sierra Club, NRDC, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 Coalition of Clean Air, and the list goes on and on. 2 But also health organizations, because they get 3 the link between climate change and pollution. California 4 Medical Association recently adopted a resolution, just 5 this year. Also on board is the Nurses Association and 6 the American Lung Association. 7 An interesting group of people actively support 8 these regulations. And that's religious groups in the 9 Interfaith Council. They think it's a moral 10 responsibility for California to lead the way on this 11 effort. 12 Water agencies support these regulations because 13 they understand the relationship between climate change, 14 snow pack and water availability and supply. 15 Cities and counties throughout California and 16 other states support the attempts that this Regulation 17 will make to reduce greenhouse gas emissions. 18 Business groups such as E-2, a Silicon Valley 19 group of business leaders, support this bill as well as 20 the ski industry. 21 National, state, and local elected officials have 22 signed up in support. And editorial support from over ten 23 daily newspapers throughout California have supported the 24 adoption of AB 1493 as well as the regulations in front of 25 you today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 Some people ask me, "Well, what do average 2 Californians think about climate change and regulating 3 greenhouse gases?" A recent poll that was taken in just 4 July of this year by a nonpartisan group called the Public 5 Policy Institute of California asked the three following 6 questions: 7 Question 1 was: Do you believe the theory that 8 increased CO2 and other gases released in the atmosphere 9 will, if unchecked, lead to global warming? The response 10 among all adults, that's Democrats, Republicans and 11 independents -- 2500 Californians were polled -- came up 12 with 71 percent believed so. 13 The second question was: Do you think it is 14 necessary to take steps to counter the effects of global 15 warming right away? Over 76 percent of those polls said, 16 "Yes, right away." 17 The last question relevant to the regulations 18 here today that the FPPC or -- excuse me -- the PPIC posed 19 was: What about the state law that requires all auto 20 makers to further reduce the emissions of greenhouse gases 21 from new cars in California by 2009? Do you support or 22 oppose law?" Well, this had the strongest response. Out 23 of all adults, Republicans, Democrats and independents 24 collectively, 81 percent of those poles said "yes". And 25 in fact, interestingly enough, they asked the people, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 "What car do you drive?" Well, the people who drove 2 SUV's, eight out of the ten said yes. 3 With that kind of support, I think we're on the 4 right track. Well, I know we're on the right track. And 5 I want again thank you, Dr. Lloyd, for your leadership. 6 The administrations, past and present, have been very 7 supportive of California leading the way in adopting these 8 historic regulations that are before you today. 9 Thank you very much for allowing me to speak. 10 CHAIRPERSON LLOYD: Thank you very much for 11 coming down. We appreciate it. 12 (Applause.) 13 EXECUTIVE OFFICER WITHERSPOON: And with that, 14 we'll resume with the staff presentation, starting with 15 Mr. Chuck Shulock. 16 (Thereupon an overhead presentation was 17 Presented as follows.) 18 VEHICLE PROGRAM SPECIALIST SHULOCK: Thank you. 19 Good morning, Mr. Chairman and members. 20 As Executive Officer Witherspoon mentioned, I 21 will begin our staff presentation this morning by briefly 22 covering the highlights of what you are about to hear, 23 along with some background on climate change and our rural 24 development process. Steve Albu then will discuss the 25 staff technology assessment and the standard development PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 process. Fereidun Feizollahi will describe the staff's 2 analysis of the economic and environmental impacts of the 3 staff proposal. I then will finish up with a discussion 4 of various pending issues and our conclusions and 5 recommendation. 6 We have a considerable amount of material to 7 present. We will stop along the way at the conclusion of 8 major sections to allow for questions from the Board. 9 --o0o-- 10 VEHICLE PROGRAM SPECIALIST SHULOCK: Dr. Gong, in 11 your commentary you said, "What's the message?" Well, 12 this slide is intended to give a preview of the main 13 points that we're going to provide for you today. 14 Staff has performed an in-depth evaluation of 15 vehicle technology and has identified a number of 16 technology packages that are available to reduce 17 greenhouse gas emissions. These packages can be applied 18 in a cost-effective manner without reducing vehicle 19 availability. 20 When applied to the light-duty vehicle fleet, 21 this improved technology will result in significant 22 greenhouse gas reductions, on the order of 17 percent in 23 2020 and 27 percent in 2030. The proposal will also have 24 a positive effect on smog-forming pollutants. Because the 25 vehicles using this improved technology will be cheaper to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 operate, the proposal also will result in a net savings 2 for consumers and increased jobs and personal income for 3 the California economy. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: Keeping in 6 mind these highlights, now let's turn to the main body of 7 the staff presentation. 8 Earlier this morning, you heard presentations on 9 climate change, its causes, and its public health impacts. 10 Our presentation will build upon that information with a 11 brief overview focusing on impacts to California. 12 I then will discuss how the action before you 13 today is not a dramatic departure, but rather builds on a 14 long history of California concern over climate change on 15 the part of state agencies and the public as well. 16 --o0o-- 17 VEHICLE PROGRAM SPECIALIST SHULOCK: This slide 18 presents some key points regarding climate change science. 19 Climate change is linked to human activities. California 20 is already experiencing climate change. Climate change 21 can affect California in a variety of ways. And those 22 impacts are expected to be worse in the future. 23 --o0o-- 24 VEHICLE PROGRAM SPECIALIST SHULOCK: Since the 25 industrial revolution human activities have dramatically PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 changed the composition of the atmosphere. Combustion or 2 fossil fuels produces large amounts of carbon dioxide as 3 well as other pollutants. This slide illustrates that the 4 concentration of carbon dioxide in the atmosphere has 5 risen since pre-industrial times and is continuing to 6 increase by approximately one-half percent per year. 7 Human activities have also increased atmospheric 8 concentrations of other greenhouse gases, such as methane 9 and nitrous oxide. Over the past 100 years methane 10 concentrations have doubled, while nitrous oxide levels 11 have risen about 15 percent. 12 --o0o-- 13 VEHICLE PROGRAM SPECIALIST SHULOCK: Climate 14 change is not upon the dim horizon. It is here today. 15 The past century has already seen changes in 16 climate-related conditions such as average temperature, up 17 seven-tenths of a degree Fahrenheit; sea level, up three 18 to eight inches; spring runoff, decreased by 12 percent; 19 and snow melt and spring bloom, advanced by one to three 20 weeks. 21 --o0o-- 22 VEHICLE PROGRAM SPECIALIST SHULOCK: Spring 23 temperatures in California have increased two to three 24 degrees over the period 1950 to 1997. The peak snow melt 25 runoff has come two to three weeks earlier across the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 western United States. In many places vegetation is 2 blooming one to three weeks earlier in the spring since 3 the mid-seventies. This early runoff can disrupt 4 California's vital water storage and delivery system, as 5 will be noted in more detail in a few minutes. 6 --o0o-- 7 VEHICLE PROGRAM SPECIALIST SHULOCK: Our rising 8 sea level has already been observed in California. As is 9 illustrated on this slide of observed sea level at San 10 Francisco, California has seen a seven inch rise in 150 11 years. The present Delta system may not be viable with an 12 additional 8 to 12 inch sea rise. 13 --o0o-- 14 VEHICLE PROGRAM SPECIALIST SHULOCK: Projected 15 climate changes may affect California in a variety of 16 ways. As you have heard this morning, climate change is 17 expected to have primarily negative consequences for 18 public health. Weather and climate can affect human 19 health both directly and indirectly. 20 Direct impacts include adverse health 21 consequences due to temperature extremes and extreme 22 weather events. 23 Indirect impacts include bet vector-borne 24 diseases such as diseases carried by mosquitoes and 25 rodents, allergic diseases, food- and water-borne PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 diseases, and air pollution related health effects. 2 Agriculture is especially vulnerable to regional 3 climate changes such as altered temperatures and rainfall 4 patterns, and new pest problems that could result from 5 climate changes. 6 Climate change would also affect forest 7 ecosystems in ways that increase fire hazards and make 8 forests more susceptible to pests and diseases. 9 Much of California is semi-arid and, thus, water 10 resources are a very important issue. Warmer temperatures 11 may result in a shift in California's water cycle from 12 winter snows to more spring rain. The Sierra snow pack, 13 that functions as the state's largest reservoir, could 14 shrink by a third by 2060 and to half its historic size by 15 2090. 16 Runoff that fills reservoirs will start in 17 mid-winter, not spring. And rain falling on snow will 18 trigger more flooding. 19 The California coast is likely to face rather 20 dramatic sea level rises that could threaten its 21 shorelines. Sea level rise and storm surges could lead to 22 flooding of low-lying property, loss of coastal wetlands, 23 erosion of cliffs and beaches, salt water contamination of 24 drinking water, and impacts on roads, causeways and 25 bridges. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 All of these changes will undoubtedly affect 2 natural areas and habitats. 3 --o0o-- 4 VEHICLE PROGRAM SPECIALIST SHULOCK: This slide 5 shows some mechanisms by which climate change and 6 variability can affect public health. Increases in the 7 number of heat waves may cause an increase in heat-related 8 mortality, depending on the effectiveness of public health 9 interventions. Increases in the number and severity of 10 floods, draughts and wild fires could put more 11 Californians at risk. 12 In addition, California's likely to see changes 13 in the geographic distribution of diseases carried by 14 mosquitoes, as a change in climate affects the range of 15 the insects. 16 There is a direct relationship between ambient 17 air temperatures and the secondary production of ozone. 18 High temperatures, strong sunlight and a stable air mass 19 create the ideal conditions for ozone formation. Higher 20 temperatures also cause an increase in emissions. More 21 fuel evaporates, engines work harder, and the demands on 22 power plants increase. 23 Air pollution is also made worse by increases in 24 natural hydrocarbon emissions during hot weather. As the 25 temperature rises and air quality diminishes, heat-related PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 health problems also increase. 2 --o0o-- 3 VEHICLE PROGRAM SPECIALIST SHULOCK: Climate 4 change could impact California agriculture by increasing 5 the demand for irrigation to meet higher evaporative 6 demand, increasing the incidents of pests, and through 7 direct temperature effects on production, quality and 8 quantity. 9 Dairy products, that are valued at $3.8 billion 10 annually, and grapes, $3.2 billion annually are the two 11 highest value agricultural commodities in California's $30 12 billion agricultural sector. 13 Climate scientists have recently projected that 14 California will get hotter and drier by the end of the 15 century, threatening its valuable wine and dairy 16 industries. Wine-growing regions in California that are 17 currently warm could face challenges in terms of over-ripe 18 fruit, added water stress, and increases in diseases and 19 pests. 20 --o0o-- 21 VEHICLE PROGRAM SPECIALIST SHULOCK: A recent 22 study by university and federal scientists projects the 23 magnitude of potential impacts to California under 24 aggressive and business-as-usual emission control programs 25 over the next 100 years. As you've heard because CO2 and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 other greenhouse gases persist in the atmosphere for many 2 decades, further climate change is inevitable. Even with 3 the use of aggressive control policies, this study 4 projected that average temperature will increase by 4 to 6 5 degrees Fahrenheit, sea level will rise by 8 to 11 inches, 6 and the Sierra snow pack will decrease by 29 to 72 7 percent. 8 These impacts are magnified if we stick to 9 business as usual. Temperature increase is 7 to 10 10 degrees, sea level rise is by 11 to 16 increases, and the 11 snow pack is reduced by 73 to 89 percent. 12 --o0o-- 13 VEHICLE PROGRAM SPECIALIST SHULOCK: Before 14 concluding this discussion of scientific background I'd 15 like to touch on one other aspect. Recent climate change 16 research has uncovered a disturbing feature of the earth's 17 climate system. It is capable of sudden violent shifts. 18 Climate change will not necessarily be gradual as assumed 19 in most climate change projections, but may instead 20 involve sudden jumps between very different states. 21 Researchers first became intrigued by abrupt 22 climate change when they discovered striking evidence of 23 large, abrupt and widespread changes in the past. Recent 24 scientific evidence shows that major and widespread 25 climate changes have occurred with startling speed. For PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 example, roughly half the North Atlantic warming since the 2 last ice age was achieved in only a decade. And it was 3 accompanied by significant climatic changes across most of 4 the globe. 5 Similar events, including local warming as large 6 as 16 degrees, occurred repeatedly during the transition 7 into and out of the last ice age. 8 The past 140-year record indicates that global 9 average surface temperatures have been rising. Eleven of 10 the warmest years on record have occurred since 1990. And 11 the five warmest of all have occurred in the last seven 12 years. Because of these recent extremes the pace at which 13 average global temperatures have been rising has 14 accelerated in the past two decades. 15 The research suggests that once temperature rises 16 above some threshold, adverse weather conditions could 17 develop relatively abruptly. Persistent changes in the 18 atmospheric circulation could cause drops in some regions 19 of 5 to 10 ° Fahrenheit in a single decade. 20 --o0o-- 21 VEHICLE PROGRAM SPECIALIST SHULOCK: Scientists 22 have so far identified only one viable mechanism to induce 23 large global abrupt climate changes: A swift 24 reorganization of the ocean currents circulating around 25 the earth. These currents, collectively known as the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 ocean conveyor, distribute vast quantities of heat around 2 our planet and, thus, play a fundamental role in governing 3 earth's climate. 4 There are some indications today that global 5 warming has reached a threshold where the oceanic 6 circulation could start to be significantly affected. 7 These indications include freshening of the North Atlantic 8 by melting glaciers, increased precipitation and fresh 9 water runoff, making it substantially less salty over the 10 last 40 years. 11 Research suggests that there is a possibility 12 that gradual global warming could lead to a relatively 13 abrupt slowing of the ocean's conveyor, which could lead 14 to harsher winter weather conditions, sharply reduced soil 15 moisture, and more intense winds in certain regions that 16 currently provide a significant fraction of the world's 17 food production. 18 --o0o-- 19 VEHICLE PROGRAM SPECIALIST SHULOCK: Although the 20 scientific understanding of climate change and its effects 21 continues to improve, it has been clear for quite some 22 time that climate change poses a threat to California. 23 Thus it is not surprising that attention has been focused 24 on this issue for many years. The regulation before you 25 today is a logical outgrowth of this previous work. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 In 1988 the California Energy Commission, in 2 conjunction with the Air Resources Board and other state 3 agencies, began to assess climate trends and impacts. The 4 Commission and its staff have mounted a comprehensive 5 research program and have laid the foundation for our 6 current understanding of California greenhouse gas 7 emissions and impacts. 8 The ARB staff report for this rulemaking contains 9 a lengthy chronology of the many climate change studies, 10 reports and other actions that have been undertaken by the 11 Commission and by other state agencies. 12 Recent initiatives by the state have included the 13 establishment of the California Climate Action Registry, 14 the West Coast Governors Global Warming Initiative, and 15 the California Hydrogen Highway Network. Thus, the action 16 before you today builds on a long history of previous 17 climate change activity in California. 18 --o0o-- 19 VEHICLE PROGRAM SPECIALIST SHULOCK: Today's 20 proposal also builds upon long-standing California 21 programs to control motor vehicle emissions. California 22 was the first state in the nation to establish pollution 23 controls for motor vehicles. The current version of our 24 program, known as the Low-Emission Vehicle Program, or LEV 25 II, in shorthand, has been highly successful in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 controlling smog-forming emissions. What is before you 2 today is an expansion of that program to include the 3 regulation of greenhouse gases. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: Finally, 6 today's proposal also builds on a long history of public 7 support for environmental protection. California citizens 8 have consistently called upon their leaders to protect and 9 enhance our natural environment. This support continues 10 today. As Assembly Member Pavley mentioned in her 11 remarks, the Public Policy Institute of California has 12 conducted several recent polls asking about environmental 13 issues. When asked what about the state law that requires 14 all auto makers to further reduce the emissions of 15 greenhouse gases from new cars in California by 2009, for 16 three years in a row 80 percent or more of the public has 17 voiced their support. 18 --o0o-- 19 VEHICLE PROGRAM SPECIALIST SHULOCK: Thus, we are 20 brought here today by the convergence of several factors: 21 Scientific research on climate change, a long history of 22 motor vehicle pollution control, and public support for 23 environmental action. These factors along with a healthy 24 dose of environmental leadership lead to the passage of AB 25 1493 in July of 2002. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 --o0o-- 2 VEHICLE PROGRAM SPECIALIST SHULOCK: AB 1493 3 requires the Air Resources Board to adopt regulations by 4 January 1, 2005, that provide the maximum feasible and 5 cost effective reduction of greenhouse gases from new 6 motor vehicles. The Board must report to the Governor and 7 the Legislature also by January 1, 2005, regarding the 8 action taken. 9 The regulations may not take effect prior to 10 January 1 of 2006. The one year intervening period 11 between January '05 and January '06 is set aside for 12 legislative review of the adopted regulation. 13 Finally, the regulation can apply to 2009 and 14 later model year vehicles. 15 --o0o-- 16 VEHICLE PROGRAM SPECIALIST SHULOCK: The bill 17 provides direction as to what the regulation must include. 18 The regulation must provide maximum flexibility, must 19 recognize actions taken in advance of the effective date, 20 and must allow for alternative means of compliance. 21 --o0o-- 22 VEHICLE PROGRAM SPECIALIST SHULOCK: AB 1493 is 23 quite explicit as well as to some things that the 24 regulation cannot do. The regulation cannot require fees 25 or taxes on vehicles, fuels or travel. Nor can it man the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 sale of any vehicle category such as SUV's, require 2 reduction in vehicle weight, or require a limitation on or 3 reduction of the speed limit or vehicle travel. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: The bill 6 sets forth some ambitious technical targets and an 7 ambitious time line. In this next section I will describe 8 how staff went about the development of our staff proposal 9 to meet those requirements. 10 --o0o-- 11 VEHICLE PROGRAM SPECIALIST SHULOCK: This 12 slide -- I'm sorry. I'm looking -- all right. Thank you. 13 This slide presents a big picture overview of our 14 work. The work was broken into several phases. For the 15 first year and a half we conducted a thorough technical 16 assessment. 17 Could you back up one please. 18 Great. 19 --o0o-- 20 VEHICLE PROGRAM SPECIALIST SHULOCK: The output 21 of this effort was an assessment of the technologies that 22 are available, the best tools to assess the environmental 23 and economic impacts of those technologies, possible 24 approaches to alternative compliance, and similar finding. 25 During this phase we held a number of workshops PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 and provided an update to the Board in November 2003. 2 The next phase was the development of our staff 3 proposal. This involved the integration of our staff 4 findings into a draft staff report, which was released on 5 June 14th. 6 Following the public workshop on the draft we 7 developed our final proposal, which was released on August 8 6th. 9 Throughout the development of the staff proposal 10 we have maintained an open public process with numerous 11 opportunities for comment. 12 --o0o-- 13 VEHICLE PROGRAM SPECIALIST SHULOCK: I won't go 14 through all the details, but this slide lists the various 15 workshops that we have held along the way. Some major 16 milestones are the International Vehicle Technology 17 Symposium held in March of 2003, the April 2004 workshop 18 on our draft technology assessment, and the July 2000 19 workshop on our draft staff report. Thus the major 20 outlines of our proposal have been public for a 21 considerable period of time. 22 While on the subject of process, let me note that 23 we recently reduced an addendum to the final staff report. 24 This addendum updates in response to comments received our 25 cost analysis and our analysis of the resulting economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 impacts. In the addendum we increased our estimate of the 2 average fleet-wide cost of meeting the standard, 3 particularly for passenger cars and small trucks. 4 This did not, however, change any of our 5 fundamental conclusions as to the impact of the regulation 6 on the economy or on consumers. 7 We also now are estimating that the regulation 8 will have a larger beneficial impact on emissions of 9 smog-forming pollutants. All of the numbers that we will 10 be presenting to you today are based on this most recent 11 update. 12 --o0o-- 13 VEHICLE PROGRAM SPECIALIST SHULOCK: All of this 14 work has been conducted within the framework of the 15 Administrative Procedures Act which governs the ARB 16 rulemaking process. Rule adoption also requires 17 compliance with the California Environmental Quality Act, 18 or CEQA. Our staff report and our response to 19 environmental comments fulfill our environmental 20 documentation responsibilities under CEQA. 21 --o0o-- 22 VEHICLE PROGRAM SPECIALIST SHULOCK: In addition 23 to the various workshops and public meetings that were 24 held to seek comment on the staff analysis, the staff 25 report was formerly submitted for peer review. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 --o0o-- 2 VEHICLE PROGRAM SPECIALIST SHULOCK: The report 3 and its supporting documents were submitted for peer 4 review by experts associated with the University of 5 California. The University of California Office of the 6 President administers the peer review process including 7 the identification and approval of the peer reviewers. 8 The reviewers are selected based on their areas of 9 expertise. 10 This slide identifies the six peer reviewers and 11 their affiliations. Two of the reviewers, Professor 12 Hanemann and Professor Prather, are in the audience today. 13 The peer reviewers evaluated the June 14 draft 14 staff report and related technical support documents and 15 provided written comments. In response to those comments 16 staff made several revisions which are reflected in the 17 final staff report released in August. Several of the 18 comments focused on providing additional clarifying 19 language in the draft staff report. 20 The revised staff report as well as staff 21 responses to the peer review comments were also provided 22 to the peer reviewers for a second look. Based on their 23 independent reviews, the peer reviewers concluded that the 24 staff analysis and recommendations relies on the 25 application of sound scientific knowledge, methods and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 practices. 2 In addition to revising the staff report, the 3 document that provides each of the peer reviewers comments 4 and the staff responses was prepared and is available on 5 the ARB website. 6 Next, Mr. Steve Albu will cover the technology 7 assessment and standard development. 8 CHAIRPERSON LLOYD: I think this might be an 9 appropriate spot to take a break before we get into that. 10 And it's now 10:53 by the clock here. So maybe break till 11 10 minutes after 11. 12 I'd also like to highlight before we get into the 13 technology piece here that outside we do have a 2004 14 Nissan Murano with continuously variable transmission, 15 CVT; an Audi -- 2004 Audi TT with six-speed manual 16 transmission with direct shift gear box; 2005 Dodge 17 Magnum, 5.7 liter Hemi with cylinder deactivation; a 2004 18 Acura RSX with an I-V Tech engine; and a 2004 Prius. 19 And the people who can talk about this will be 20 Louise Bedsworth, Union of Concerned Scientists; John 21 Pacheco from Environmental Defense; and Roland Hwang from 22 NRDC. So that's very timely because now we're getting 23 into technical issue. 24 Before we break, does the Board -- my colleagues 25 have any questions of staff at this time? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 Seeing none, then let's break and come back at 10 2 after 11. 3 (Thereupon a recess was taken.) 4 CHAIRPERSON LLOYD: I'd like to get started. I 5 realize all the executive staff have left. So maybe I can 6 get them back together. 7 BOARD MEMBER RIORDAN: Ms. Terry's coming. She's 8 here. 9 CHAIRPERSON LLOYD: Thank you, Lynn, for leading 10 the way. 11 BOARD MEMBER RIORDAN: We'll turn it over to you, 12 Lynn. 13 (Laughter.) 14 CHAIRPERSON LLOYD: Now 11:15. I can see the 15 danger of letting people go and then getting them back. 16 DEPUTY EXECUTIVE OFFICER TERRY: I lost a Board 17 member on the way back. 18 CHAIRPERSON LLOYD: You lost a Board member. 19 (Laughter.) 20 CHAIRPERSON LLOYD: Well, I would like to make 21 sure that we've got Board members here and staff. 22 I would like to say that, my understanding from 23 staff, is an additional technology on display. It's a 24 Jeep Liberty with a CO2 air-conditioning system. Is that 25 correct? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 That's also out there. So sorry I didn't add 2 that in. So it would be something good to look at. 3 Steve, are you going to continue, or is it Paul? 4 ENGINEERING STUDIES BRANCH CHIEF ALBU: It's me. 5 CHAIRPERSON LLOYD: You are. Okay. 6 Well, I'd like to wait. 7 Oh, there she is. 8 I think also before we start our Legal Counsel, 9 Ms. Johnston, wanted to say something about the course 10 before us. 11 GENERAL COUNSEL JOHNSTON: I just wanted to point 12 out to the Board members that you've received testimony 13 that's covered with a pink sheet. And that is 14 confidential business information that we will be treating 15 confidentially. So we will be collecting the testimony 16 again during lunch period and at the end of day to protect 17 its confidentiality. 18 Thank you. 19 CHAIRPERSON LLOYD: So we should -- 20 BOARD MEMBER PINEDA: Diane, you may want to just 21 confirm that I did not receive a copy. 22 GENERAL COUNSEL JOHNSTON: Right. And Board 23 Member Pineda has not received this information because of 24 her earlier statement. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 CHAIRPERSON LLOYD: Thank you for clarifying 2 that. 3 I guess with that -- we're still missing two 4 Board members, but -- they're on their way. So since 5 they're on their way, we will -- I think we should start. 6 ENGINEERING STUDIES BRANCH CHIEF ALBU: Good 7 morning, Chairman Lloyd and members of the Board. 8 I would like to first discuss staff's assessment 9 of greenhouse gas emission reduction technologies for 10 motor vehicles. Then I will describe how the emission 11 standards were derived and cover the cost to consumers of 12 implementing the proposed requirements. 13 Next I will describe the role of alternative 14 fuels in reducing climate change emissions. 15 Last I will cover how early credits can be earned 16 in alternative means of compliance available to the 17 manufacturer. 18 --o0o-- 19 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 20 primary sources of greenhouse gas emissions from motor 21 vehicles include the vehicle power train, the 22 air-conditioning system, and a minor contribution from the 23 after-treatment system. 24 Most of the climate change emissions are carbon 25 dioxide, and the remainder include the air-conditioning PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 system refrigerant, methane, and a small amount of nitrous 2 oxide emitted from the catalytic converter as it warms up. 3 --o0o-- 4 ENGINEERING STUDIES BRANCH CHIEF ALBU: In March 5 2003 the Air Resources Board hosted a three-day 6 international vehicle technology symposium. It brought 7 together numerous experts on vehicle climate change 8 emission reduction technologies. Leading researchers from 9 the auto industry, vehicle component suppliers, academia, 10 and vehicle simulation firms were invited to discuss 11 numerous technologies and their potential to reduce 12 climate change emissions in the 2009 through 2016 13 timeframe. 14 Unlike smog-forming pollutants, vehicle climate 15 change emissions cannot be controlled primarily by 16 after-treatment. Accordingly, specific technology areas 17 that were presented at the symposium included engine and 18 drive train modifications to reduce carbon dioxide, or 19 CO2, modifications to mobile air-conditioning systems to 20 reduced the CO2 and hydrofluorocarbon, or HFC, emissions 21 associated with their use in vehicles, and alternative 22 fuels. 23 Some small reductions in methane and nitrous 24 oxide can be achieved through catalytic converter 25 improvements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 --o0o-- 2 ENGINEERING STUDIES BRANCH CHIEF ALBU: Besides 3 using information presented at the symposium, staff also 4 conducted an extensive review of the technical information 5 and consulted with experts from the automotive component 6 suppliers to identify promising greenhouse gas reduction 7 technologies. 8 Staff also relied on and participated in the 9 technical study initiated by the Northeast States Center 10 for a Clean Air Future, or NESCCAF. This study is the 11 most comprehensive investigation of motor vehicle 12 greenhouse gas reduction technologies undertaken to date. 13 --o0o-- 14 ENGINEERING STUDIES BRANCH CHIEF ALBU: Listed 15 here are some of the technologies that will be widely 16 available in the near term from 2009 through 2012. They 17 include improvements to the engine, transmission and 18 accessories. 19 --o0o-- 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: Two of 21 the near-term technologies are illustrated here, along 22 with current production vehicles incorporating them. 23 Cylinder deactivation allowed the engine to operate on 24 fewer cylinders when load is reduced, during light 25 acceleration and steady cruise operation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 The automated manual transmission reduces energy 2 losses by eliminating the torque converter in conventional 3 automatic transmissions and by incorporating more gear 4 ranges that allow the engine to operate more often in an 5 optimum speed and load range. Both technologies provide 6 substantial CO2 reductions. 7 --o0o-- 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: Variable 9 valve timing and lift can reduce greenhouse gas emissions 10 by more optimally controlling when the valves open and 11 close and by how much they open and close. 12 Illustrated here are several current model 13 vehicles that incorporate variable valve timing and lift 14 in their engines. 15 --o0o-- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: Other 17 newer term greenhouse gas reduction technologies and the 18 vehicle models now using them are shown in this slide. 19 Volkswagen Audi currently has advanced gas and indirect 20 injection engines available in 2005, but also incorporate 21 continuously variable valve timing. 22 The new V8 engine in the BMW 5-series is probably 23 the most advanced engine technology available today in 24 terms of low global warming emissions. It incorporates 25 gasoline direct injection with continuously variable valve PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 timing and lift that can eliminate the need for a throttle 2 under normal driving conditions. 3 Turbocharging is widely used in Europe and 4 offered on several popular models in the U.S. today, 5 including Volvo with its refined 5-cylinder, low pressure 6 turbo system. 7 --o0o-- 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: Some of 9 the greenhouse gas reduction technologies staff 10 anticipates will be widely available in the midterm, 2013 11 through 2016, are listed here. 12 They include the integrated starter generator, 13 camless valve actuation, gasoline homogeneous combustion 14 compression ignition engines, and more efficient low-leak 15 air-conditioning systems using an alternative refrigerant 16 with global warming potential such as R-152A. 17 --o0o-- 18 ENGINEERING STUDIES BRANCH CHIEF ALBU: While the 19 integrated starter generator is currently available on the 20 GMC Silverado, Chevrolet Sierra, and Dodge Ram trucks, 21 staff has classified this technology as midterm since it 22 would not be in high-volume production till the 2013 to 23 2016 timeframe. 24 Two other promising technologies currently being 25 developed by industry are: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 Camless valve actuation. It provides fully 2 optimized engine control for lowest global warming 3 emissions under all driving conditions. 4 And homogeneous combustion compression ignition 5 engines that enable gasoline engines to operate more like 6 diesels. 7 --o0o-- 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 9 technology shown here were also evaluated by staff. While 10 they're not required to meet the proposed standards, they 11 do provide manufacturers with greater flexibility to 12 utilize alternative approaches to reduce vehicle 13 greenhouse gas emissions and thereby provide a cushion for 14 meeting our requirements. 15 --o0o-- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 17 NESCCAF study I alluded to earlier relied on computer 18 simulations performed by AVL Power Train Engineering, Inc. 19 of Livonia, Michigan. 20 In order to properly evaluate the greenhouse gas 21 reduction potential of combinations of technologies 22 computer modeling is required. This is because different 23 technologies can address the same engine losses; 24 therefore, simple summation of individual technology 25 benefits can overstate the real potential to reduce global PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 warming emissions. 2 For example, variable valve timing and lift, 3 turbocharging, and even the number of gears or type of 4 transmission, each reduces engine pumping losses. 5 Therefore, simply adding the potential benefits of these 6 individual technologies would overstate the combined 7 impact on greenhouse gas emissions. 8 In the modeling exercise it should be noted that 9 projected improvements in vehicle performance for model 10 year 2009 were maintained. Thus the standards being 11 proposed today assume that performance continues to 12 improve compared to current vehicles. 13 --o0o-- 14 ENGINEERING STUDIES BRANCH CHIEF ALBU: This 15 schematic illustrates the computer model CRUISE used by 16 AVL to evaluate the potential greenhouse gas emission 17 reductions of the technology packages selected for the 18 large truck or sport utility class. CRUISE is a vehicle 19 simulation and power train analysis tool that consists of 20 an assembly of carefully calibrated modules for all of the 21 vehicle subsystems that can affect global warming 22 emissions. 23 Computer models such as CRUISE are widely used by 24 industry itself during development of new engine and drive 25 train technologies to evaluate their potential to improve PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 performance or reduce global warming emissions. 2 Computer modeling is the norm in industry today, 3 because building numerous prototype engines or drive 4 trains for evaluation would be prohibitively expensive and 5 time consuming. 6 --o0o-- 7 ENGINEERING STUDIES BRANCH CHIEF ALBU: Numerous 8 technology packages were modeled by AVL for the five 9 vehicle classes in the NESCCAF study. These classes, 10 spanning the range of light-duty vehicles, include small 11 car, large car, minivan, small truck or sport utility 12 vehicle, and large truck or large sport utility vehicle. 13 The technology packages were classified as either 14 near-term or midterm, depending on staff's analysis as to 15 whether they would be commercially viable in the 2009 to 16 2012 or 2013 to 2016 time frames. 17 I will pause here for a moment in case the Board 18 has any questions about our analysis approach. 19 --o0o-- 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: Okay. 21 Well, seeing none, I'll continue. 22 In determining the appropriate emission standards 23 staff selected the two or three near and midterm 24 technology packages that achieved the most reductions at 25 reasonable costs for each of the vehicle classes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 --o0o-- 2 ENGINEERING STUDIES BRANCH CHIEF ALBU: To assure 3 that the emission standards were feasible for all 4 manufacturers, they were set relative to the manufacturer 5 with the worst starting position. Since greenhouse gas 6 emissions are strongly correlated to vehicle weight, the 7 emission standards for the two emission categories were 8 set to the manufacturer with the highest fleet average 9 weight based on data from the California Department of 10 Motor Vehicles for 2002, which in this case is General 11 Motors. 12 This approach ensures that model -- complete and 13 model availability would be retained for all 14 manufacturers. Even the largest sport utility vehicles 15 would be able to comply. Consumer choice is maintained. 16 --o0o-- 17 ENGINEERING STUDIES BRANCH CHIEF ALBU: This 18 chart illustrates the wide variety of technology packages 19 that were modeled, in this example for the large car 20 class. In conjunction with NESCCAF, staff selected an 21 array of technology combinations that make sense to 22 combine from an engineering standpoint for reducing 23 greenhouse gas emissions. 24 Each line on this chart represents one such 25 combination of technologies. We picked near and midterm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 combination packages that gave the most benefit for the 2 least cost for setting the standards. These packages are 3 highlighted in red. Similar technology package matrices 4 were modeled for the other vehicle classes. 5 --o0o-- 6 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 7 proposed emission standards combine the four greenhouse 8 gas emissions from motor vehicles: Carbon dioxide, 9 methane, nitrous oxide, and hydrofluorocarbons from 10 vehicle air-conditioning systems. 11 The standards are expressed in CO2-equivalent 12 terms so that each greenhouse gas is weighted according to 13 its global warming potential when determining compliance 14 with the emissions standards. 15 --o0o-- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 17 CO2-equivalent emission standards in phasing requirements 18 are shown here. Greenhouse gas emissions from new 19 vehicles will be reduced from 2002 levels by approximately 20 22 percent in 2012 and by 30 percent in 2016 when the 21 standards are fully phased in. 22 Again, if there's any questions, I can maybe 23 address them in terms of the standard. 24 CHAIRPERSON LLOYD: You skipped by me before 25 without realizing you were pausing. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 When you looked at the simulation model, you used 2 the AVL model. Are there any other models out there or -- 3 you know, people who are familiar with modeling, they 4 always look at -- typically can shop around for different 5 models. But what's so unique about the AVL model and how 6 does it compare with other potential models? 7 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, 8 others may use a model vehicle simulation, it's called 9 Vehicle Sim. There's a number of others actually. But 10 CRUISE is one that's been used by this company because 11 it's been developed in conjunction with the European 12 manufacturers to give them a process for which they could 13 model improvements in technologies. So it's basically a 14 combined effort of the European Union manufacturers to 15 come up with a modeling approach that's highly reliable 16 and projects the improvements very reliably and 17 accurately. 18 So in that sense we think it's one of the best. 19 CHAIRPERSON LLOYD: And then you mention also 20 that -- you just got to the standards. Before you get 21 into costs, how do those standards compare with the 22 voluntary agreements of one forty grant -- I know 23 there's -- it's not an easy answer. But are we in the 24 ballpark as you look at that and -- 25 ENGINEERING STUDIES BRANCH CHIEF ALBU: You're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 right, it's not an easy answer because there's so many 2 differences in test cycle and so on. But I would say that 3 it's generally fairly characteristic of what's being done 4 in Europe. It's fairly similar. I think that's the best 5 way to answer it. 6 CHAIRPERSON LLOYD: And then based on your 7 experience over the years of looking at some of the 8 technology options and as you've looked to couple these 9 together, tried to meet some reasonable standards, and if 10 they're complying with the legislation -- I know, Steve, 11 you've been at it a long time. How would you say, is this 12 completely different than what we've done before? Do you 13 see the technologies -- the many technologies similar or 14 broader or that the -- a technical feasibility? 15 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, I 16 think that from an engineering standpoint it involves 17 evaluation of new technologies, which we did in the 18 Low-Emission Vehicle Program. And we're doing the same 19 kind of thing here. We work with industry as best we can 20 to determine what the advantage of certain technologies 21 are as opposed to others. And then we try to quantify 22 those, the improvements we can gain from them. 23 I think some of the packages that we put together 24 actually make a great deal of sense. And I think that 25 going forward, they will provide very attractive vehicles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 to consumers, both in drivability and in terms of reduced 2 operating costs. 3 So we think it's a good program. 4 CHAIRPERSON LLOYD: Have you driven any of the 5 vehicles that you talk about? 6 ENGINEERING STUDIES BRANCH CHIEF ALBU: Yes. I 7 drove the Chrysler 300C when it came out at the press 8 review in Palm Springs. It has cylinder deactivation. I 9 was expecting to see some kind of jerking in and out of 10 turning off four of their 8 cylinders. And I can tell 11 you, I was very impressed. I mean there was absolutely 12 seamless operation. And I was expecting maybe there might 13 be some noise or vibration that might come through because 14 of the resonance that comes typically when you're 15 operating on only half the cylinders. But it was 16 impeccably subdued. I couldn't even detect when it was 17 going in and out except if I listened extremely hard to 18 just one very characteristic note in the exhaust. And it 19 was just -- if you had the radio on you could not tell in 20 any way. 21 So I think they deserve a great deal of credit 22 for bringing this technology to the forefront and being 23 first with it. 24 I've also driven the Audi with -- actually it was 25 a Volkswagen variant of it -- with the automated manual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 transmission. And I must say that the shift quality in 2 that transmission was every bit as good as any automatic 3 I've driven. So there's issues with taking off from the 4 start, which it's not quite the same phenomenon that we 5 may be used to in the U.S. But it's still something that 6 they're working on to make as good. 7 So I've driven those. And of course I've driven 8 a lot of vehicles with overhead cam systems, with variable 9 valve timing. I just driven a multitude of those. And of 10 course they tend to rev much more easily than typical 11 engines. And they sound good, feel good. And I think 12 customers like them. 13 CHAIRPERSON LLOYD: Any questions from my 14 colleagues on this piece of the presentation? 15 Thank you very much. 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: Okay. I 17 will now discuss the technology costs for the proposed 18 program. 19 --o0o-- 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: Component 21 costs for the technology packages were determined by the 22 Martec Group. 23 This slide is for a presentation by Martec at the 24 technology workshop that will be held in April of this 25 year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 It illustrates the comprehensive approach they 2 used to derive component costs. Martec is used by 3 industry itself to determine costs of new technologies and 4 their expected volumes in future years. They interview 5 numerous departments within the vehicle manufacturers in 6 addition to Tier 1 and 2 suppliers to develop their 7 forecasts. 8 ARB staff consulted with Martec on an informal 9 basis in developing costs for the Low-Emission Vehicle 10 Program over the last 15 years. Because ARB costs have 11 been very accurate in the past, we are confident in the 12 cost projections for this rulemaking as well. 13 Costs were determined for higher volume 14 production, assuming at least three auto makers employing 15 the hardware at 500,000 units per year and at least three 16 suppliers available for each auto maker. 17 In order to meet our long-term cost projection 18 guidelines, staff applied additional cost reductions for 19 some selected emerging technologies to account for design 20 innovation. And higher volume learning was assumed by 21 Martec. 22 Staff then applied a markup factor of 1.4 to 23 derive the retail price equivalent to determine the 24 ultimate cost to the consumer. This factor is consistent 25 with factors used in studies by the U.S. EPA and others on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 vehicle technologies. 2 --o0o-- 3 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 4 average retail price increase for new vehicles ranges from 5 $277 in the near term to $1,064 dollars in the midterm. 6 However, these cost increases are more than offset by 7 savings and operating costs, as I will show in the next 8 slide. 9 --o0o-- 10 ENGINEERING STUDIES BRANCH CHIEF ALBU: While 11 prices will increase, consumers will realize a net savings 12 when they purchase a new vehicle. For example, for a 13 PC/LDT1 purchased in 2012 when the near-term standards are 14 fully phased in, the retail price increase is projected to 15 be $367. Assuming a five-year loan at 5 percent interest 16 rate, monthly payments increase by about $7. However, 17 with a monthly savings in operating costs of $18, the 18 consumer would realize a net savings of $11. 19 In 2016 when the retail price increase is 20 projected to be $1,064, the consumer will still realize a 21 monthly net savings of $3. 22 Similar cost increases can be expected for the 23 larger trucks and SUV's. However, there would still be a 24 net monthly savings of about $7 in 2016. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 ENGINEERING STUDIES BRANCH CHIEF ALBU: To 2 summarize, the proposed maximum feasible and 3 cost-effective emission standards are based on the most 4 extensive vehicle power train modeling exercise to date. 5 The methodology used by staff to evaluate engine and 6 vehicle technologies is the same one used by industry. 7 Our cost assessment also relies on the source used by the 8 automobile industry and with which we have had prior 9 experience in the Low-Emission Vehicle Program. 10 Cost-effective, technically feasible reductions of up to 11 30 percent have been demonstrated. 12 --o0o-- 13 CHAIRPERSON LLOYD: I'd ask you to go back on -- 14 you made one statement when you were -- I guess before on 15 slide 56 or maybe -- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: 17 Fifty-sixth? 18 CHAIRPERSON LLOYD: Yeah, you made some statement 19 there about staff's ability to predict future costs. Can 20 you repeat that statement? 21 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, 22 just to amplify what I said, we worked with Martec and to 23 go back and forth to discuss the technologies and their 24 costs. And they talk to everybody in industry. And 25 industry in fact goes to them to determine what's going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 happen in the future, what products are going to be in 2 high volume most likely, which ones consumers want and 3 which ones manufacturers are going to tend to want to 4 produce, you know, what costs will they be. 5 We have worked with Martec in the past in the 6 Low-Emission Vehicle Program since the early 1990's. Just 7 on an informal basis I have met some of the people there 8 at an SAE convention, and we just started to talk about 9 technology on low-emission vehicles, catalytic converters 10 or whatnot. And we just saw that our costs were pretty 11 much in line, in synch. And so they would have some 12 input, we would have some input, and together we would 13 kind of come up with the right numbers. And it's been the 14 same process here. Only in this case it's more formal due 15 to the NESCCAF study. 16 CHAIRPERSON LLOYD: And you have pretty good 17 confidence in the numbers? 18 ENGINEERING STUDIES BRANCH CHIEF ALBU: I do. I 19 think they're very good. I really do. I mean it's -- of 20 course when the industry looks forward, I mean even in 21 the -- program we had the issue come up where, when you're 22 looking down the road ten or more years, as we are here, 23 when we project fairly low costs, they just throw up their 24 hands and say, "This is impossible. It can't be done." 25 And they -- of course they look from a more near-term PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 perspective and more volumes initially, putting it in 2 prototypes. And these are all daunting issues to them as 3 they look forward. 4 But we try to look beyond that and ask ourselves, 5 "Is it good public policy to be requiring these kinds of 6 technologies?" Do we think they will really come down in 7 price in long-term, higher volume production? And when we 8 look at that evaluation we think it can be done, and 9 that's why we, you know, proposed what we did today. But 10 industry normally does react this way. We expect it. But 11 reality is in the Low-Emission Vehicle Program they've met 12 or they actually exceeded our expectations in terms of 13 costs for technology. 14 In fact, Peter Welsh in one of our workshops, 15 indicated it's been very difficult for consumers to even 16 notice the cost increase in these new vehicles that are 17 basically putting out near zero tailpipe emissions now 18 once they're warmed up. So it's the same thing here, I 19 believe. 20 CHAIRPERSON LLOYD: Thank you. 21 Dr. Gong. 22 BOARD MEMBER GONG: A question about 23 collaboration between staff and the automobile 24 manufacturers. 25 Since I wasn't on the Board at the time, but I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 was just wondering in terms of that listing of all the 2 workshops and other venues. Have you collaborated much 3 with the automobile makers in delivering and calculating 4 these numbers? 5 ENGINEERING STUDIES BRANCH CHIEF ALBU: In this 6 rulemaking we haven't had as much opportunity. So I've 7 had to rely on talking more to suppliers rather than the 8 vehicle manufacturers themselves. So, for example, we 9 would talk with some of the companies that provide 10 integrated starter generators or electric water pumps or 11 things -- components like that. The auto manufacturers 12 themselves have been more reluctant to participate in this 13 particular process. 14 I do have my normal contacts in the industry that 15 I've dealt with over 20 or more years. And we talk. And 16 of course they can inform me that way. But in the 17 workshop process industry's not been very forthcoming 18 honestly. 19 CHAIRPERSON LLOYD: Again, I think it's worth 20 pointing out, as you did earlier, these are performance 21 standards. And you did a scenario as illustrative that it 22 can be complied with. But obviously the flexibility with 23 the manufacturers, a different company will choose 24 different paths based on the performance standards that we 25 set there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 ENGINEERING STUDIES BRANCH CHIEF ALBU: And 2 that's really an important point. I think in reading some 3 of the comments we received, some of them seemed to 4 suggest they would pick some technologies for the near 5 term and then switch them all and do something different 6 for the midterm. But that's not what we had in mind. We 7 think that what they should be doing, at least in my view, 8 is to start with an approach and then follow through with 9 it in the midterm and add to it. And that way the 10 technology roll out or cadence, as they call it, makes 11 much more sense, and so on. 12 For example, we see already the Volkswagen, Audi, 13 even BMW, they've got certain approaches. Both starting 14 with the turbocharged engines. They look at direct 15 injection, variable valve trains, and so on. They can 16 pursue that in the near term. And in the midterm they can 17 look at adding integrated starter generators. So that's 18 one approach. Or they could go with camless valve 19 actuation systems in the midterm as well. 20 So there's all kinds of approaches. It's best to 21 just decide on one and go forward. 22 CHAIRPERSON LLOYD: Yeah, I'm continually in awe 23 of what they're able to do with the different 24 technologies -- 25 ENGINEERING STUDIES BRANCH CHIEF ALBU: They PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 always exceed our expectations. 2 CHAIRPERSON LLOYD: Ms. Witherspoon. 3 EXECUTIVE OFFICER WITHERSPOON: Dr. Gong, I was 4 just going to add as a point of reference, that we rarely 5 find ourselves in agreement with the automotive industry 6 on what proposed regulations will cost. However, in our 7 dialogues with them we do benefit a great deal on our 8 feasibility assessments. 9 And one of the major changes in the staff 10 proposal from the initial draft to the final draft was a 11 change in the implementation schedule from six to eight 12 years based on those conversations and a more thorough 13 understanding of the degree of difficulty that would be 14 affecting the automotive industry. So it has a great 15 weight in staff's consideration. But over 30, 40 years 16 we've never found a way to agree on cost estimates. 17 CHAIRPERSON LLOYD: Thank you. 18 ENGINEERING STUDIES BRANCH CHIEF ALBU: Okay. 19 Moving on then. The next portion of the staff 20 presentation addresses some other aspects of the proposed 21 standard. 22 --o0o-- 23 ENGINEERING STUDIES BRANCH CHIEF ALBU: AB 1493 24 directs that the regulation should include credits for 25 early action and provide flexibility through the use of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 alternative methods of compliance. 2 I will now provide an overview of staff's 3 proposal for addressing these two areas. 4 --o0o-- 5 ENGINEERING STUDIES BRANCH CHIEF ALBU: 6 Concerning early credits, AB 1493 states that the 7 Board shall grant emission reduction credits for any 8 reductions in greenhouse gas emissions from motor vehicles 9 that were achieved prior to the operative date of the 10 regulations. 11 After substantial internal discussions and 12 interactions with stakeholders, staff has designed a 13 program that meets the intent of the legislation, while 14 ensuring that the credits meet state and federal program 15 guidelines. 16 --o0o-- 17 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 18 proposed program is intended to reward those actions taken 19 to accelerate the commercialization of technologies to 20 reduce climate change emissions. 21 --o0o-- 22 ENGINEERING STUDIES BRANCH CHIEF ALBU: 23 Specifically the staff proposes a credit for 24 early action and should be available for model years 2000 25 to 2008. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 The baseline against which an auto maker's 2 emissions are measured is the fully phased-in near-term 3 standard for 2012. For example, for passenger cars, our 4 proposed fully phased-in near-term standard is 233 grams 5 per mile CO2 equivalent. Thus under the proposal an auto 6 maker's fleet average emissions for passenger cars in each 7 model year 2000 to 2008 will be compared to this 233 gram 8 standard. Auto makers would receive credit for emission 9 reductions below 233 grams. 10 To ensure that the regulation ultimately achieves 11 the greatest possible climate change reductions, staff 12 proposes that the credits generated by early compliance 13 retain full value through the 2013 model year. The value 14 of these credits will then decline over time. 15 --o0o-- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: AB 1493 17 also specifies that the State Board must provide 18 flexibility to the maximum extent feasible in the means by 19 which a person subject to the regulations may comply with 20 them. 21 The Board also must ensure that alternative 22 methods of compliance achieve equivalent or greater 23 emission reductions than achieved by the regulations. 24 --o0o-- 25 ENGINEERING STUDIES BRANCH CHIEF ALBU: In order PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 to provide flexibility manufacturers can average -- and 2 create emissions. They can also aggregate across 3 greenhouse gas pollutants. 4 For eligible projects to receive alternative 5 compliance credits, staff reviews the standard state and 6 federal program guidelines, specifically that the credits 7 are real, surplus, verifiable, enforceable and 8 quantifiable. 9 --o0o-- 10 ENGINEERING STUDIES BRANCH CHIEF ALBU: Staff 11 also proposes additional limitations on the generation and 12 use of credits. 13 Projects must take place in California. They 14 must be sponsored by an auto manufacturer. And they must 15 involve 2009 and later light-duty vehicles or the 16 increased use of alternative fuels in such vehicles. And 17 they must not cause an increase in criteria pollutant or 18 toxic air contaminant emissions. 19 --o0o-- 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: I will 21 now turn to the alternative fuels and the role they can 22 play in achieving our greenhouse gas reduction goals. 23 --o0o-- 24 ENGINEERING STUDIES BRANCH CHIEF ALBU: 25 Alternative fueled vehicles have been used for many years PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 to reduce vehicular criteria pollutant emissions and 2 provide energy diversity benefits. This assessment is 3 focused on those alternative fuel vehicles that could be 4 reasonably expected to be available in volume production 5 beginning in 2009. 6 --o0o-- 7 ENGINEERING STUDIES BRANCH CHIEF ALBU: ARB staff 8 has assessed the overall greenhouse gas emissions and 9 costs of several alternative fuel vehicles and compared 10 them to a gasoline vehicle. 11 We have conducted a well-to-wheels analysis that 12 evaluates both vehicle tailpipe and upstream climate 13 change emissions. 14 Upstream emissions are those from activities that 15 occur prior to the point of vehicle refueling and include 16 emissions from the extraction, transport, processing, 17 distribution, and marketing of the fuel. 18 The analysis is designed to provide a general 19 sense of the potential for alternative fuel vehicles to 20 provide cost-effective approaches to comply with the 21 regulation. As such, the assessment does not evaluate 22 infrastructure and marketability issues. 23 --o0o-- 24 ENGINEERING STUDIES BRANCH CHIEF ALBU: 25 The alternative fuels considered by staff include PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 compressed natural gas, liquid petroleum gas, ethanol 2 derived from corn, electricity used in battery electric 3 vehicles and hybrid electric vehicles capable of an 4 all-electric range of 20 miles, and hydrogen. 5 To assess cost, staff has assumed that each of 6 the technologies evaluated would be produced in commercial 7 quantities. 8 --o0o-- 9 ENGINEERING STUDIES BRANCH CHIEF ALBU: Now I 10 will discuss the types of credits that alternative fuel 11 vehicles receive and how upstream emissions play into 12 these credits. 13 Dedicated alternative fuel vehicles get full 14 credit for emission benefits including upstream emissions. 15 Bi-fuel vehicles get credit only when they can document 16 the use of the alternative fuel. 17 --o0o-- 18 ENGINEERING STUDIES BRANCH CHIEF ALBU: The 19 production and distribution of alternative fuels results 20 in different greenhouse gas upstream emissions than the 21 production and distribution of gasoline. 22 Under staff's proposal gasoline upstream 23 emissions would be used as the baseline. All alternative 24 fuels would have their vehicle emissions adjusted by an 25 appropriate factor to compensate for the relative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 differences in upstream emissions. 2 Staff has developed special emission rates on a 3 grams-per-mile basis for technologies such as hydrogen and 4 electricity, that have no direct greenhouse gas emissions. 5 --o0o-- 6 ENGINEERING STUDIES BRANCH CHIEF ALBU: This 7 table illustrates the calculated adjustment values for 8 each fuel. For CNG vehicles, since the fraction of 9 emissions that occur upstream are slightly higher than the 10 fraction of emissions that occur at the tailpipe 11 relatively to gasoline, the adjustment factor is slightly 12 greater than one. 13 From this table you can also see that LPG and E85 14 are lower than one, indicating that relative to gasoline 15 the upstream emissions represent a smaller fraction of the 16 overall upstream plus tailpipe emissions. 17 For CNG, LPG and Ethanol 85 tailpipe exhaust 18 emissions would be multiplied with this adjustment factor 19 to determine compliance with the applicable standards. 20 For hydrogen and electric powered vehicles the 21 only greenhouse gas emissions would be HFC, or 22 hydrofluorocarbon, emissions from the air-conditioning 23 system. Therefore, to determine the upstream emissions of 24 other greenhouse gas pollutants, staff quantified the 25 upstream emission related to production of hydrogen or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 electricity and developed an estimate of total emissions 2 associated with hydrogen and electric vehicles. This 3 number can be adjusted to better reflect the actual 4 emissions once such vehicles are in production. 5 --o0o-- 6 ENGINEERING STUDIES BRANCH CHIEF ALBU: Although 7 neither hydrogen nor electric vehicles were used to 8 establish the proposed greenhouse gas emission standards, 9 by 2009 there will be more of these vehicles on the road 10 than there are today, and they will likely be cleaner than 11 illustrated in the last slide for two reasons: 12 First, the numbers shown in the previous table do 13 not reflect the potential benefits associated with the 14 California Hydrogen Highway Network. 15 In April of this year, Governor Schwarzenegger 16 signs an Executive Order that established the California 17 Hydrogen Highway Network, declaring all of California's 21 18 interstate highways to be a part of this network and 19 calling for a plan to ensure the availability of hydrogen 20 in the 2010 timeframe. 21 This effort is led by CalEPA Secretary Terry 22 Tamminen and Chairman Lloyd, and he is one of the 23 executive panel members. Dr. Lloyd is joined on this 24 panel by a diverse group of stakeholders from the public 25 and private sector and a representative for environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 justice concerns. 2 In the Executive Order the Governor specifically 3 requires the significant and increasing use of the 4 renewables, such as biomass and the solar, to generate 5 hydrogen. 6 Further, the Executive Officer stipulates that 7 the hydrogen's highway effort provide an overall reduction 8 in greenhouse gas and other pollutants. 9 Given the clear direction from the Governor, the 10 executive panel will be considering the inclusion of a 11 2010 goal to produce hydrogen from at least 20 percent 12 renewable resources. 13 The panel will also be considering a goal to 14 reach at least a 30 percent reduction in greenhouse gas 15 pollutants from hydrogen vehicles relative to gasoline 16 vehicles. 17 Meeting these goals would result in hydrogen 18 vehicles emitting less greenhouse gas emissions than seen 19 in the previous table. 20 The second reason we expect the numbers shown in 21 the previous table to decrease is the state's commitment 22 to its renewable portfolio standard, or RPS. The RPS 23 currently requires at least 20 percent of the electric 24 sold in California to come from renewable sources by the 25 year 2017. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 The state is committed to reaching the 20 percent 2 goal in 2010 rather than 2017. And the utilities and 3 Public Utilities Commission are in full support of moving 4 the goal forward to 2010. 5 The California hydrogen highway effort along with 6 the state's renewable portfolio standard would decrease 7 greenhouse gas pollutants from both hydrogen and electric 8 vehicles. 9 --o0o-- 10 ENGINEERING STUDIES BRANCH CHIEF ALBU: In 11 summary, alternative fuel vehicles are already available, 12 although in limited quantities. Staff's analysis 13 indicates that substantial reductions in greenhouse gas 14 pollutants are possible through their use. And for two 15 alternative fuel vehicle technologies the life cycle costs 16 of doing so are positive. 17 Further, there are efforts underway, including 18 the California Hydrogen Highway Network, that enjoy the 19 support of both industry and government and help to 20 mitigate some of the cost and fuel availability issues for 21 alternative fuel vehicles. 22 --o0o-- 23 ENGINEERING STUDIES BRANCH CHIEF ALBU: With that 24 I can pause once again and see if there's any questions 25 from Board members. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 CHAIRPERSON LLOYD: Questions from colleagues? 2 And I think you captured pretty well clearly the 3 work on the California Hydrogen Highway Network. It is 4 pretty fast moving and there's still a lot to be done 5 there. 6 And also I think your comment about the 30 7 percent target by 2010, obviously that's still undergoing 8 discussion as well. 9 ENGINEERING STUDIES BRANCH CHIEF ALBU: Right. 10 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 11 Thank you. 12 Good morning. My presentation will provide an 13 over -- 14 CHAIRPERSON LLOYD: Can you introduce yourself. 15 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 16 Yes. My name is Fereidun Feizollahi, and I'm the 17 manager of the Economic Studies Section. 18 My presentation will provide an overview of the 19 economic and the environmental impacts of the proposed 20 regulations. 21 --o0o-- 22 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 23 Staff's economic analysis consists of three 24 parts: 25 The first part focuses on characterizing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 statewide impacts. It is a required element of our 2 analysis for proposed regulations. 3 The second part of the analysis focuses on 4 characterizing the potential impact of proposed 5 regulations on low-income and minority communities, 6 including their ability to attract and maintain 7 businesses. 8 Further consideration of community impacts was 9 included in the AB 1493 language. 10 The third part presents analyses that were done 11 as a supplement to the required analysis in an effort to 12 provide additional insights. 13 --o0o-- 14 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: All 15 regulations that the ARB proposes are required to assess 16 the potential impacts on business expansion or elimination 17 on individuals as measured by impacts on employment, on 18 California business competitiveness with other states, and 19 on the state and local governments. 20 --o0o-- 21 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 22 estimate the impacts on California's economy, we first 23 analyzed what the economy will pay for the regulations and 24 what it gets back through savings. The results of these 25 calculations were used as input to a model of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 California economy. 2 The cost of the regulations spread over the life 3 of the vehicles was calculated by annualizing the costs of 4 the new vehicles as they are purchased every year, and 5 accumulating the cost for every year of the vehicle life. 6 The annualized costs for the year 2020, 11 years 7 after the regulation takes effect, totals about $1.2 8 billion. This amount represents the cost of the vehicle 9 model years 2009 through 2020 that are in the fleet. 10 In the same year these vehicles will have $5.3 11 billion less in operating costs. This is a net savings of 12 $4.1 billion. In 2030 the net savings would be about 7 13 billion or $4 of savings for each $1 of cost, a ratio of 4 14 to 1. 15 --o0o-- 16 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 17 Because there are net savings to the consumers 18 and the economy, business activity picks up and creates 19 jobs and income. Using a model developed by UC Berkeley 20 called E-gram we assessed the impacts on the California 21 economy. 22 This model was initially developed for the 23 Department of Finance and is used for tax revenue impact 24 analysis. It was refined in late 1990's to characterize 25 the potential impact of major regulations on the economy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 and has been a fundamental tool in the ARB's assessment of 2 major air quality programs such as state implementation 3 plans. 4 The assessment shows that personal income in the 5 state goes up by about $5 billion in 2020 and 7 billion in 6 2030. Further, jobs increase by about 53,000 above what 7 the economy otherwise would create in 2020 and 77,000 more 8 jobs in 2030. 9 --o0o-- 10 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 11 summarize, the regulation has positive net impacts on 12 California's economy. Personal income and jobs increase, 13 leading to expanded business and economic activity, 14 without significantly affecting the competitiveness of 15 California businesses with other states. 16 There are net savings for the consumers and state 17 and local governments and the economy. 18 --o0o-- 19 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: Now 20 I will present impacts on the low-income and minority 21 communities. 22 --o0o-- 23 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 24 Low-income and minority communities are most 25 often the first and hardest hit when it comes to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 health effects of pollution and economic hardship. 2 Therefore, the health effects of climate change are likely 3 to harm these communities to a greater degree than more 4 affluent communities. Staff has worked with an outside 5 contractor redefining progress to document and 6 characterize these impacts on California's communities. 7 They will be testifying today regarding their preliminary 8 results. 9 --o0o-- 10 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 11 Along with working to characterize the impacts of 12 climate change in the absence of our regulations, the ARB 13 has been committed to developing a partnership with the 14 environment justice stakeholders and community members to 15 ensure that our climate change regulations do not cause 16 any adverse impact on the environmental justice 17 communities. 18 Input at the community level has been essential 19 to having a successful partnership and successful 20 regulation. 21 --o0o-- 22 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 23 This slide shows how staff has been working to 24 involve communities throughout the process. You'll see 25 that in addition to attending local environmental justice PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 forums and meetings, staff held four public workshops to 2 address the climate change regulations in an environmental 3 justice context. 4 --o0o-- 5 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: For 6 low-income communities we assessed impacts on businesses 7 and households. 8 --o0o-- 9 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: We 10 used the San Diego environmental justice communities as an 11 example of the potential impact on low-income communities. 12 We use San Diego because they're environmental justice 13 community designations accurately correspond to business 14 and job data available to us. We believe this analysis 15 provides considerable insight on how low-income 16 communities in the state may be impacted. 17 As part of our assessment, we considered 18 businesses such as gasoline stations, auto repair shops, 19 and auto repair shops in low-income communities, as these 20 sectors are the most likely to be adversely impacted. 21 We see that because consumers spend less on fuel, 22 the growth in gasoline distribution would slow. That is, 23 increasing trend in gasoline station business will be 24 somewhat lower. Because of this, there could be fewer 25 jobs at the gas station than the baseline. But these jobs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 would be more than offset by the San Diego share of the 2 job increases, up 53,000, in the other sectors that I 3 showed you earlier. 4 --o0o-- 5 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 6 assess the impact on low-income households we calculated 7 the cost and savings that a typical household would be 8 expected to experience. On average, such individuals tend 9 to buy ten-year-old cars and drive about 9,000 miles per 10 year. We used a three-year financing term at 10 percent 11 in real interest rate to calculate monthly payments for a 12 $245 price increase. 13 We see that the monthly payment increase of about 14 $8 per month is well covered by the operating cost savings 15 of $14. Further, if they drive more than assumed here, 16 the benefits increase. 17 --o0o-- 18 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 19 provide additional perspective on staff's analysis and 20 findings, the supplemental analysis of the proposed 21 regulations was conducted that employed newly developed 22 tools and studies. 23 Though these tools require further refinement, 24 they are useful for providing insight with respect to 25 potential economic impacts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 --o0o-- 2 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 3 Specifically we analyze the potential impacts of 4 cost increases associated with the proposed regulation on 5 vehicle sales and the impact of reduced operating costs on 6 vehicle miles that the consumers drive. 7 --o0o-- 8 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 9 supplemental analysis is not a part of the ARB's 10 traditional economic impact analysis. This analysis 11 shows -- the supplemental analysis shows that impacts are 12 indeed small. 13 --o0o-- 14 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 15 assess the fleet turnover effect we used an existing model 16 of the consumer choice. It is called CARBITS. This model 17 simulates vehicle purchases of consumers, even prices and 18 other attributes of the vehicle. 19 Specifically we were interested in better 20 understanding the impact of the proposed regulations on 21 new vehicle sales as well as the overall age of the 22 vehicle fleet. 23 The inputs to the model are based on technology 24 assessment presented earlier. Vehicles impacted by the 25 proposed regulations would differ in two ways: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 1) Their price would be higher; and 2) their 2 operating costs would be lower. 3 We ran the model for a predicted future baseline 4 scenario and the regulatory scenario to assess the changes 5 in sales, the fleet size, and the fleet age. Then we 6 compared the results of the scenarios to assess the 7 regulation's impact. 8 --o0o-- 9 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 10 model results show that the impacts on sales are positive 11 for a number of years. That is, the sales rise at a 12 faster rate than the baseline. The reason for the 13 positive impact is that the regulation reduces operating 14 costs without changing other attributes at a modest cost 15 for the improved technology. 16 The rate of vehicle sales growth slows slightly 17 when the midterm measures take effect. Overall the model 18 shows that vehicle sales continue to grow throughout the 19 analysis but at different rates. 20 --o0o-- 21 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 22 impacts on vehicle fleet turnover were estimated by 23 looking at the weighted average age of the vehicles in the 24 fleet. 25 The model results show that the fleet gets PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 younger for a few years as a result of increased sales of 2 new cars, and then ages slightly for a few years. The 3 differences are on the order of less than a month and very 4 insignificant. 5 --o0o-- 6 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 7 consumer choice analyses of sales and fleet turnover were 8 then to see if there are any significant impacts on 9 climate change and criteria pollutant emissions. The 10 results of the CARBITS model were fed into ARB's motor 11 vehicle emission model, called EMFAC. The results showed 12 that the emission impacts were small and in all cases less 13 than 1 percent of the total emissions, and more than 14 offset by the upstream emission reductions, which I will 15 present later. 16 --o0o-- 17 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 18 vehicles complying with the proposed regulation would have 19 lower operating costs. Lower operating costs may cause an 20 increase in driving. This phenomenon is known as a 21 rebound effect in the literature. 22 The rebound effect says people tend to drive 23 their cars more if the vehicle operating costs decline. 24 The Literature has a number of estimates, but mostly at 25 the national level. To assess the extent of the rebound PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 effect in California, the ARB sponsored research by UC 2 Irvine to estimate California's specific rebound effect. 3 Their estimate shows a 3-percent rebound effect. 4 That is, for example, if operating costs were to declined 5 by 25 percent in 2020, consumers may increase the number 6 of miles they drive by 0.75 percent, that is, 3 percent of 7 the 25 percent. 8 To get additional perspective, the staff asked 9 the Southern California Association of Governments to run 10 their travel demand base model to estimate the rebound 11 effect. Their estimates of a rebound effect were lower 12 than UC Irvine's estimate. 13 --o0o-- 14 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 15 rebound effect may lead to increased emissions. EMFAC was 16 used again to analyze impacts. Based on the UC Irvine 17 estimates of the rebound effect, the impacts on the 18 emissions are very small as well as the case for the fleet 19 turnover and more than offset by the upstream emission 20 reductions. 21 --o0o-- 22 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 23 Throughout the staff report an estimated price of 24 gasoline of a dollar seventy-four per gallon was used. 25 This price is a long-term forecast for gasoline by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 California Energy Commission. 2 However, to provide additional perspective on our 3 analysis, we also ran our analyses using $2.30 per gallon. 4 The results show that all positive impacts are 5 amplified. Operating cost savings increase, payback 6 period shortens, net savings of new vehicles almost 7 double, and job creation accelerates. 8 --o0o-- 9 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 10 staff performed the supplemental analysis in addition to 11 the standard analysis and found that based on the 12 regulatory scenario, there is no strong consumer response 13 that would alter the conclusions under positive impacts of 14 the regulation. 15 --o0o-- 16 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 17 supplemental analysis supports staff's conclusions of 18 positive impacts on the California economy and consumers. 19 --o0o-- 20 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 21 summarize. The staff's standard analysis supported by the 22 supplemental analysis lead to the following findings on 23 the economic impacts of the proposed regulation: 24 Increases in jobs and income. The regulation 25 will lead to -- result in increasing jobs and income, net PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 savings for consumers, positive impacts on the 2 communities, increase in number of businesses, no adverse 3 impact on California competitiveness with other states, 4 and net savings for state and local governments. 5 --o0o-- 6 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 7 Next I present the impacts of the proposed 8 regulation on the environments. 9 --o0o-- 10 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: To 11 assess the environmental impacts ARB staff developed a 12 climate change emission inventory. This inventory relies 13 on traditional tools such as the impact motor vehicle 14 emissions model, as well as new vehicle tests for N2O 15 emissions and development of the new mass balanced model 16 for HFC emissions. 17 In this section I will present the estimated 18 emissions reductions from the proposed regulation and our 19 analysis of cost effectiveness. I will finish by looking 20 at the environmental impacts including emissions 21 reductions from the upstream fuel cycle. 22 --o0o-- 23 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 24 This slide shows the impact of the regulation on 25 light-duty vehicle CO2-equivalent emissions in California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 out to calendar 2030. 2 The black line shows baseline emissions without 3 the regulation. The pink line shows these emissions with 4 the regulations in place. In 2020 omissions from the 5 light-duty fleet are lowered by 18 percent from the base 6 case, a reduction of 88,000 CO2-equivalent tons per day. 7 In 2030 the emissions are lowered by 27 percent, 8 a reduction of 155,000 CO2-equivalent tons per day. 9 With the regulation in place, 2020 and 2030 10 emissions will be lower than 2010. 11 --o0o-- 12 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 13 Typically emission control regulations impose a 14 cost. However, AB 1493 requires that the regulation be 15 economical to the consumer over the life cycle of the 16 vehicle. 17 This regulation is cost effective because it 18 saves money. There is a substantial savings to consumer 19 from the reduction in vehicle-operating costs. 20 --o0o-- 21 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: In 22 addition to the vehicle emissions reductions, the 23 regulation also results in reductions to upstream 24 emissions from the motor vehicle fuel cycle. These 25 additional upstream reductions are estimated to be 27,000 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 CO2-equivalent tons per day in 2020. 2 The rebound effect results in a slight increase 3 in CO2-equivalent emissions due to the projected increase 4 in vehicle miles traveled. Our analysis of fleet turnover 5 shows a slight decrease in CO2-equivalent emissions, as 6 turnover is slow. The older vehicles that remain in the 7 fleet longer tend to be driven fewer miles than newer 8 vehicles, resulting in decreased emissions. 9 The combined impact of rebound and fleet turnover 10 is a slight additional reduction in CO2-equivalent 11 emissions. 12 The regulation results in a net reduction of over 13 115,000 tons per day of CO2-equivalent emissions. 14 --o0o-- 15 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: The 16 regulation will also reduce smog-forming emissions from 17 upstream processes by 6,000 per day in 2020. As 18 previously discussed, the rebound effect and fleet 19 turnover increase smog-forming emissions slightly. The 20 combined impact of these effects is to reduce smog-forming 21 ROG and NOx emissions by 3.2 tons per day and reduce 22 particulate matter emissions by one-half ton per day. 23 --o0o-- 24 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: In 25 summary, staff has found the proposed regulation to have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 positive environmental impacts. In addition to reducing 2 climate change emissions, the regulation improves air 3 quality by reducing smog-forming and particulate matter 4 emissions. The regulation is also expected to reduce 5 adverse impacts on water quality due to fuel leaks, 6 spills, and storm water discharge, and the technologies 7 and strategies required to meet the regulations are 8 projected to reduce future demand for fuel relative to 9 current trends. 10 --o0o-- 11 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 12 That concludes my presentation. 13 CHAIRPERSON LLOYD: Questions? 14 Dr. Gong. 15 BOARD MEMBER GONG: You've had a series of 16 workshops with low-income communities and individuals. 17 Could you or other staff summarize what their response is 18 to the costs that you've just illustrated for us? 19 AIR POLLUTION SPECIALIST TUTT: Because there's a 20 cost savings and -- my name's Eileen Tutt. I'm a staff 21 here at ARB. Because there were cost savings associated, 22 overall cost savings, the environmental justice community 23 was not worried about the cost. And in particular we 24 looked at used vehicles purchased by community members, 25 and we found that the cost savings associated with used PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 vehicles was actually larger than the cost savings 2 associated with new vehicles, and that the communities 3 themselves benefited. And just to give you a 4 perspective -- and I think we'll hear from a few 5 environmental justice folks today. But the overwhelming 6 response from the environmental justice community members 7 that we met with was support of the regulations and 8 concern about the public health effects associated with 9 climate change and not the costs. 10 CHAIRPERSON LLOYD: And I think you're right. We 11 have some representatives from the communities which 12 should be able to address that first hand. 13 Supervisor DeSaulnier. 14 BOARD MEMBER DeSAULNIER: On slide number 94, I 15 appreciate the emphasis on rebound. But just so the 16 public understands, much to my chagrin the legislation 17 doesn't allow us to address VMT, as I often engage staff 18 with why we don't do more about land use and VMT. 19 But, Catherine, could you respond to that? 20 Although I'm delighted to see that Sierra Research is 21 concerned about the growth in VMT. 22 (Laughter.) 23 EXECUTIVE OFFICER WITHERSPOON: The most 24 exhaustive analysis of strategies to reduce VMT was 25 included as an appendix -- most recent analysis was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 included as an appendix in the petroleum dependency report 2 that the Air Resources Board developed in concert with the 3 California Energy Commission and analyze the strength of 4 each particular measure to reduce vehicles' miles traveled 5 and petroleum demand in California. Those same strategies 6 are still on the table, as California is beginning to 7 assess should it have goals for the entire state for 8 reducing climate change, not just this single regulation, 9 but multiple strategies to reduce those effects. 10 So I think that's probably where the next round 11 of dialogue will come from, in addition to the long 12 standard of congestion relief. Our citizens are crying 13 out for relief. And there's no way construction's going 14 to keep pace with demand. And so there's a desire to 15 reduce the burden on our highway structure. 16 BOARD MEMBER DeSAULNIER: It's nice to hear you 17 make those comments. 18 And the second thing maybe staff could comment a 19 little bit about: The cost effectiveness and some of the 20 editorial comment you put in the staff report about the 21 secondary costs, the costs, for instance, to El Nino that 22 you mention in it or the costs that some writers talk 23 about prospectively in insurance costs and things like 24 that. So you've got the real cost effectiveness as our 25 normal statutory model, but you've included some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 commentary about secondary costs. 2 Chuck. 3 VEHICLE PROGRAM SPECIALIST SHULOCK: I -- 4 BOARD MEMBER DeSAULNIER: Is that just 5 background? 6 VEHICLE PROGRAM SPECIALIST SHULOCK: Yes, that 7 was not included in the actual numerical cost analysis. 8 BOARD MEMBER DeSAULNIER: And now I'm going to 9 bring it up because I think it's important in the 10 conquest -- Freudian slip -- the context of what we talk 11 about as the cost effectiveness applies to the model. But 12 there are secondary costs, many of us believe, that affect 13 this rule. 14 VEHICLE PROGRAM SPECIALIST SHULOCK: Yes. 15 BOARD MEMBER DeSAULNIER: Thank you, Mr. 16 Chairman. 17 CHAIRPERSON LLOYD: Good point of clarification. 18 Ms. Berg. 19 BOARD MEMBER BERG: Thank you. 20 On the creation of the new jobs, what type of 21 jobs are we talking about, the 53,000? What sectors? 22 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 23 Most of the sectors were in the food and 24 entertainment industry as well as the public health. 25 Almost 30 percent of it was in the public health. In PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 other words, people tend to spend their savings on 2 public -- I'm sorry, not public health -- personal health 3 on the health sector. 4 BOARD MEMBER BERG: And so are we saying that the 5 low-income sectors are going to be able to take advantage 6 going from working at a gas station to entertainment or 7 the public care? 8 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 9 Or in the food industry or retail. A number 10 of -- the retail industry includes a lot of other sectors 11 that usually unskilled or low-skilled labor can 12 participate in. 13 BOARD MEMBER BERG: Okay. Then on slide -- I 14 need to have glasses, I think. I think it was slide 15 number 99, regulation reduction in climate change 16 emissions. 17 VEHICLE PROGRAM SPECIALIST SHULOCK: Let me 18 interject. 19 Can I just throw in one thing here. For some 20 reason that I haven't been able to figure out the 21 numbering on the screen slides is off by one from the 22 numbering on the handouts. So -- 23 BOARD MEMBER BERG: Okay. It's either then 98 or 24 100. 25 VEHICLE PROGRAM SPECIALIST SHULOCK: If you could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 just read the title. 2 BOARD MEMBER BERG: That one right there. 3 VEHICLE PROGRAM SPECIALIST SHULOCK: Okay. 4 Great. 5 BOARD MEMBER BERG: It shows a pretty dramatic 6 savings and yet in 2010 will be the first year that the 7 new cars -- we would have a savings. And so does this 8 assume -- what are the assumptions here to get this 9 savings on the climate change emissions? That the impact 10 of the new cars that are being sold in 2009 forward is 11 going to make this type of impact that the other cars that 12 stay on the road -- 13 EXECUTIVE OFFICER WITHERSPOON: Mrs. Berg, this 14 slide indicates that the standard begins to be phased in 15 in 2009. And what you see is the gradual penetration of 16 new car sales accumulating over the subsequent years. So 17 that by 2020 we have an 18-percent reduction over the 18 baseline, emissions that would have happened had there 19 been no regulation. But it is the effect of new car sales 20 and gradual turnover in the fleet, beginning with the 2009 21 model year. 22 BOARD MEMBER BERG: And these numbers are based 23 on historical purchases of new cars? 24 EXECUTIVE OFFICER WITHERSPOON: Historical 25 purchases plus the growth rate in population and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 growth rate in vehicles sales. 2 BOARD MEMBER BERG: And you bring up an 3 interesting point on the population increase. We're 4 assuming that the population increase will be purchasing 5 more new cars than the population increase will be 6 purchasing old cars? 7 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: No, 8 we're not assuming that there will be any kind of a change 9 in the composition of the sales because of the population 10 increase. The same kind of proportionality will remain 11 throughout the analysis or 2030. 12 BOARD MEMBER BERG: Okay. Thank you very much. 13 CHAIRPERSON LLOYD: Thank you. 14 Any more questions? 15 Thank you. 16 VEHICLE PROGRAM SPECIALIST SHULOCK: Okay. Well 17 then I will finish up here. 18 Now that we've gone through the staff proposal 19 and its impacts, we thought it would be useful to spend 20 some time going over a number of issues that have been 21 raised during our work so far. 22 There will be likely more in your testimony 23 today. This touches on what we've heard to date. 24 Back up please. 25 Yeah, thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 --o0o-- 2 VEHICLE PROGRAM SPECIALIST SHULOCK: We've 3 divided the various issues into three categories: Those 4 related to the process, some general concerns, and a 5 number of issues that deal with the specifics of our 6 regulatory proposal. 7 --o0o-- 8 VEHICLE PROGRAM SPECIALIST SHULOCK: Turning 9 first to process concerns, we've heard arguments that 10 there has not been sufficient time to review the details 11 of the staff analysis. 12 As I noted at the outset, we've been at work for 13 a long time. All along the way we have provided material 14 for public comment and we have attempted to engage all 15 interested parties in a substantive discussion of our 16 findings. 17 We released a detailed technology assessment on 18 April 1st and a complete draft staff report on June 14. 19 Thus the major outlines of our work have been out in the 20 public for several months. 21 You may recall that I mentioned earlier an 22 addendum to the staff report. We recently released the 23 addendum as the result of public comment and additional 24 staff analysis. In and of itself this is not unusual. 25 The purpose of the public comment period is to show our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 work so that any issues can be identified and corrected. 2 --o0o-- 3 VEHICLE PROGRAM SPECIALIST SHULOCK: The next 4 process issue relates to the availability of supporting 5 documentation. Throughout our work we've attempted to 6 provide all of the underlying spreadsheets, models, 7 details, analysis, et cetera, on an ongoing basis. 8 One specific narrow issue has come up with 9 respect to the CARBITS model, which is the source of our 10 estimates of the effect of the regulation on vehicle 11 sales. This model was developed by researchers at UC 12 Davis. We contracted with them to apply the model to this 13 regulation. They provided us with a working copy of the 14 model, which we had made available to all interested 15 parties, along with considerable documentation and other 16 explanation. 17 This model was developed by experts in the field 18 and has been peer reviewed, and we have confidence in its 19 validity. Consultants to the auto makers have asked for 20 some of the underlying survey data that was collected when 21 the model was first developed. This is prior to our use 22 in this regulation. And they have also asked for the 23 actual source code by which the model operates. We do not 24 have this information. It's proprietary information owned 25 by the researchers. And from our standpoint it was not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 needed in order to appropriately apply the model to the 2 task at hand. We thus have not been able to make the 3 requested information available. 4 It's important to bear in mind, however, that 5 with the copy of the model that we've provided the 6 consultants are fully able to use it, replicate the staff 7 results, and investigate the use of different inputs and 8 assumptions. 9 --o0o-- 10 VEHICLE PROGRAM SPECIALIST SHULOCK: Next I will 11 speak to two general concerns that have been expressed. 12 The first involves the interaction of this regulation with 13 federal statutes. 14 During the implementation of AB 1493 two main 15 arguments have been raised concerning the Board's 16 authority to adopt this regulation. First, some question 17 whether the Board can act to regulate greenhouse gases 18 when U.S. EPA has not done so under the Federal Clean Air 19 Act. The answer is that consistent with decades of 20 practice under the Federal Clean Air Act, California 21 through the Air Resources Board adopts its own emission 22 standards for new motor vehicles and motor vehicle engines 23 and then seeks a waiver of federal preemption for those 24 standards. 25 U.S. EPA need not regulate greenhouse gases or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 other emissions as air pollutants before California acts. 2 The second concern centers on the effect of the 3 Federal Energy Policy and Conservation Act, or EPCA, on 4 the proposed regulations. The argument offered is that 5 the EPCA fuel economy statutes preempt California from 6 adopting emission standards that may have an effect on the 7 amount of fuel used by the California fleet. 8 While the line of reasoning is complex, again the 9 ultimate answer is that for a regulation like this one, 10 intended to regulate greenhouse gases, the ARB is not 11 precluded from acting because the regulation may 12 indirectly affect the amount of fuel regulated vehicles 13 will use. 14 --o0o-- 15 VEHICLE PROGRAM SPECIALIST SHULOCK: The second 16 overarching concern has to do with the effect of the 17 California regulation. At our workshop some commenters 18 argue that California accounts for only a small portion of 19 world greenhouse gas emissions and, therefore, California 20 controls will not solve the climate change problem. 21 We recognize that a California regulation viewed 22 in isolation is not sufficient to solve climate change. 23 That does not mean, however, that the answer is to do 24 nothing. Rather there are compelling reasons for 25 California to act. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 First of all, as you've heard, our analysis 2 concludes that the proposal provides economic and 3 environmental benefits for California. Thus it is worth 4 pursuing on its own merits. 5 More importantly, any supposition that California 6 is acting alone is simply not supported by the facts. 7 Other nations have already adopted motor vehicle 8 greenhouse gas measures and other states have indicated 9 that they plan to adopt California standards when 10 possible. 11 There's also a long history of California motor 12 vehicle pollution controls being adopted by other 13 jurisdictions. Thus what you do here today can provide a 14 model for still others to follow. Thus California would 15 not be acting in isolation, but would rather be doing its 16 fair share to help address a significant problem that 17 cannot be solved by any single institution. 18 --o0o-- 19 VEHICLE PROGRAM SPECIALIST SHULOCK: Finally, I 20 will address several issues that have been raised 21 regarding the implications of the staff proposal. 22 These issues include the effect of the proposal 23 on vehicle availability, vehicle attributes and vehicle 24 cost, its effect on manufacturer competitive positions, 25 and the stringency of the standard and our treatment of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 alternative fuels. 2 --o0o-- 3 VEHICLE PROGRAM SPECIALIST SHULOCK: First, will 4 the proposal restrict vehicle availability? 5 Our answer is no. As was explained by Steve Albu 6 during his presentation, the standard was set such that it 7 can be met by all manufacturers while maintaining today's 8 fleet mix. The standard requires improved technology. 9 But it does not require manufacturers to build different 10 types of vehicles. We have been very careful throughout 11 the process to ensure this outcome. 12 --o0o-- 13 VEHICLE PROGRAM SPECIALIST SHULOCK: Second, will 14 the proposal affect vehicle attributes such as speed, 15 performance, size or towing capacity? 16 Again, the answer is no. In our modeling we 17 assumed that the vehicles would maintain projected model 18 year 2009 baseline performance levels. Thus the vehicles 19 will be able to perform equivalent to vehicles that you 20 can buy today. 21 The same holds true with respect to weight. No 22 downsizing is needed in order to meet these standards. 23 Rather they can be met entirely through the application of 24 technology. Thus the proposal does not require any 25 changes to the fleet mix. Given that the fleet mix is not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 affected, by extension the staff proposal does not have 2 any implications regarding vehicle safety. 3 --o0o-- 4 VEHICLE PROGRAM SPECIALIST SHULOCK: Next, some 5 will argue that the vehicles modified to comply with the 6 regulation will be too costly. Here, first of all, you 7 must bear in mind that our analysis shows that the 8 technology needed to comply with the regulation will pay 9 for itself due to reduced vehicle operating costs. For 10 example, as we've said earlier, the near-term standards 11 would have a payback on average of somewhat less than two 12 years. 13 Thus, for the near-term standards our 14 supplemental analysis actually shows a small increase in 15 vehicle sales because vehicles are more attractive to the 16 consumers. 17 The supplemental analysis projects a slight sales 18 decrease as a result of the midterm standards. But these 19 effects are small due to the net overall savings to 20 consumers. 21 --o0o-- 22 VEHICLE PROGRAM SPECIALIST SHULOCK: Next, will 23 the proposal require excessive investment on the part of 24 auto manufacturers? 25 Again, the proposal has been carefully designed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 to ensure that this is not the case. The staff proposal 2 provides ample lead time. No changes are needed until 3 model year 2009. And ample phase-in time: The standards 4 are then phased in over an eight-year period. Thus, 5 manufacturers can build the needed modifications into 6 their production plans. They will not be required to tear 7 up existing facilities or plans. Rather they can 8 incorporate the needed technology into future plan 9 redesigns. 10 In addition, many of the components that will be 11 needed to comply are typically provided by outside 12 suppliers rather than by the auto manufacturers 13 themselves. 14 --o0o-- 15 VEHICLE PROGRAM SPECIALIST SHULOCK: Next, will 16 the staff proposal result in unacceptable competitive 17 impacts? 18 Again our answer is no. This concern is based on 19 differences in fleet mix across manufacturers. In looking 20 closely at the implications of the proposal, however, the 21 cost of control for the smaller vehicles, what we call the 22 PC and LDT 1 category, is similar for all manufacturers. 23 Thus, any differences are concentrated in the large truck 24 category. Here the cost of control does vary across 25 manufacturers according to their model mix. Any such PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 differences, however, are expected to decrease over time 2 as more manufacturers move into and emphasize the LDT 2 or 3 large truck market. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: Should the 6 standard be strengthened? You may hear arguments that the 7 standard should be made more stringent than what we 8 propose by making the phase in more rapid or requiring 9 more technology on the vehicles. 10 Again our answer is no. From the staff's 11 standpoint, we have carefully constructed the proposal so 12 as to achieve the maximum feasible and cost-effective 13 reduction as required by the legislative language. We 14 believe strongly that the proposed regulation is feasible. 15 But we also recognize that manufacturers face 16 severe lead time and resource constraints. That is the 17 reason that we actually extended the phase-in period in 18 our final proposal, as compared to the draft we released 19 in June. We wanted to be sure that the proposal was 20 consistent with the timing for manufacturer redesigns. 21 --o0o-- 22 VEHICLE PROGRAM SPECIALIST SHULOCK: Finally, 23 does the proposal adequately address alternative fuels? 24 Here our answer is yes. Dedicated alternative 25 fuel vehicles, by which I mean vehicles that use only one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 fuel, such as natural gas, electricity, or hydrogen, are 2 treated fairly under the regulation. They get full credit 3 for any emission benefits provided, including any upstream 4 benefits due to the use of a different fuel. 5 Bi-fuel vehicles are vehicles that can run on 6 either of two fuels. Consistent with our general practice 7 in the LEV II program, we would assume in our 8 certification process that such vehicles use the dirtier 9 fuel. But if a manufacturer can demonstrate and document 10 the actual use of the alternative fuel, we have 11 established a mechanism to give credit as appropriate. 12 Let me note here that we have received some 13 comments regarding how certain details of our proposed 14 regulation as it relates to grid-connected hybrid vehicles 15 could be changed to better accomplish our intent to 16 provide appropriate credit. You will likely hear 17 testimony on these points later today. Our initial 18 reaction is that some of these suggestions have merit. 19 We also have received some comment that this 20 regulation should actually establish a new fuel 21 specification; that is, we should require the use of a low 22 carbon fuel. We have evaluated such an approach and have 23 concluded that it is not economical to the consumer within 24 the guidelines established by AB 1493. And, therefore, we 25 are not pursuing such a measure in this rulemaking. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 Outside of AB 1493, however, we are taking a look 2 at possible ways to incorporate greenhouse gas 3 considerations into our fuels program. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: At long last 6 we would like to summarize our conclusions and staff 7 recommendation. 8 --o0o-- 9 VEHICLE PROGRAM SPECIALIST SHULOCK: As I hope we 10 have demonstrated throughout this presentation, the staff 11 proposal complies with the legislative mandate. We have 12 been exceedingly careful throughout our development of the 13 staff proposal to incorporate all the considerations that 14 the bill says are necessary and completely avoid any 15 outcomes that the bill says are forbidden. 16 In addition, the proposal is good for public 17 health and the environment, good for the California 18 economy and good for consumers. It reduces greenhouse 19 gases and smog forming emissions. It increases statewide 20 jobs and personal income. It preserves consumer choice. 21 And it results in a net savings for consumers. 22 --o0o-- 23 VEHICLE PROGRAM SPECIALIST SHULOCK: For all of 24 these reasons staff recommends that the Board adopt the 25 staff proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 Thank you very much for your attention. 2 CHAIRPERSON LLOYD: Thank you very much for a 3 very thorough job from staff. Excellent. 4 Comments, questions -- more questions from our 5 colleagues? 6 Mrs. Riordan. 7 BOARD MEMBER RIORDAN: Mr. Chairman, I would like 8 to comment by saying I thought the staff presentation was 9 an excellent one, very well organized and very thoughtful. 10 And the principal part that I like and I think is 11 very helpful to the general public and, that is, the 12 general concerns section that you just went through. I 13 think that is a very carefully thought out addendum, I 14 guess you might call, to the staff presentation. And I 15 very much appreciate that, and I think the general public 16 will too. And hopefully as the media continues to cover 17 this meeting, it will be helpful to them to convey then 18 also to others, because it really answers some very good 19 questions that the general public has. 20 Thank you. 21 CHAIRPERSON LLOYD: I was also listening very 22 intently, Chuck, to your -- the way you dealt with the 23 alternate fuels and use of alternate fuel, decarbonization 24 in fuels. I thought you handled it very adeptly, and 25 you -- as you'd indicated, we'd agreed not to address in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 this particular regulation. 2 But clearly, as we move ahead, and addressing 3 greenhouse gases, the whole issue of fuels, obviously 4 looking at the California Hydrogen Highway, looking at 5 pieces of the ZEV regulation, all tend to reduce 6 greenhouse gases. 7 So maybe I'd like Ms. Witherspoon to indicate an 8 all -- staff has been very wonderful not being -- try to 9 be pinned down on this. But could you give us some sort 10 of timeframe where you'll be able to come back and give us 11 some reasonable feeling of where -- options where we might 12 look at for that. Maybe -- if you want to take some time 13 to think about it, maybe after lunch so that -- 14 EXECUTIVE OFFICER WITHERSPOON: Or maybe consult 15 with Mr. Scheible over the lunch period. 16 Though I will say at the outset, we have been 17 very interested in fuel diversity questions as they 18 relate, you know, back to the petroleum dependency report. 19 And figuring out what the entry point of those discussions 20 has been the biggest challenge of all, what levers can we, 21 the Air Resources Board, use and others use to affect the 22 introduction of different fuels and in larger quantities 23 into the fleet. 24 CHAIRPERSON LLOYD: Well, again, I think all the 25 fuels, as we look at -- I think, as Supervisor DeSaulnier PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 mentioned earlier, as we look at the fuels and the total 2 environmental impact and then the public health impact, 3 public protection of that, as we're looking at one 4 approach for that, there are other approaches. So maybe 5 this afternoon we'd probably get some witnesses to bring 6 that up, so maybe come back to it at that time. 7 Supervisor DeSaulnier and Ms. Berg. 8 BOARD MEMBER DeSAULNIER: Well, first off I also 9 want to say staff's done a great job. I remember during a 10 legislative debate where my representative in the Assembly 11 had to quote one of the papers, saying he didn't want to 12 put something like this in the hands of bureaucrats. And 13 I would only say I think this is the best place to put it, 14 our staff. 15 On the question of the extra two years that you 16 changed from the draft, the phase in -- and I looked 17 specifically at page 111 of the staff report. 18 Maybe Chuck or Catherine can tell me why we 19 landed on that particular period. Because I'm 20 anticipating that we're going to have some testimony that 21 that's still not enough time, particularly for Ford and 22 General Motors. So I think you did a really good job from 23 my perspective of giving a little more leeway, given the 24 lead-in time, but also allowing for credits for 25 manufacturers who might be able to implement some of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 strategies, particularly the transmission issue. 2 So what's the right time? And I think we're 3 going to be asked that question from, I would guess, two 4 of the manufacturers. 5 VEHICLE PROGRAM SPECIALIST SHULOCK: That's 6 probably best addressed by Steve. 7 ENGINEERING STUDIES BRANCH CHIEF ALBU: Yeah, we 8 had some abbreviated discussions with industry about lead 9 time and so on. And I was actually convinced that in 10 order to incorporate new technologies and do so in a 11 cadence that is in concert with normal engine and 12 transmission changes, that a four-year succession, two 13 sets of them would be more appropriate than three. 14 And as a result, we made the change. It's 15 just -- we think it's reasonable -- the request is 16 reasonable and responded. 17 BOARD MEMBER DeSAULNIER: So you had discussions 18 about accommodating to the extra two years. Did you 19 discuss about going even further out? 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, of 21 course they wanted more, but -- 22 BOARD MEMBER DeSAULNIER: No, I'm not supportive 23 of that. I'm just -- 24 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, 25 yeah. But we went back and thought about it and looked at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 the technologies and where they're at today and we felt 2 that the two four-year periods would be adequate. 3 BOARD MEMBER DeSAULNIER: Okay. Thank you. 4 Thank you, Mr. Chairman. 5 CHAIRPERSON LLOYD: Ms. Berg and then Dr. Gong. 6 BOARD MEMBER BERG: Oh, thank you. 7 I also would like to echo that the report was 8 extremely well laid out, and I appreciate that. It was 9 easy to stay connected and to listen to the information. 10 But within the conclusions, do we have within the 11 regulations to actually track our improvement to 12 greenhouse gases and also to track the increased jobs, so 13 that we will know that the regulation, if in fact passed, 14 did meet what we thought? 15 ENGINEERING STUDIES BRANCH CHIEF ALBU: In terms 16 of the greenhouse gases, the manufacturer will have to 17 certify their product models and they will have to 18 indicate with each certification of each model what the 19 CO2 levels are from those. And then we would keep track 20 of those on a yearly basis to make sure they were 21 complying. 22 BOARD MEMBER BERG: But what about the actual 23 greenhouse gases in the air? I mean that's what we're 24 trying to improve. 25 EXECUTIVE OFFICER WITHERSPOON: Mrs. Berg, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 actually the regulation only affects motor vehicles. And 2 so we will be tracking, as Mr. Albu indicated, the exact 3 emissions from the motor vehicle fleets of the auto 4 manufacturers subject to this regulation. In the separate 5 process the California Energy Commission keeps a 6 comprehensive greenhouse gas emission inventory for the 7 State of California, which is periodically updated and 8 would reflect other changes going on in the economy and 9 society that either are increasing or decreasing 10 greenhouse gases in California. 11 BOARD MEMBER BERG: So will we take a look at 12 that and -- I mean our assumption has to be that if we in 13 fact pass this regulation and execute it, that we should 14 see an improvement. Will we look at those figures? 15 EXECUTIVE OFFICER WITHERSPOON: Absolutely, we 16 will, and both independently and in collaboration with the 17 Energy Commission. 18 And then the economics question referred to, 19 there again tracking job changes over time and being able 20 to attribute that back to regulatory actions or other 21 levers. 22 ECONOMIC STUDIES SECTION MANAGER FEIZOLLAHI: 23 Yes, we could -- I need to ask Professor Berg. But I 24 believe we could use the model of the economy that we have 25 and run those for the actual savings that we'll see in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 future and try to estimate whether that is really the case 2 or not. And the model is almost constantly being updated 3 with new data and calibrated to California economy. And 4 my answer would be, yes, I think we could trace that later 5 on. 6 BOARD MEMBER BERG: Thank you. 7 CHAIRPERSON LLOYD: Dr. Gong. 8 BOARD MEMBER GONG: Actually I had similar 9 questions according to what Ms. Berg asked. 10 As in any process or research study or taking 11 care of a patient, you want to know not just about the 12 treatment, but what are you going to follow? What are the 13 endpoints, the relevant endpoints that tell you that you 14 are succeeding in what you thought you were going to be 15 doing? 16 So if I came in 20 years, 30 years from now and I 17 looked back -- because I know it takes time to change the 18 course of an aircraft carrier or whatever. But if I do 19 that, what parameters do I look at, both health and 20 non-health ends points? And I realize we could take the 21 temperature -- air temperature over Sacramento at any time 22 and say, "Oh, it's going down on the average." But is 23 there a plan for that? 24 Anyone. 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Let me PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 take a crack at that, because there's a number of things 2 that we would look at between the time the regulation's 3 adopted and it's fully implemented. So in this case, 4 between now and 2016. And some of them are easier to 5 track than others. 6 For example, we always go back -- in fact the 7 Board often directs us to sort of review the progress 8 between the Board adoption and implementation, in this 9 case between, let's say, now and 2009. So we'd be looking 10 at: Are the manufacturers developing the technologies? 11 Are there more vehicles like you see in the picture on the 12 wall over there coming into play, so that we have some 13 confidence that the technologies are developing? 14 Then when those vehicles first hit the road, we 15 would be looking at the costs and seeing whether the cost 16 estimates that we made here are in the right ballpark or 17 were they way out of line. We'd also be looking to see if 18 there are other new technologies we didn't even foresee 19 that are coming in that could help improve greenhouse gas 20 emissions. 21 In terms of the -- then Steve answered that in 22 terms of the actual emissions from the vehicles we have a 23 whole process which measures, you know, virtually every 24 vehicle. And we determine that the CO2-equivalent 25 emissions are in fact 12, 15, 20, 25 percent lower PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 depending on the year you pick. So that one I think is 2 identified very carefully. That then flows into the 3 emission inventory that we have for California so we can 4 tell what the overall change in emission inventory is. 5 If we go to the next step of saying can we 6 measure the amount of CO2 in 2008, and then measure the 7 amount of CO2 in the atmosphere as a concentration in 8 2010, I think at that point it becomes much more difficult 9 to try to ferret out what this impact -- impact of this 10 regulation has vis-a-vis all of the world's CO2-equivalent 11 emissions. So that becomes more difficult. 12 We have the same problem with ozone. You know, 13 many of the regulations you adopt. We could not find in 14 measured ozone -- given all of the other things that 15 affect it, we could not find the identical impact of that 16 regulation. And so that's why we use models. That's why 17 we historically have gone back and looked at trends, 18 things like that, to try to see that the endpoint that you 19 referred to is in fact being achieved. And I think 20 Fereidun's response on the jobs is that way too. We can't 21 go out there and say, "That job was created by this 22 regulation." 23 But using the models -- and lots of other things 24 affect the economy that are more strong than the impact 25 this will have on the economy in terms of inflation and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 all the, you know, various other economic factors. So 2 we're going to have to do that one by modeling as well. 3 BOARD MEMBER GONG: It's a tough question. And 4 you try to respond to the non-health aspect. What about 5 the health aspects, the health outcomes? How do we know 6 that the public health improvement is there? Do we have a 7 plan for that? 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 9 again, I think it's -- you know, the biggest challenge 10 when you get to these sort of macro endpoints is being 11 able to separate out the impact of what is one step, and 12 albeit one relatively small step compared to the world 13 situation on global climate change, from all the other 14 things that impact health around the world. 15 So, again, I think it's going to be difficult to 16 count the number of heat deaths, for example, from if we 17 had a heat wave in a given year and say, "Well, this would 18 have been worse if we hadn't done this regulation," or if 19 we don't do the regulation, it would have been better if 20 we had done it. That's going to be difficult to really 21 ferret out. 22 EXECUTIVE OFFICER WITHERSPOON: On the other hand 23 there are striking studies, for example, when power plants 24 were closed unexpectedly and there was an immediate 25 falloff -- these coal-fired power plants analysis, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 immediate falloff in hospital admissions and bronchial 2 disease and clinic visits, which correlated with what our 3 models had been telling us was the case across the 4 country, as particulate levels rose and so did admit. And 5 we saw the reverse take effect as well, that when a large 6 amount of particulate emissions and NOx and SOx was 7 removed from the atmosphere, there was an immediate 8 improvement in the adjacent resident's public health and 9 their reliance on the health system. 10 And so some we can see and some we cannot. And 11 then there's confounding effects like increasing asthma. 12 Even as believe air pollution is coming down, and we 13 measure air pollution coming down, so there must be 14 multiple causes accounting for that. So things of that -- 15 where did the cancer come from, for example? Those are 16 the very difficult questions. 17 BOARD MEMBER GONG: Those are reasonable 18 responses for a very complex question that I think I 19 raised. Thank you. 20 And I also would like to compliment the staff for 21 their excellent presentation. 22 CHAIRPERSON LLOYD: Yeah, I think, Tom, on the 23 record, you're saying if we look at 2008, by 2010 be able 24 to see any effect with this regulation is difficult, 25 thus -- could be impossible. It's not going to be likely. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 Sorry. Ms. D'Adamo. 2 BOARD MEMBER D'ADAMO: Just on follow-up to that 3 point. Having sat through several ZEV hearings, I'm 4 interested in obtaining information as we move forward but 5 in more of a global, no pun intended, context. For 6 example, as we receive information on health updates and 7 ozone and that sort of thing, that I think we'd be making 8 a mistake if we tied that information specifically to this 9 regulation. 10 Because as Mr. Cackette indicated earlier, if you 11 just look at ozone, there are so many different components 12 that would go into us meeting a standard. We can't tie it 13 to specifically one regulation as to whether or not we've 14 been able to meet the standard on any given day. There's 15 the whole toolbox of all the different regulations that 16 we've implemented. And then, in addition, there are 17 climate issues, transported air pollution. There's so 18 many different components that go into it. 19 So I'd be interested in hearing updates, but in 20 the context of health updates or whatever it is that we 21 normally receive in terms of periodic updates, as we do 22 with ozone and public health. 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And 24 certainly one of the things that we can include in those 25 is -- as Dr. Sander was indicating, is that, you know, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 world is committed to climate change and so things will be 2 changing. And if that is a valid observation, we should 3 be able to see it over, you know, 10-year periods, 4 decades, of some growth in temperature. And some of the 5 effects that we've charted historically up there, you 6 should be able to project. 7 If in fact they're dropping off, then maybe 8 things -- you know, it's the reason we're not correct. 9 But we would be able to report back over the next decade 10 or so certainly those kind of changes. But I don't think 11 that it's going to be as easy to do it in terms of actual 12 health impacts or, you know, the next level down of 13 specificity. 14 CHAIRPERSON LLOYD: I think as we saw from a 15 presentation earlier this year -- and we're grappling with 16 a global pollutant here. But a lot of these pollutants 17 now are becoming global, as we've seen in the transport 18 from Asia and other parts of the world. We look at 19 background ozone increasing. We look at the transport of 20 PM. We look at some of the -- the work that's being done 21 on global dimming. All of those lead us in the direction 22 that more and more the atmosphere is tied together as one 23 atmosphere. So I think it's very important to recognize 24 that. And we can track that, but it's over a period of 25 time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 The other thing is that as well as continuing to 2 track the health impacts in California, some of the 3 phenomenon we talked about earlier will be tracked over 4 the period of time. But the other thing is that if we 5 look at, for example, a ZEV regulation, some of the other 6 regulations, they're also helping to address some of these 7 issues as well as this program which will kick in at the 8 end of the decade. 9 So I think these are tough issues, but can be 10 addressed. And, again, a lot of the monitoring is out 11 there. 12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And 13 there is -- in this case with some of the global warming 14 emissions like CO2, you know, its state in the atmosphere 15 is pretty well understood. If you're not putting as much 16 in, there is less going into the world's atmosphere. It's 17 not as -- that is not as complex as, for example, 18 emissions for ozone where we have photochemical reactions 19 and a lot of other things that have to be understood. So 20 I think there is some additional faith, certainly we have 21 got faith, that if you're reducing the pollutant, it's not 22 going into the environment and it has a beneficial effect. 23 CHAIRPERSON LLOYD: Seeing no more questions -- I 24 know that we want to break for lunch. Before that, I 25 would like -- we do have one witness who has real time PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 constraints. So before we get into the witness list, I'd 2 like to call on the Ombudsman to see if she has any -- to 3 describe the public participation process followed during 4 the development of this regulation and to share with us 5 any observations, concerns, et cetera, that you may have. 6 OMBUDSMAN TSCHOGL: Thank you. 7 Mr. Chairman and members of the Board. 8 This regulation has been developed with input 9 from the auto industry, alternative fuel providers, 10 alternative fuel vehicle manufacturers, the various 11 environmental groups, community advocates, other state 12 agencies, and interested citizens. 13 Staff has already shared with you the specifics 14 of their workshops and their outreach activities. In the 15 interests of time and to avoid repeating that which you've 16 already heard, I'll limit my comments. I would simply 17 like to add that when the draft staff report was released 18 on June 14th, 2004, it was posted on the ARB website, and 19 an E-mail notification was sent to the climate change list 20 serve, which includes approximately 700 businesses and 21 individuals. 22 Also, when the final staff report was released on 23 August 6th, 2004, it was noticed in the California 24 regulatory notice register maintained by the Office of 25 Administrative Law. It was also posted on the ARB's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 website, and an E-mail notification was sent to the 2 climate list serve as I mentioned before. 3 Any questions? I'd be happy to add on. 4 CHAIRPERSON LLOYD: Who's going to summarize the 5 112,000 letters that came in on this regulation? 6 OMBUDSMAN TSCHOGL: You know, I'm working on 7 that. 8 (Laughter.) 9 OMBUDSMAN TSCHOGL: I'll be providing that to you 10 some other time. 11 (Laughter.) 12 BOARD MEMBER DeSAULNIER: Let's give her a 13 page -- 14 CHAIRPERSON LLOYD: If she needs more time, maybe 15 we should give her some more time. 16 Thank you very much. 17 With that I'd like to call the first of the 18 witnesses before us today. 19 I'd like to remind the witnesses, if you have any 20 written comments, to please provide those. 21 But I know Dr. Henry Clark has a real time 22 commitment. 23 So Dr. Clark, would you please come down. And we 24 very much appreciate you coming down from the Bay Area, 25 taking time out to address the very important aspect of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 the impact of this regulation on some of the communities. 2 DR. CLARK: Thank you, Mr. Chairman and members 3 of the Board. My name is Dr. Henry Clark. I'm the 4 Executive Director of an environmental justice 5 organization called the West County Toxics Coalition based 6 in Richmond, California, which is one of the oldest 7 environmental justice organizations in the country and now 8 about 21 years old. Also, Vice President of the National 9 Black Environmental Justice Network, which is the largest 10 environmental justice network in the country. 11 I'm glad to be here to testify today. And I 12 thank the Board for helping me to get here. I thought I 13 wasn't at first since I just got back from St. Louis late 14 last night. But with the Board assistance, I'm here to 15 testify. 16 Also participating in the regional hearing that 17 was held in Oakland and helped to get representatives from 18 the environmental justice community to that particular 19 meeting. 20 As has been stated, in our communities, our 21 environmental justice communities, as we say, you know, we 22 certainly are concerned about this particular effort to do 23 some greenhouse gases, because we look at it from a health 24 standpoint. Primarily because of the fact that there's 25 high rates of childhood asthma in our communities, they -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 in the Richmond area where I live there's a 33 percent 2 higher than state average lung cancer rate. So when we 3 talk about emissions, greenhouse gas and then the other 4 emissions, we translate it from then to how they affect 5 our health and the health of our children. And certainly 6 this regulation to reduce greenhouse gases in the State of 7 California will reduce asthma triggers and will have a 8 beneficial effect on residence in our community as well as 9 children in our community, and that's a good thing. 10 Overall from the hearings that I have attended 11 and the discussions in my community and many others, this 12 effort is a positive effort, certainly in the right 13 direction. It doesn't cure all the environmental problems 14 that we have in our communities, you know, won't cure them 15 overnight, but this is a major, major step -- major step 16 forward here; and I can say that from the environmental 17 justice community's standpoint, this is a great day not 18 only for environmental justice, but it's a great day for 19 the State of California. And hopefully other states will 20 follow suit, because addressing greenhouse gases is a 21 situation that we, as you very well know, not only need to 22 address here in the State of California, but throughout 23 the country and throughout the world. And I'm proud that 24 California is leading this effort and that the 25 environmental justice community is a part of this effort. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 So thank you. 2 CHAIRPERSON LLOYD: Thank you very much indeed 3 for those comments and thanks for coming down. 4 With that, I think what we will do, we will 5 take -- I tried to take a shorter break this morning. But 6 being realistic, I'll probably, being honest, try to take 7 an hour break in this time. And hopefully we can really 8 make it one hour. 9 So let's at 1 o'clock -- at 1 o'clock we will 10 start with -- and the first three witnesses at that 11 time -- 2 o'clock. Sorry, 2 o'clock. 12 The witnesses at that time will be Bob Roberts, 13 Commissioner Boyd, and Coralie Cooper. So those are the 14 first three witnesses which will lead off at 2 o'clock. 15 Thank you. 16 (Thereupon a lunch break was taken.) 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 AFTERNOONSESSION 2 CHAIRPERSON LLOYD: We'll start the afternoon 3 session please. 4 As I mentioned, we'd start the afternoon session. 5 The first three witnesses will be Bob Roberts, 6 Commissioner Boyd and Coralie Cooper. 7 So if people could be quiet please while we have 8 the first witness this afternoon. 9 Please. 10 Thank you, Bob. Appreciate you coming. Thank 11 you. 12 MR. ROBERTS: Thank you, Chairman Lloyd and 13 members of the Board. My name is Bob Roberts. I am the 14 Executive Director for the California Ski Industry 15 Association. And I'm here today to reiterate what we 16 wrote to you back in March in terms of our support for 17 this process and specifically our earlier support for 18 Assemblywoman Pavley's legislation and the work that she's 19 done. 20 We by California standards are a very small 21 industry, unless of course you're above 7,000 feet. Then 22 we think we're pretty big stuff. But our concern is 23 that -- we have talked and we have watched all morning the 24 analyses and the various studies that have been brought 25 out. Actually our probably wake-up call came in 1999 with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 the Scripps report. And from that we began to dialogue 2 and we began to concern ourselves, because we are -- or at 3 least we consider ourselves to be the stewards of the snow 4 pack. And when you live and work on the snow pack, when 5 it begins to shift, it makes a big difference in our lives 6 and, frankly, it makes a large difference in the 7 community's that we serve. 8 We're small. We pump about a half a billion 9 dollars directly into the communities from Mount Shasta 10 all the way down to Big Bear. But the ripple effect and 11 what we do becomes an engine for our communities. 12 So we looked at these studies. And it's 13 interesting even now -- and in November the United Nations 14 came out with a study specifically focused on winter 15 sports. And they drew some pretty horrific formulas and 16 forecasts for what could be happening in the Alps. They 17 tread less -- more softly in our part of the world. But 18 they're looking that somewhere in the next 30 to 70 years 19 we may find ourselves completely out of business or, at 20 best, we are going to be fairly dislocated in terms of the 21 tops of our mountains and the communities that we work and 22 live in and require for our base. 23 Having said that, we worked very closely here in 24 California with Bluewater Network and others to try and 25 build an interest. But we've also worked with our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 national resorts and the fellows that we work with 2 nationally. About three years ago we were able to put 3 together a coalition with the National Resources Defense 4 Council. And we now have a "Winter, Keep It Cool" 5 campaign, which is designed to do two things: One is to 6 educate our own people, our staffs, our communities about 7 this phenomenon. The other is to really spread the word 8 to the people who come up and to use our facilities, who 9 ski. 10 So these are the things for us that are 11 important. We're getting the word out. We are able to do 12 some very small things in our own way. Mammoth Mountain 13 today has fully solarized, if you will, all of its lift 14 operations on their mountains. They're not the prime 15 movers, but all of the ancillary operations. 16 North Star now uses biodiesel fuel in their 17 entire transportation system. And we're going to see more 18 and more of that in our resorts, as they're converting. 19 So little by little we're doing our small, small 20 part. But for us, the real issue lies in what's happening 21 upstairs, where is that CO2, what's the larger issue? And 22 that's why we are very supportive, and we are very happy 23 to be here today to lend our support to this cause. And 24 we wish you good work. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 CHAIRPERSON LLOYD: Thank you very much indeed. 2 Thanks for coming. 3 Questions or comments? 4 Thank you, Bob, again. 5 MR. ROBERTS: Thank you. 6 CHAIRPERSON LLOYD: Commissioner Boyd, Coralie 7 Cooper and David Shaw. 8 CEC COMMISSIONER BOYD: Good afternoon, Chairman 9 Lloyd, Board members. 10 Thank you, Chairman Lloyd, for the courtesy of 11 allowing a sister state agency to appear rather early on 12 your agenda. I would love to stay for the whole two days. 13 But there's something about energy problems in California 14 that will draw me back to Sacramento tonight. 15 I've enjoyed what I've seen. In fact what I've 16 seen so far will allow me to shorten my presentation 17 because your staff has done an excellent job in making a 18 presentation of the subject. 19 And of course I bring greetings to a sister 20 agency from the CEC. And I would like to express my, I 21 guess, personal greetings to those Board members whom I've 22 known for many years and worked with for many years. And 23 I want to congratulate the newest Board members. And I 24 want to hope that their appointments and their working 25 career with the Air Resources Board are as gratifying as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 my 20 years with the Air Resources Board proved to be. So 2 congratulations to you, and look forward to meeting some 3 of you more formally and working with you in the future. 4 And as always, a very affectionate hello to -- 5 and greetings to the staff and many, many old friends at 6 the ARB. 7 As the Energy Commission Commissioner with 8 responsibility for the Energy Commission's climate change 9 activities, I'm frankly gratified to be the one to be here 10 to be representing the Commission. We're extremely 11 pleased to be able to address you on the greenhouse gas 12 control proposal before you today. 13 As you've heard from Assemblyman Pavley, for 14 instance, one of my favorite expressions is California is 15 a nation state. She already told you we are the -- we've 16 got an awful lot of people, pushing 36 million people. 17 We're the world's fifth largest economy, which means we're 18 also the world's fifth largest consumer of energy, which 19 is a major contributor to the issue that we deal with. 20 As your very excellent staff report detailed, the 21 Energy Commission has a long history, long before me, of 22 involvement in the California climate change issues. And 23 as already indicated by one of those speakers, we were 24 first charged by the Legislature back in 1988 to prepare 25 and maintain an inventory of greenhouse gas emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 And that first inventory was released in 1990. 2 Since that time a host of reports have been 3 issued by the Energy Commission, which are almost all 4 documented in your staff report, and I won't go through 5 that list. There was one fairly prominent one that I have 6 used quite a bit in the past several years, which was 7 entitled "Greenhouse Gas Emission Reduction Strategies for 8 California," because it identified potential effects of 9 greenhouse gas emissions on the California environment and 10 major sectors of the economy and provided an initial set 11 of policy recommendations and strategies to reduce 12 greenhouse gas emissions back in the eighties, but -- or 13 early nineties -- didn't attract much attention. So we've 14 had trouble getting this subject front and center. 15 But events of the last decade certainly have done 16 the job. And certainly the work of the California 17 scientific community, if not the scientific community at 18 large, has brought home the problems to California. And 19 the last speaker made reference to a watershed report also 20 from Scripps that helped us start to turn attention to 21 this subject. 22 The Energy Commission administers a very wide 23 variety of what I like to call collaborative climate 24 change research activities. We try to leverage public and 25 private expertise and funds, and have had for several PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 years a very deep research program into the issue of 2 climate change. And, frankly, some of the projects that 3 we carry out are administered by your staff at the ARB and 4 we're very grateful for that. 5 A result of a lot of that work, which included 6 the universities and Lawrence Livermore and Lawrence 7 Berkeley and lots of other of the imminent institutions in 8 California, in 2003, with the cooperation of the 9 University of California, the Energy Commission created 10 what we call the California Virtual Research Center, which 11 is -- involves Scripps Institute of Oceanography, the 12 University of California at Berkeley, and the UC Office of 13 the President. And that has allowed us to move even 14 further forward with a lot of the research which many of 15 us use today to demonstrate to others the severity of the 16 problem we have in California. 17 And I would mention that the Energy Commission 18 now chairs what we call the State's Joint Agency Climate 19 Team, that was established by the Secretary of Resources 20 in 1999. And as Deputy Secretary of Resources in those 21 days, I had the privilege of chairing that Committee. 22 Well, it followed me to the Energy Commission, and I still 23 chair the Committee. 24 But utilizing work of Scripps, Berkeley and other 25 institutions in those early days, we got all the state PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 agencies who were either affected by -- their programs 2 would be affected by or who would have an influence on 3 climate change together first to educate each other on the 4 subject and then to start talking about policy actions and 5 strategies. 6 And the group early on came to the conclusion 7 that -- that you've heard from scientists today -- that we 8 have a problem, something's happening, and, if nothing 9 else, we have adaptation problems to deal with. And, 10 secondly, if you really want to get into the subject, we 11 have to deal with mitigation issues. And we've been 12 working at that ever since. And we have a draft slate of 13 11 initiatives that will be floating within government in 14 the not too distant future. 15 However, a couple of anecdotal comments. As a 16 Resources Agency Deputy Secretary, all the resources 17 components were involved in this issue. And as a result 18 of scientific work, such as Dr. Santer earlier today, I've 19 seen agencies go from pure disbelief or ambivalence on 20 this subject to totally committed to the issue of climate 21 change because of the problems that it will bring to 22 California. 23 And the most dramatic shift I saw was of course 24 in our water resources people, who went from, frankly, 25 ambivalence to extreme interest in the subject. And this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 has become an important part of their next round of state 2 water plan planning. And as you've heard, the snow pack 3 is our most important reservoir. And our entire water 4 distribution system is predicated on using that reservoir 5 and on using the Delta of California as the heart of the 6 water system. And if we have sea level rise, we could 7 really ruin the Delta system, and it will cost our economy 8 greatly. And if we don't get that snow pack, but we get 9 lots of rain at different times of the year, we'll have to 10 invest huge amounts of money in a different type of 11 system. 12 That's just a small example of the issues that 13 we've been dealing with for quite some time. 14 Getting back to the CEC, I would just point out, 15 as directed by statute, we've been providing technical 16 support to the California Climate Action Registry that was 17 launched in September 2002 by the work of the Resources 18 Agency. And in July of this year, the Commission convened 19 the first meeting of its statutory authorized California 20 Climate Change Advisory Committee, which covers academia, 21 business, environmental, local government, and a host of 22 others. 23 There are numerous other programs and activities 24 that the CEC directed toward climate change and greenhouse 25 gas reduction. I could go on and on, but I won't. Your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 staff covered that quite well. But I would mention, and 2 it's something that they did mention, that California's 3 energy efficiency and renewable energy programs that were 4 birthed at the Energy Commission, again long before I got 5 there, are known worldwide for their impact on energy and, 6 thus, worldwide for the impact they have on greenhouse gas 7 emission reductions. 8 And one small piece of information: Two to three 9 years ago, based on the policies of the United States, 10 Europe and other countries really didn't feel they had an 11 ally here that could pay much attention to us because our 12 national policy didn't seem to be moving very 13 aggressively. And some of us were fortunate enough to 14 address representatives of parliament of several European 15 countries and tell them what states do and tell them, you 16 know, how the democracy of the United States work. And 17 the greatest example of upward pressure of course is the 18 California Air Pollution Control Program. And the second 19 greatest opportunity might be the activities of the State 20 of California, other states in putting upward pressure on 21 national policies as states begin to address issues of 22 public health and environmental concern. 23 Well, that turnaround in the understanding of 24 these people got California invited as a charter member of 25 the so-called Conference of the Reducers, which has now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 been rolled into the Climate Group, which is 2 headquartered in London. And I was privileged a few years 3 ago to represent California. And Secretary Tamminen's 4 office and I this last -- earlier this year represented 5 California in Toronto at another meeting of that group. 6 My intention is just to point out that there's a 7 lot going on in this state. And the last thing I'm going 8 to mention with regard to the Energy Commission is that as 9 a result of the, as everyone chooses to call it, energy 10 crisis, as I'd like to point out it was only an 11 electricity crisis -- we're having crises in all the other 12 energy areas as well -- a few years back the Legislature, 13 as I would say, sincerely in its wisdom asked the Energy 14 Commission to produce an integrated energy policy report. 15 And I had the privilege of chairing that effort. And last 16 December we turned into the present Governor our report. 17 And in that report we called out climate change as a 18 serious concern. 19 And in that report we called on the California 20 Public Utilities Commission to include climate change 21 efforts and specifically called out the efforts of the 22 utilities -- California's utilities in their electricity 23 procurement activity. And they have done that, and they 24 have included that in their -- and then we, the 25 Commission, said we're going to include here and after in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 your power plant siting operations a requirement that 2 there be CO2 emissions data included in the so-called data 3 adequacy that would require a power plant proponent. 4 So there are many activities. And I mention all 5 of these activities, as I said, not to point out the 6 Energy Commission so much, as to demonstrate our 7 involvement and our commitment to climate change issues; 8 and as the foundation for, you know, why are we here 9 today? But also just to point out how perverse throughout 10 state government climate change activities have been for 11 quite some time. 12 And, frankly, while we work at the Energy 13 Commission on more aggressive development of renewable 14 energy, which you've heard referred to as a significant 15 contributor to helping reduce greenhouse gas emissions in 16 the electricity generation sector, the very first 17 greenhouse gas inventory that I mentioned and all the 18 subsequent updates the Legislature has asked for, such as 19 1997 and 2002, have identified the transportation sector 20 and the motor vehicle as California's principal 21 contributor to greenhouse gas emissions. 22 And I think you heard Assemblywoman Pavley this 23 morning say that's a little different than the majority of 24 the world. And that's true. Energy production and 25 developed throughout the world is the chief contributor to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 the most CO2 emissions to the world's atmosphere. But in 2 California it's the transportation sector. And the 3 transportation sector is growing more and more in other 4 parts of this country. And as we watch, in my opinion, 5 every male human on the planet fulfill their desire for an 6 automobile in the developing countries, and we see 7 incredible growth in the number of motor vehicles, the 8 transportation sector more and more is going to become 9 overwhelmingly a major contributor to the issue of climate 10 change. 11 So it was both timely and appropriate that 12 Assemblywoman Pavley introduced her legislation when she 13 did, addressing this problem and turning to this Board to 14 act on the problem. 15 The staff of the CEC has appreciated and enjoyed 16 the opportunity it's had to work with some of your staff 17 on some facets of the issue that's before you today. And 18 this effort to me is indicative of the very successful 19 collaboration between the Energy Commission and the Air 20 Resources Board down through the years as they worked to 21 address the link between air quality and energy. And I'm 22 glad to see it's continuing. And I'm particularly 23 appreciative to Chairman Lloyd for his recognition of that 24 and his reaching out to the Energy Commission. 25 We look forward at the Energy Commission to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 future CEC and ARB collaborative efforts on such things as 2 alternative fuels that the Chairman mentioned today and 3 even ultimately on linking the use of low carbon fuels and 4 vehicle technologies as an important future step to reduce 5 further greenhouse gas emissions. 6 The proposed regulations before you are to us at 7 the CEC a continuation of the ARB's widely heralded work 8 in reducing harmful emissions from mobile sources; and, 9 again, would demonstrate the ARB's leading role in finding 10 and promoting technological solutions to protect the 11 California public's health, its safety, and the California 12 environment. 13 So on behalf of the California Energy Commission, 14 it is my privilege to bring to the ARB the full support of 15 my agency exhibited in a unanimous vote on September 8th 16 of the California Energy Commission to endorse the 17 proposal that your staff has brought before you. And we 18 look forward to continuing our work with you and we look 19 forward to moving this ball down the field. 20 Thank you very much for the opportunity to 21 address you today. 22 CHAIRPERSON LLOYD: Thank you very much indeed, 23 Commissioner Boyd. And, again, thanks in two areas: For 24 your leadership when you were with -- the Executive 25 Officer for many years with the ARB; and continuing that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 work looking at energy, but also cognizant of air 2 quality/energy interface at the CEC. And, again, we have 3 a very good working relationship with you and the 4 commissioners. We appreciate the commissioners' endorsing 5 this. And thank you very much indeed for taking the time. 6 CEC COMMISSIONER BOYD: Thank you very much. 7 CHAIRPERSON LLOYD: Questions from my colleagues? 8 Ms. D'Adamo. 9 BOARD MEMBER D'ADAMO: Yes, thank you very much 10 for your testimony. Thank you for your leadership. And I 11 wanted to just perhaps make a comment. I appreciate your 12 words regarding the impact on our water supply and the 13 work that you're doing with the Department of Water 14 Resources. And I note here that -- I don't see anyone 15 from the Department of Water Resources that will be 16 testifying. 17 So I just thought I'd point out that -- just to 18 reiterate the concern on cost that we have with the impact 19 of climate change. As we speak there's legislation before 20 the U.S. Congress on our water supply system in 21 California. It's been almost a decade's long effort 22 called CALFED. That effort is supposed to address our 23 state's -- our growing state's needs for water supply, 24 water quality, levee stability, flood control. It is a 25 severely underfunded effort, and we're already looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 several billion dollars. As I understand it, this -- 2 because it was put together several years ago, it does not 3 account for the impacts of climate change. So we're 4 looking at an untold price tag if we were to add that into 5 the equation. So I just wanted to highlight that. And 6 thank you for your comments. 7 CEC COMMISSIONER BOYD: Thank you. That's an 8 excellent point. We've been talking to the CALFED people 9 for quite some time. 10 CHAIRPERSON LLOYD: Thank you very much. 11 Coralie Cooper, David Shaw, David Doniger, Fred 12 Webber. 13 MS. COOPER: Thank you, Chairman, and members of 14 the Board. My name is Coralie Cooper. On behalf of the 15 Northeast States for Coordinated Air Use Management, or 16 NESCAUM, and its sister organization, NESCCAF, which 17 stands for the Northeast States Center for a Clean Air 18 Future. I'm pleased to have the opportunity to testify in 19 support of the ARB proposal to control greenhouse gas 20 emissions from motor vehicles. 21 NESCAUM is an association of the eight northeast 22 state air pollution control programs. Our members include 23 the six New England states, New York and New Jersey. 24 NESCCAF is a nonprofit organization which creates 25 effective solutions to critical clean air issues through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 cutting edge science, policy analysis and demonstration 2 projects. 3 The reduction of greenhouse gas emissions is 4 extremely important to northeast regulators and policy 5 makers. In terms of the specific risks of climate change 6 for the northeast states, modeling suggests that average 7 temperatures in New England could increase by 3 to 5 8 Centigrade by the year 2090, given increasing levels of 9 greenhouse gases. 10 A study funded by the U.S. Global Exchange 11 Research Program noted that global warming at the higher 12 end of climate change modeling projections would raise 13 average year-round temperature in Boston to a level 14 currently measured in Atlanta, Georgia. 15 Associated impacts on a region could include more 16 frequent and intense storms, increased damage on coastal 17 areas from flooding and erosion associated with sea level 18 rise and a variety of stresses on fish and grounds, 19 forests and coastal ecosystems. 20 Northeast air quality regulators estimate that 21 approximately 25 percent of total anthropogenic greenhouse 22 gas emissions in our region come from passenger cars and 23 light-duty trucks. In order to reduce greenhouse gas 24 emissions from the region the New England Governors have 25 committed to reduce greenhouse gases as part of the New PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 England Governors Eastern Canadian Premier's Climate 2 Action Plan, which was adopted in 2002. 3 The initial goals of the plan are to stabilize 4 greenhouse gas emissions of 1990 levels by 2010, followed 5 by a 10-percent reduction below 1990 levels by 2020. And 6 they plan to -- they plan for subsequent major reductions 7 beyond that as well. 8 New York and New Jersey are also undertaking 9 greenhouse gas reducing initiatives. Given the 10 transportation sector's contribution to the inventory, 11 achieving the region's climate goals will require 12 effective means to address the motor vehicle component. 13 In that context the northeast states are closely 14 monitoring the AB 1493 rulemaking, and some have already 15 expressed an interest in adopting the new California 16 requirements. 17 In 2003, for example, a proposal to adopt 18 California's regulations for the control of greenhouse gas 19 emissions for motor vehicles was included in Governor 20 George Pataki's State of the State Address. 21 The northeast states have an established record 22 of adopting California's more stringent motor vehicle 23 regulations. Several -- and these include New York, 24 Massachusetts, Vermont and Maine -- had been enforcing the 25 LEV standards in lieu of federal standards for a decade. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 Three other northeast states -- Rhode Island, Connecticut 2 and New Jersey -- are in the process of implementing the 3 LEV II Program. 4 To assist the northeast states in developing a 5 viable strategy to reduce motor vehicle greenhouse gases, 6 NESCAUM conducted a comprehensive analysis to assess the 7 feasibility and costs associated with the introduction of 8 technologies to reduce greenhouse gases from passenger 9 cars. 10 As was described by the ARB staff earlier, the 11 NESCCAF study team used state-of-the-art computer 12 simulation modeling software to evaluate 75 different 13 technology packages on five different vehicle types. The 14 study team also conducted a comprehensive cost analysis on 15 the technologies evaluated. 16 The study found that cost-effective technologies 17 exist to reduce motor vehicle greenhouse gases for a range 18 of reductions of up to 47 percent. NESCAUM and NESCCAF 19 believe the standards proposed by the Air Resources 20 Board's staff make sure that significant greenhouse gas 21 reductions for motor vehicles will be achieved 22 expeditiously, while at the same time provide an adequate 23 lead time for manufacturers to meet the standards. 24 The NESCCAF study found that technologies 25 currently in production such as improved air-conditioning, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 variable valve timing and lift, six-speed automotive 2 transmissions, and cylinder deactivation could be used to 3 reduce motor vehicle greenhouse gases by 25 percent; and 4 much greater reductions of up to about 50 percent can be 5 achieved through the use of more advanced technologies 6 such as stoichiometric gasoline direct injection, hybrid 7 electric and diesel vehicles. 8 Given the gradual wrap-up of the standards 9 proposed by the ARB, the current availability of 10 technologies and the flexibility provided to manufacturers 11 in the form of early credits in trading mechanisms, the 12 northeast states believe the standards are fair and could 13 be met in the timeframes set out by the staff. 14 The regulations would not only reduce greenhouse 15 gases, but will benefit consumers given the significance 16 savings that can be achieved in operating costs as 17 outlined by the staff. 18 In the NESCCAF study, we found that consumers 19 will save up to $2,000 over the life of a lower emitting 20 vehicle, given the cost savings in fuel that will be 21 realized. These savings assume a gasoline price of $2 per 22 gallon and a vehicle life of 150,000 miles. 23 To conclude, the northeast states strongly 24 support the ARB proposal to reduce motor vehicle 25 greenhouse gases. With this regulation California is once PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 again leading the nation in controlling motor vehicle 2 pollution. 3 Thank you. 4 CHAIRPERSON LLOYD: Thank you very much. And 5 thank you, Coralie, for your extensive efforts and help in 6 working together with our staff on this issue. A lot of 7 work. 8 Questions from the Board? 9 Thank you very much indeed. 10 David Shaw, David Doniger, Fred Webber, Tom 11 Austin. 12 MR. SHAW: Thank you very much, Chairman Lloyd 13 and members of the Board. My name is David Shaw. I'm the 14 Director of the Air Resources Program at the New York 15 State Department of Environmental Conservation. 16 Commissioner Crotty asked me to extend her 17 appreciation for the opportunity to speak with you today 18 and also to send her regrets that she was not able to do 19 so personally. 20 I would like to thank the Board for this 21 opportunity to testify on behalf of the State of New York 22 regarding the Greenhouse Gas Emissions Reduction 23 Regulation required by the Pavley bill. 24 The New York State Department of Environmental 25 Conservation and the California Air Resources Board have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 established a strong working relationship particularly in 2 the area of mobile source emissions assessment and 3 control. We look forward to continuing that relationship 4 as we move forward towards controls for emissions of 5 greenhouse gases. 6 The leadership that California has established in 7 emission controls is of critical importance to New York 8 and many other states in meeting our air quality 9 objectives. The Clean Air Act specifically permits states 10 to adopt California motor vehicle emission standards. 11 This is a right that we embrace and fully expect to 12 continue to exercise. 13 Governor Pataki has directed the state to 14 undertake many actions to reduce greenhouse gas emissions, 15 two of which I will highlight for the Board. 16 In April 2003 Governor Pataki invited the 17 governors from the ten northeastern states, from Maine to 18 Maryland, to join in a collaborative effort to establish a 19 regional greenhouse gas initiative to develop a cap and 20 trade program for carbon dioxide emissions from power 21 plants in our region. This effort is currently under way 22 with our sister states, with a goal of reaching an 23 agreement by April of 2005. 24 And in his 2003 State of the State message, 25 Governor Pataki announced that New York would work to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 reduce greenhouse gases by adopting CO2 emission standards 2 for motor vehicles as proposed by California. 3 I'm here today to support the proposal before the 4 Board and to reiterate New York's commitment to adopt the 5 CO2 emission standards being considered today. 6 Motor vehicles account for approximately 20 to 25 7 percent of greenhouse gas emissions in the northeast, with 8 CO2 being the greatest concern. In order to make real 9 progress on greenhouse gas control, emissions from cars 10 and trucks must be reduced. CO2 cannot effectively be 11 removed from tailpipe emissions through the use of 12 after-treatment devices such as catalytic converters. 13 Therefore, CO2 emissions must be reduced directly at the 14 source through the use of advanced engine, transmission, 15 and air-conditioner technologies. 16 NESCCAF has indicated studies indicate that CO2 17 emissions from motor vehicles can be reduced by up to 47 18 percent by using various combinations of existing and 19 emerging technologies. 20 California motor vehicle emission control 21 programs have been a tremendous success story. Emissions 22 are a fraction of what they were in the past and continue 23 to decline. Hybrid electric vehicles are now widely 24 available and in an increasing number of vehicle models 25 and configurations. The technological hurdles have been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 enormous, but the industry has met the challenge and 2 continue to provide automobiles that meet not only 3 tailpipe standards, but also requirements for increased 4 durability. 5 It is now appropriate to turn our attention to 6 greenhouse gases and use a consistent approach to address 7 this family of pollutants. We believe that the 8 technology-forcing elements of the current emissions 9 control programs are critical to the long-term success of 10 motor vehicle emission controls and we urge the Board to 11 continue this course by implementing the greenhouse gas 12 program. 13 We recognize that our adoption of the program has 14 an impact on how automotive manufacturers react to changes 15 in the program here. New York believes that California's 16 proposed regulation provides the automotive industry with 17 the flexibility necessary to bring compliant vehicles to 18 the market. This would be accomplished through the use of 19 phase-in periods to reach both the near and midterm 20 standards as well as a vast array of existing and emerging 21 technologies that are expected to be widely available 22 within the next decade. This would provide manufacturers 23 with enough lead time to incorporate any combination of 24 improved engine designs, transmissions, and mobile 25 air-conditioning systems into future vehicle models. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 The proposal before you today also provides 2 additional flexibility for manufacturers by allowing them 3 to participate in alternate compliance programs. This 4 mechanism grants credits for projects that achieve real 5 and quantifiable reductions in greenhouse gas emissions 6 due to increased use of alternative fuels in eligible 2009 7 and later vehicles. 8 In closing, I would like to reiterate the 9 department's support for the Board's concerted pursuit of 10 greenhouse gas reductions as directed by the Pavley Bill. 11 We must all take action as soon as possible to reduce the 12 potentially enormous impacts of climate change. 13 And I thank you for the opportunity to testify 14 today. 15 CHAIRPERSON LLOYD: Thank you very much, David. 16 And thank you for taking the time. Good to see you again. 17 MR. SHAW: It was my pleasure. Likewise, Mr. 18 Chairman. 19 CHAIRPERSON LLOYD: Questions or comments from 20 the Board? 21 Dr. Gong. 22 BOARD MEMBER GONG: Just interested if the other 23 northeast states in that consortium, have they -- have 24 their governors or legislatures made similar conclusions 25 or statements like New York's? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 MR. SHAW: I'm not aware of any other state 2 that's made such an announcement as Governor Pataki has. 3 But then of course I can't speak for the other states. 4 But to my knowledge just Governor Pataki's made this 5 commitment. 6 CHAIRPERSON LLOYD: Thank you very much. 7 MR. SHAW: Thank you very much. 8 CHAIRPERSON LLOYD: David Doniger, Fred Webber 9 and Tom Austin, and John Cabaniss. 10 MR. DONIGER: Thank you, Mr. Chairman. My name 11 is David Doniger. I'm a senior attorney with the Natural 12 Resources Defense Council. And I'm also the Policy 13 Director of NRDC's Climate Center. My colleague, Roland 14 Hwang, will testify on technological and economic issues 15 later. I would like to focus briefly on legal issues. 16 California has clear legal authority under the 17 Federal Clean Air Act to set standards for air pollutants 18 emitted by vehicles. And despite all the industry efforts 19 to change the subject, the regulations you are considering 20 today are squarely about air pollution and not about fuel 21 economy. Nothing in the Federal Fuel Economy Law affects 22 California's authority to set these standards. 23 The subject of those proposed standards, carbon 24 dioxide and the other greenhouse gases, are air pollutants 25 emitted by vehicles. These heat trapping pollutants are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 causing global warming and, as a result, a host of adverse 2 effects on health and the environment. And under your law 3 here in California and under the Clean Air Act, these 4 substances are air pollutants. 5 It is being argued that the Federal EPA, under 6 the current administration anyway, does not consider CO2 7 or other greenhouse gases to be air pollutants. EPA's 8 current position, or reversal of its earlier position, is 9 flatly contradictory to the plain language of the Clean 10 Air Act. California and other states, environmental 11 organizations and others have taken EPA's ruling to the 12 U.S. Court of Appeals in Washington. And I am very 13 confident the court will overturn that ruling, and here's 14 why: 15 The Clean Air Act says that an air pollutant is, 16 quote, "any physical or chemical substance or matter which 17 is emitted into the air, otherwise enters the ambient 18 air," unquote. These are terms that obviously include 19 the heat-trapping emissions covered by your proposed 20 standards. 21 The Clean Air Act authorizes regulation of any 22 motor vehicle air pollutant determined to, quote, "cause 23 or contribute to air pollution which may reasonably be 24 anticipated to endanger public health or welfare." 25 Increases in heat deaths, increases in asthma and other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 illnesses due to smog or higher smog levels, increases in 2 infectious diseases related to global warming, all of 3 these are clear dangers to public health. 4 Further, the Clean Air Act specifically defines 5 "welfare" to include effects on weather and on climate. 6 The pollutants you're proposing to regulate are clearly 7 affecting our climate. In addition to direct effects on 8 climate, global-warming-related welfare effects include 9 effects on the weather, such as increased storm activity 10 and changes in rainfall and drop patterns, destruction of 11 property, damage to crops, and many other effects within 12 the federal definition of "welfare". 13 These definitions have part of the Clean Air Act 14 for more than 30 years. The reference to "climate" was 15 specifically included in the law in 1970. And the 16 awareness of the risk of climate change from CO2 emissions 17 can be seen in Congressional debate as far back as 1965. 18 For more than 30 years California's a clear 19 authority under Section 209 of the Clean Air Act to set 20 motor vehicle emission standards. And this authority 21 extends not just to the pollutants that are federally 22 regulated, but also to pollutants not yet regulated by the 23 Federal EPA. 24 In addition, other states are clearly authorized 25 to adopt the California standards under Section 177 of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 Act. This is a clear green light under federal law for 2 the actions you're taking. 3 Despite the fact that California's addressing an 4 air pollution problem under its Clean Air Act authority, 5 it is being argued that the state is preempted under the 6 Energy Policy and Conservation Act, the federal law under 7 which CAFE standards are set. That argument depends on 8 the false premise that California's regulating fuel 9 economy, not air pollution. The subject is air pollution, 10 not fuel economy. And that's California's operating under 11 the green light of the Clean Air Act. As a result there 12 simply is no red light coming from the Energy Policy and 13 Conservation Act. 14 Moreover, from its beginning the Federal Fuel 15 Economy Law has expressly dealt with the relationship 16 between air pollution standards and fuel economy. 17 In early instances where air pollution controls 18 made meeting fuel economy standards more difficult, fuel 19 economy -- the Fuel Economy Law gave priority to the 20 pollution safeguards, not the other way around. In these 21 cases that law said that, if anything, the fuel economy 22 standard is the one that should be relaxed, not the air 23 pollution standard. 24 Today when it sets fuel economy standards, the 25 National Highway Transportation Safety Administration is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 required by law to take federal and California air 2 pollution standards into account when determining new fuel 3 economy targets. 4 More recently, and certainly the case of the 5 standards before you, most modern air pollution control 6 technology lowers fuel consumption. If the Federal Fuel 7 Economy Law did not stand in the way of California's air 8 pollution standards when they made better fuel economy 9 harder to achieve, then it certainly does not stand in the 10 way when California's air pollution standards make fuel 11 economy -- better fuel economy easier to achieve. 12 Let me touch briefly on several other objections 13 that have been raised. It's being argued that California 14 is not uniquely affected by global warming. But 15 California has never been required to show that its air 16 pollution problem is totally unique. The smog problems 17 that affect California affect many other states as well. 18 The same is so for global warming. And as others 19 have testified, California will be heavily affected by 20 global warming. 21 It is also argued that California's actions alone 22 will not solve the global warming problem. There are 23 three answers to this complaint: 24 The first is to note that many sources contribute 25 to global warming, and it will take many separate actions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 to cut global warming pollution. Each measure contributes 2 to the solution of the problem, even though no one measure 3 will be sufficient alone. 4 Second. These standards are just one of the 5 measures California's taken to contribute to reductions in 6 global warming pollution. 7 And, third, California's standards have 8 repeatedly leveraged much larger emission reductions by 9 other jurisdictions, other states such as New York who 10 you've just heard from, the federal government and many 11 other countries. Note in answer to the question asked of 12 a speaker, the laws of several of the other New England -- 13 northeastern states basically require them to follow suit. 14 As California upgrades its standards, those state laws 15 instruct their government -- their governors to follow 16 suit. So we expect that all of those jurisdictions will 17 follow your lead. 18 The actions California takes here will be 19 magnified once your standards are adopted by other 20 jurisdictions and as the technology on which your 21 standards are based diffuses into the vehicle fleet well 22 beyond your boarders. 23 So to summarize, California is operating well 24 within its legal authority under the federal law. You're 25 regulating air pollution, not fuel economy. That is your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 right under the Clean Air Act and the Energy Policy and 2 Conservation Act. Your pioneering actions are an enormous 3 step forward in the effort to safeguard our health, our 4 environment and our economy. 5 Thank you. 6 CHAIRPERSON LLOYD: Thank you very much, David. 7 It brings a lot of clarity to the issue. Thank you. 8 Any questions, comments? 9 Thank you very much indeed. 10 We have Fred Webber and Tom Austin, and John 11 Cabaniss and Dorothy Rothrock. 12 MR. WEBBER: Well, good afternoon. And thank 13 you, Mr. Chairman, for this opportunity. It's good to see 14 you again. 15 As most of you know, the Alliance is a trade 16 association of nine car and light truck manufacturers 17 representing over 80 percent of the new car market in 18 California. Our members are BMW, Daimler-Chrysler, Ford, 19 General Motors, Mazda, Mitsubishi, Porsche, Toyota and 20 Volkswagen. 21 And I should note that this is a very important 22 state for the automobile industry. It has the highest -- 23 or third highest employment rate; 680,000 people can tie 24 their jobs to the automobile industry in California. We 25 have 106 facilities, including a production facility, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 research, design, and corporate offices. Again, 2 California is very important to the automobile industry. 3 We had just heard lengthy presentations from ARB 4 staff on the importance of clean air in California. Auto 5 makers agree. It's a fact that today autos are 99 percent 6 cleaner than their counterparts in 1970. And auto makers 7 are working now on the last one percent through advanced 8 technologies and through programs like California's Fuel 9 Cell Partnership. 10 Auto makers have also made advancements in fuel 11 efficiency. For example, fuel economy levels for cars 12 have more than doubled in the past generation. 13 According to EPA data, fuel efficiency has risen 14 by about two percent per year for almost 20 years. 15 Cleaner vehicles and more fuel efficient vehicles provide 16 real benefits for Californians. That is what is 17 important, providing real benefits to Californians. 18 Today I would like to focus on the impact on 19 Californians of ARB's proposal. 20 The Alliance have submitted extensive comments 21 for the public record. 22 And, by the way, Dr. Gong, I think we have 23 participated. Our engineers got into this very early in 24 the game. Not just lawyers, not just government affairs 25 specialists, but engineers. We witnessed the first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 workshop. As you know, I directly participated in the 2 second. And we welcomed that opportunity to participate 3 throughout the length of this process. 4 As promised, our comments address the technical 5 feasibility, economic impacts, and cost effectiveness of 6 the proposed regulation, as well as addressing ARB's 7 proposal in light of the legal issues it raises, including 8 the federal preemption issue. 9 After reviewing the proposed rule and the 10 substantial amount of information related to it, the 11 Alliance and its member companies do not support the 12 proposed rule and, therefore, respectfully request the 13 Board reject it. 14 In our comments we make these four points: 15 First, while auto makers are constantly 16 developing and introducing new fuel efficient 17 technologies, the ARB staff proposal goes far beyond what 18 is reasonable and achievable in the timeframe considered. 19 The ARB staff proposal even goes beyond what the National 20 Academy of Sciences and the federal government found to be 21 technically and economically feasible. 22 Second, the proposed regulation will cost 23 California new car buyers not an up-front cost of a little 24 over a thousand dollars, but by our calculations -- and 25 we'll get into more deeply -- and Tom Austin is here with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 me, and we'll do this -- but this is going to be an 2 up-front cost of over $3,000. It would be interesting to 3 get a response from the people who were polled if they 4 were told that indeed their vehicles are going to cost 5 over $3,000. This represents a substantial economic 6 impact on California drivers. 7 That $3,000, in our opinion, will not be 8 recoverable through fuel cost savings, nor will that 9 $3,000 surcharge provide any measurable improvement in air 10 quality. 11 Third, the ARB proposal does not meet the 12 cost-effective standard as outlined by the California 13 Legislature in AB 1493. 14 And, finally, this proposal is in fact a fuel 15 economy rule and, as such, is clearly preempted by federal 16 law. 17 Let me elaborate. First, technical feasibility 18 in our fuel efficiency progress. We all care about 19 improving automobile fuel efficiency. We know that our 20 customers consider fuel efficiency when making buying 21 decisions, along with other attributes like safety and 22 utility. As a result, it is always on the minds of our 23 designers and engineers, "Let's review where we stand with 24 fuel efficiency." 25 Auto makers are continually introducing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 technologies to improve efficiency. Some recent examples 2 include cylinder deactivization, hybrid electric power 3 trains, clean diesel, as well as 5 and 6 speed automatic 4 continuously variable transmissions, just to name a few. 5 And you saw some of those vehicles with those attributes 6 outside on the curb during the morning session. I saw 7 that some of them were gone. I hope they went with the 8 rightful owners. 9 (Laughter.) 10 MR. WEBBER: For the long term auto makers are 11 actively participating in efforts to bring commercially 12 viable advanced technology vehicles such as the 13 hydrogen-powered vehicle to the market. I drove one of 14 those vehicles in Detroit not too long ago. It was a 15 thrill. 16 Auto makers are investing billions of dollars to 17 develop and produce these and other breakthrough 18 technologies. These investments have generated impressive 19 gains in vehicle fuel efficiency. 20 To be clear, fuel efficiency is the measure of 21 how effectively the vehicle uses the fuel. Sort of a 22 pound-for-pound look at the fuel economy of the various 23 vehicles we offer to the public. Technologies that 24 provide fuel efficiency improvements can be used to 25 improve fuel economy or they can be used to provide other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 characteristics that our customers care about when buying 2 a vehicle for work, for family, including increased towing 3 capacity, increased acceleration especially as you get on 4 to that freeway, and enhanced safety. Ultimately it's the 5 consumer who is in the driver's seat. No pun intended. 6 Consumers choose which technologies, including fuel 7 efficiency technologies, meet their needs. 8 The current ARB proposal goes far beyond, as I 9 said earlier, the National Academy of Sciences' and the 10 U.S. Department of Transportation findings. In other 11 words the findings having to do what is technically 12 economically feasible. 13 In effect, the ARB staff proposal mandates the 14 use of all those technologies it has identified as capable 15 improving fuel economy on all vehicles. This type of 16 technology mandate fails to properly account for various 17 driving conditions our vehicles are required to 18 accommodate. It does not account for preferences of 19 consumers for certain levels of performance. It does not 20 acknowledge different approaches that automobiles take in 21 designing vehicles and the technologies already in use. 22 Forcing expensive and sometimes unproven 23 technologies on Californians goes far beyond the 24 requirements of AB 1493, leading to costly vehicles that 25 may well sacrifice the attributes that most consumers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 want. In fact, the proposed standard based on how 2 California now defines them are so extreme that not even a 3 zero-emission hydrogen-powered vehicle would meet them. 4 And we'd be delighted to go into depth on that. This 5 means California would have to consider disbanding its 6 fuel cell partnership and closing down the hydrogen 7 highway. And I don't really think anyone here in this 8 room wants to do that. 9 It simply makes no sense to invest billions of 10 dollars in limited engineering resources, either public or 11 private, in fuel cell vehicle technology that does not 12 meet ARB's midterm standards, let alone future standards. 13 Second, economic impact: What's the true cost of 14 the proposal? What will this rule mean to the pocketbooks 15 of Californians? We estimated the impact on California 16 consumers, also vehicle choice, also the California 17 economy, and the automobile industry employment in 18 California and throughout the United States. As mentioned 19 earlier, your staff now predicts that the price of every 20 car or truck, van, minivan, and SUV sold in the state will 21 increase by an average of over $1,000 under the fully 22 phased-in midterm standard. 23 Now, that in itself is a substantial price 24 increase for Californians. But there is more. 25 The current estimated costs still substantially PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 underestimate the real costs of the regulation. The 2 Alliance asked Sierra Research under Tom Austin's 3 leadership to review the staff report and conduct an 4 independent analysis of the cost to meet the proposed 5 standard. 6 Sierra Research found that when all costs are 7 considered, not just the ones selected in the staff 8 report, the real costs of this proposal is closer, as I 9 mentioned earlier, to $3,000 for motor vehicles in the 10 state of California. And as we discussed in our comments, 11 this cost is not fully recoverable by fuel cost savings, 12 nor does it provide any measurable improvement in air 13 quality. 14 Third, let me address cost effectiveness, in 15 other words balancing costs and benefits to California's 16 climate. 17 For our comments we assessed the engineering 18 costs and benefits of the proposal and use this to 19 estimate its cost effectiveness. AB 1493 directed ARB to 20 develop and adopt regulations that achieve a maximum 21 feasible and cost-effective reduction of greenhouse gas 22 emissions from motor vehicles. That being the case, it is 23 important to stress that these regulations are not 24 intended to reduce pollution or any adverse health effects 25 related to air pollution. ARB's traditional role of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 adopting standards that improve air quality in California 2 does not come into play here, because these regulations 3 focus predominantly on controlling carbon dioxide. Of 4 course carbon dioxide is what we are all exhaling today. 5 I heard the previous speaker talk about carbon dioxide and 6 whether or not it's a pollutant. We know what the 7 official definition is today. I'll be interested to see 8 if his prediction comes true. 9 By way of background, greenhouse gas is quickly 10 dispersed throughout the global atmosphere. And 11 reductions in California will have no preferential impact 12 on California. 13 To the extent that ARB is able to reduce the 14 local greenhouse gas inventory, any positive benefits for 15 the state will only occur if other sources of greenhouse 16 gases, most notably those of developing countries in the 17 world -- and I think here of China and India -- if they're 18 taking steps to regulate greenhouse gas emissions, and you 19 and I know so far that is not the case. Controlling 20 greenhouse gas emissions is indeed an energy-related issue 21 that is being debated internationally and, in our opinion, 22 can only be effectively addressed on a global basis. 23 According to the ARB staff report, California 24 light-duty vehicles subject to this regulation account for 25 about 2 percent of the total U.S. greenhouse gas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 emissions. The U.S. produces about 25 percent of 2 worldwide greenhouse gas emissions. Thus California 3 light-duty vehicles subject to this regulation account for 4 about one half of one percent, .5 percent of the global 5 greenhouse gas inventory. According to the staff report, 6 the proposed regulations reduce emissions by an average of 7 27 percent. The ARB staff estimate that these regulations 8 would reduce global greenhouse gas emissions by about 9 one-tenth of one percent is documented in their report. 10 Let me put that in perspective. Even if ARB 11 eliminated every -- say you had the power to eliminate 12 every light-duty vehicle on the road, take it off the 13 road, the global greenhouse gas inventory would not 14 measurably change. And there would certainly be no 15 identifiable changes in climate in the state of 16 California. In fact, the regulations being proposed here 17 will have no impact on the climate in California and, by 18 extension, no impact on global climate. Indeed, the staff 19 report does not claim any significant air quality benefit 20 and does not attempt to quantify a single health benefit, 21 as we learned earlier during the Q and A session. 22 And despite the absence of any demonstrable 23 environmental or health improvement in California, 24 Californians will be paying more, $6 billion more each 25 year for their vehicles as a result of this proposal. You PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 know, I'm from Washington, but I still think $6 billion is 2 a lot of money. 3 California regulators have chosen to single out 4 California drivers to pay that $3,000 surcharge, which 5 amounts to in the aggregate $6 billion a year, with no 6 health or environmental benefits to its citizens. 7 So it is especially significant that the 8 Legislature in California required ARB to develop a plan 9 that is cost effective. Clearly in our mind this plan is 10 not cost effective, either in terms of the Legislature's 11 definition of the term "cost effective" in AB 1493, nor in 12 terms of any reasonable conventional definition of that 13 term. Simply put, this plan violates the legislative 14 mandate. 15 Finally, the federal preemption issue and state 16 fuel economy standards, which are prohibited. Since 17 virtually all greenhouse gas emissions from vehicles are 18 tailpipe carbon dioxide emissions, regulating vehicle 19 carbon dioxide emissions is tantamount to regulating fuel 20 economy. According to the staff report, tailpipe CO2 21 emissions are 97 percent of vehicle greenhouse gas 22 emissions. The only way to significantly reduce 23 greenhouse gas emissions from vehicles is to reduce the 24 amount of fuel consumed. This means you either reduce the 25 number of people who drive or you reduce the number of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 vehicles on the road, or you increase the fuel economy of 2 the vehicle fleet. And I think the first two options are 3 off the table. 4 Certainly it does not appear that ARB plans to 5 limit the number of vehicles on the road. And AB 1493 6 specifically prohibits ARB from reducing the number of 7 miles driven. 8 This leaves ARB with only one choice: Increase 9 fuel economy of the vehicle fleet through the control of 10 CO2 emissions. However, federal law is clear. Federal 11 law prohibits states from adopting separate fuel economy 12 standards. This preemption language was put into place 13 because of the impact that fuel economy standards would 14 have on the national economy. The U.S. Congress reserved 15 the issue of regulating vehicle fuel economy to the 16 federal government to balance all sectors of the economy 17 and to avoid a patchwork quilt of state regulations which 18 hurt businesses and, perhaps more importantly, consumers. 19 It is a simple fact. This regulations is 20 federally preempted. 21 The public comment period closes today. We made 22 this a priority for our best automotive engineers and have 23 submitted extensive comments before the deadline. We have 24 asked many times for extensions of time to ensure that all 25 necessary analyses are conducted for this rule. As you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 know, these requests were denied. We understand that ARB 2 is under a deadline to submit a plan to the Legislature 3 and to the Governor. But as our comments amply 4 demonstrate, this proposal is not in the best interests of 5 California and does not comply with AB 1493. 6 Therefore, the Alliance strongly urges this 7 distinguished Board to report to the Legislature that it 8 rejects this proposed rule on the grounds that, indeed, it 9 does not comply with AB 1493 because it will be costly for 10 Californians with no environmental or health benefits. 11 This concludes my prepared remarks. I'm sorry I 12 went on so long. Thank you for your patience. 13 I would be happy to answer questions. But before 14 I do, with the permission of the Chair, may I ask Tom 15 Austin to step in and briefly make his presentation? As 16 you know, Tom was previously executive officer of this 17 Board. He spent 30 years analyzing and regulating 18 automotive fuel economy, including the development of the 19 original standards for the federal CAFE program. 20 CHAIRPERSON LLOYD: With due respect, Fred, I 21 would -- since I know you have to catch a plane -- 22 MR. WEBBER: Yes, sir. 23 CHAIRPERSON LLOYD: -- I think Tom's motorcycle 24 can be used throughout the afternoon. And since -- 25 MR. WEBBER: Well, I plan to stay for his part of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 the presentation. I'm not going to leave. So -- 2 CHAIRPERSON LLOYD: And since you've made several 3 provocative statements, I would like to get a chance to -- 4 again, a pleasure to have you testify the first time 5 before this Board. And I think I've enjoyed meeting you 6 there. 7 However, I'm a little bit I guess taken aback. 8 That from the staff presentation this morning, I thought 9 it was a well-rounded presentation. We heard some 10 comments following up on that. They were so smart this 11 morning. And yet, according to you, they're incompetent. 12 So incompetent that they would get away with a California 13 fuel cell partnership and the hydrogen highway. I can't 14 accept that. I think that's really nonsense. 15 I think on the issue of federal law -- again, I'm 16 not a lawyer, thankfully. 17 (Laughter.) 18 CHAIRPERSON LLOYD: But we just heard I think -- 19 David Doniger gave his view of things. And clearly I'm 20 happy that the courts are going to examine that issue. 21 The other thing I think that you've had benefit 22 of not representing the Alliance or the auto companies, I 23 guess, over the years. And I think that -- otherwise I 24 think that you would recognize that the prediction of 25 costs, I think that our staff has more credibility there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 than the industry. 2 Also, I think the idea that this will have no 3 impact -- the cars have no impact on emissions or air 4 quality. For years we've heard the issue, yes, get rid of 5 all the cars during the ZEV requirement, get rid of all 6 the cars, we'd still exceed the air quality standards. 7 So I think that it stretches at least my 8 credibility on some of these issues. But, given that, 9 what would you suggest we do to meet the very challenges 10 you saw pointed out this morning, the increasing concern 11 with public health, the increasing actual public health 12 issues in California where we have so many days lost, we 13 have excess deaths, over 6,000 a year, all of which 14 getting contributed -- and it's likely to be exacerbated 15 by greenhouse gases. And I think we heard some eloquent 16 discussions this morning. 17 And, again, California's always prided itself, we 18 have to protect public health. If we waited till all the 19 evidence is in, we would never have stepped forward in the 20 first place. And we have looked -- we've wanted to work 21 with the Alliance, we wanted to work with the auto 22 companies, and we've got nothing coming back in return. 23 Now, for you to say that this is -- that what our 24 staff has done in cooperation with some of the best 25 experts throughout the world is illegal in terms of what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 we're trying to do and that our staff has really fallen 2 down, I find difficult to -- and maybe Mr. Austin's going 3 to further identify some of the points you made. 4 MR. WEBBER: Well, thank you, sir, I think. 5 (Laughter.) 6 MR. WEBBER: And it's an appropriate challenge. 7 We didn't come into this lightly. We don't enjoy taking 8 positions like this, but we're trying to be realistic. 9 And we based our findings on a lot of research, a lot of 10 studies, and a lot of experts, including Tom and Sierra 11 Research. And he can go into depth for you, for example, 12 on the hydrogen if you -- issue if you would care to. 13 But, again, we concluded, painfully I might add, that even 14 the hydrogen vehicle would not qualify midterm under the 15 standard being proposed here today. 16 But I do want to address global climate change. 17 To my way of thinking, that issue has to be 18 addressed on a global basis. To my way of thinking, that 19 issue has to start in Washington DC. To my way of 20 thinking, individual states really can't enable us to get 21 a handle on this problem, if indeed there is a serious 22 problem. I come from Maine. I was telling a New York 23 Times reporter earlier we had the coldest -- one of the 24 coldest winters on record. Ice would not go out. Pipes 25 would freeze. Summer's been terrible. I like California, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 frankly. I think maybe I'll just drop anchor here. 2 But -- 3 CHAIRPERSON LLOYD: We're talking about 4 climate -- 5 MR. WEBBER: -- it has to be debated and it has 6 to be addressed at the global level. I'm getting on a 7 plane tonight for Europe to talk to my colleagues from 8 around the globe in a series of panels in the next two 9 days. This will be one of the subjects. 10 But that's where we are in global climate change. 11 It's a big "if". I've seen the scientific reports. I've 12 seen opposing reports. It's a hard one. But right now 13 we're focusing on ARB for -- you know, the proposal that 14 the ARB has come forward with. And in the name of 15 reducing CO2, we think you've gotten into the fuel economy 16 standard and we think you're preempted. 17 And I would like to quote, sir, from the 18 California Energy Commission and California Air Resources 19 Board Joint Agency Report back in August of 2003. I'll 20 just quote: "Requiring vehicle manufacturers to improve 21 fuel economy, however, is the sole domain of the federal 22 government. The challenge for California policy makers is 23 to work effectively with the federal government to improve 24 new vehicle fuel economy." 25 And I would say to you, I think NITSA's doing a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 pretty good job. And if you're not happy with the way 2 NITSA's progressing -- and they're already addressing 3 light truck fuel economy standards and they're about to 4 address automobile fuel economy standards -- again, go to 5 Washington. You've got a great presence there. You've 6 got a strong congressional delegation. And slug it out 7 with them. But federal law to us is very clear here, the 8 position of the previous speaker notwithstanding. That's 9 my opinion anyway. 10 CHAIRPERSON LLOYD: Well, thank you. Again, 11 clearly is -- ARB stand behind that report. Our purpose 12 here is to reduce greenhouse gases. We don't agree, 13 disagree with that previous statement. We're talking this 14 here, however, about reducing climate change gas. 15 The other statement you made, well, some of the 16 major countries in the world, some of the increasing, 17 rapidly expanding economies should be taking action on 18 climate change. China is taking action on climate change. 19 They're talking about reducing greenhouse gases. 20 MR. WEBBER: They're talking about it. But if 21 you look at the track record, it's a very dramatic curve 22 upwards still. 23 CHAIRPERSON LLOYD: Well, I -- 24 MR. WEBBER: And I was there a year ago. 25 CHAIRPERSON LLOYD: Maybe other people can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 mention that. 2 But I think it is important that, as we waited -- 3 no matter -- you know, we have great respect, and I agree 4 with your point about Washington. On this issue there 5 when we've got 80 percent of the people in California 6 think something should be done about climate change, and 7 we are under the requirement of Assemblywoman Fran 8 Pavley's bill to come up with a regulation, we can't wait 9 for Washington. That's not what our charter is. 10 MR. WEBBER: I understand, sir. 11 CHAIRPERSON LLOYD: Any comments from the Board? 12 Ms. D'Adamo. 13 BOARD MEMBER D'ADAMO: I'd like for staff to 14 respond to the economic analysis, and perhaps if the 15 witness could as well. It appears that the Alliance used 16 different factors than what staff used, or perhaps 17 additional factors. Just would like to try and get a 18 handle on it. And I understand -- or recall what Ms. 19 Witherspoon said earlier today and, that is, that staff 20 rarely agrees with the industry. But if you could help us 21 to get a better sense of why we have two such divergent 22 viewpoints. 23 CHAIRPERSON LLOYD: Ms. D'Adamo, I don't know, 24 maybe this is a case where -- does Mr. Austin need to go 25 first though, I think, because -- yeah, I think Tom should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 go first. 2 MR. WEBBER: Thank you. 3 CHAIRPERSON LLOYD: Because I think he can 4 amplify on that issue. 5 MR. AUSTIN: I am going to introduce that issue. 6 If I could have the PowerPoint presentation back 7 up, and then the next slide. Or do I have a way to 8 control it here? 9 (Thereupon an overhead presentation was 10 Presented as follows.) 11 MR. AUSTIN: Okay. This slide just summarizes 12 what you just heard about how our analysis compares to the 13 CARB staff analysis, where we're showing here with 14 rounding this off. CARB estimating that the average price 15 increase associated with the 2016 standards is about a 16 thousand dollars average for cars and trucks combined and 17 that that will generate lifetime fuel savings -- as best 18 we can understand the way the staff has calculated fuel 19 savings from the backup spreadsheets that they were good 20 enough to provide us, lifetime fuel savings on a present 21 value basis of about $3,000. And so you end up with this 22 net $2,000 economic benefit, which is why you get the 23 economic conclusions that you heard earlier today. 24 We on the other hand come up with numbers that 25 are exactly the reverse of this. We've estimated the cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 of compliance for cars and trucks combined to be about 2 $3,000 per vehicle on average, and that the lifetime fuel 3 savings will only be about $1,000. 4 We've given you a very detailed submission that 5 explains in great detail the assumptions we use, the data 6 we use to come up with these numbers. And what I'm going 7 to do here today is to just kind of touch on some of the 8 more significant problems that we identified with the 9 staff analysis that contribute greatly to the difference 10 that's shown on this summary slide. 11 As you'll see from looking at our detailed 12 submission, our analysis is based on the same kind of 13 vehicle simulation modeling that the staff relies on. We 14 used a model that's very similar to the model that AVL 15 runs. For cost data we relied on submissions from Harbor 16 & Associates. That's the firm that the manufacturers are 17 most dependent on for doing cost analysis, not Martec. 18 Martec is a firm that does do a lot of good work for 19 vendors to the industry. And, quite frankly, as you'll 20 see in our detailed analysis, we thought that most of what 21 Martec did was very reasonable. We only take issue with a 22 few of the cost numbers that Martec came up with. Our 23 main concern is how those numbers were used by the ARB 24 staff. 25 And so if we could turn to the next slide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 --o0o-- 2 MR. AUSTIN: This is one of the issues related to 3 how the Martec cost numbers were used by ARB staff. As 4 the staff described earlier this morning, they applied a 5 40 percent markup factor, or a 1.4 multiplier to the 6 vendor cost estimates that were made by Martec. However, 7 when we look at the source of that 1.4 multiplier, it's an 8 analysis done by Argon National Labs, which we've 9 reviewed. We don't really take issue with what Argon did. 10 But Argon made it very clear that they believe that that 11 1.4 multiplier was an appropriate multiplier for a 12 component where the vendor is actually taking full 13 responsibility for research and development and 14 engineering and warranty costs. And they gave as an 15 example that being an appropriate multiplier for something 16 like a large electric vehicle battery. 17 Argon specifically said that a different 18 multiplier would have to be applied in cases where we're 19 talking about a component designed by an original 20 equipment manufacturer; manufactured by a vendor, sold to 21 the manufacturer, but the manufacturer actually took 22 responsibility for R&D and engineering and warranty. And, 23 in fact, the NESCCAF report specifically says -- and this 24 is a direct quote from the NESCCAF report -- that 25 additional manufacturer level costs that were not captured PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 in this analysis but that could be associated with the use 2 of new technologies include engineering costs, including 3 advanced R&D, vehicle design and development, engineering 4 for integrating new technologies and software development, 5 and warranty and possible recall costs. 6 The Martec numbers did not account for these 7 costs. That's laid out very clearly in the NESCCAF 8 report. And the multiplier that the staff put on the 9 Martec numbers was not the appropriate multiplier given 10 that these costs had to be covered by that multiplier. 11 When you look at the work that Argon did on 12 appropriate markup factors for vendor costs, the Argon 13 work from which this 1.4 factor was extracted would 14 support using a multiplicative factor of 2.05 when we're 15 talking about the kind of components that are in the 16 staff's analysis on this rulemaking. 17 --o0o-- 18 MR. AUSTIN: On the next slide, this is another 19 cost-related issue. The staff report says that 20 turbocharging with engine downsizing and automated manual 21 transmissions are actually going to reduce the cost of 22 vehicles while simultaneously improving air/fuel economy, 23 and that these technologies are not going to be used in 24 the no-regulation case. But if you pass a regulation, 25 you're going to somehow force the auto industry to use PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 technologies which will save them money. 2 This essentially assumes that manufacturers are 3 not going to act in their own economic interests in the 4 absence of a regulation. 5 The problem here -- and we're not saying that 6 turbochargers and automated manual transmissions are not 7 technologies that can be made available. The problem is 8 they can't be made available at the zero cost or negative 9 cost that your staff assumes. And the reason for that -- 10 I'll use turbocharging as an example. We provided very 11 detailed analysis of why we think there are problems with 12 a turbocharging analysis. But one of the simplest 13 problems to understand is that the fuel economy benefits 14 that your staff analysis assigns to turbocharging are 15 based on modeling done by AVL with premium fuel. So you 16 end up with a 20-cent-per-gallon hit to achieve that level 17 of fuel economy. 18 And the additional cost for the premium fuel was 19 not addressed in the staff analysis. And it totally wipes 20 out the economic benefit of the fuel economy advantage. 21 There are other problems with a turbocharging a 22 analysis as well which we lay out in great detail in our 23 detailed submission. 24 In the case of the automated manual transmission, 25 Martec submitted some cost information that the staff is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 relying on that essentially said that there wouldn't be 2 any piece price difference between automated manual 3 transmissions and conventional automated -- conventional 4 automatic transmissions. However, Martec knows full well, 5 and advised NESCCAF of this, that the manufacturing 6 capability to produce those transmissions does not exist 7 and that there would be substantial additional cost 8 associated with building and tooling the manufacturing 9 facilities to make those automated manual transmissions 10 that have not been accounted for in the staff's analysis. 11 Furthermore, and to comment on something that Mr. 12 Shulock said earlier, Chuck said something about there 13 wouldn't be any tear up required of existing facilities. 14 This is a prime example of where there would be 15 substantial tear up of existing facilities required. We 16 have an enormous amount of automatic transmission 17 manufacturing capacity installed in this country. None of 18 it is suitable for producing automated manual 19 transmissions of the type that are assumed in the staff 20 analysis. There would be a lot of capital investment that 21 would have to be retired prematurely. 22 This is one of the problems that ends up reducing 23 costs the way the staff analyzed it. And in our analysis 24 adds several hundred dollars of costs per car when you 25 account for the fact that we would have to invest a lot to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 make this technology come to light and we would have to 2 retire a lot of existing manufacturing capacity 3 prematurely. 4 Then I'd like to talk next -- next slide please. 5 --o0o-- 6 MR. AUSTIN: A couple problems on the benefit 7 side. This is something that -- an issue that's been 8 around for a long time that I always wondered about but 9 never really studied in detail, and just -- until just 10 recently trying to understand how the staff estimated the 11 level of benefits that it did. 12 The staff's benefit estimates for the improved 13 fuel economy are based on the assumption that the average 14 lifetime travel for passenger cars and light-duty trucks 15 in California is over 200,000 miles per year -- 202,000 16 miles lifetime -- I'm sorry -- 200,000 lifetime -- 202,000 17 miles lifetime for cars and 224,000 miles lifetime for 18 trucks, including all of the vehicles that end up being 19 scrapped because they're involved in accidents. 20 We for a long time have been concerned about 21 these numbers being so much higher than the national 22 average. And in the course of trying to figure out where 23 these numbers actually came from, discovered that there is 24 a math error in the way these numbers were calculated 25 that's built into the way VMT is calculated by the staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 And the next slide shows an example of what we're 2 talking about. 3 --o0o-- 4 MR. AUSTIN: This is kind of hard to read, so 5 I'll just kind of quickly summarize what it shows. I've 6 already talked to someone from the ARB staff this morning 7 to try to help them understand what's behind this analysis 8 to make it easier for them to get up to speed on it. 9 But basically the problem exists in the way that 10 the ARB staff has been accounting for the mileage 11 accumulation by vehicles in California fleet by using 12 odometer readings that come from your vehicle inspection 13 and maintenance program. 14 One of the problems in taking odometer readings 15 from the data that comes from that program is that 16 sometimes the mechanics write down the number and they're 17 off by one decimal point. And so if a vehicle comes in 18 the door and it's got 90,000 miles on it, they might write 19 down 9,000 miles. That happens frequently. Sometimes we 20 have older vehicles where there's a rollover problem. The 21 vehicle comes in with 20,000 miles on the odometer and 22 maybe it's really got 120,000 miles. And so your staff 23 came up with a good way of dealing with that kind of 24 problem. 25 But what they end up doing is instead of looking PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 at the average odometer of all cars coming through the 2 smog check program, they look at cars coming through the 3 program this year, specific cars, and then they trace the 4 vehicle license plate number or the VIN of that car to the 5 last time it was inspected and they look at what's the 6 change in odometer. And so if a car comes in this year 7 and it's got 50,000 miles it and it came in two years ago 8 and it had 30,000 miles on it, they conclude that it's 9 been accumulating miles at a rate of 10,000 per year, and 10 that's a reasonable number, it passes the lab test and so 11 they accept it. No problem there. 12 The problem comes in that when you actually do an 13 example and look at what happens when you apply this 14 approach in the real world, it turns out that you don't 15 get the right answer when you have high mileage 16 accumulation vehicles being retired from service at a 17 relatively young life. If, for example, you've got fleet 18 vehicles that are accumulating 40,000 miles per year, 19 which I use in this example, after four years they have 20 160,000 miles on them. If you assume they're retired from 21 service at this point and that the vehicles that remain in 22 the fleet are only getting 10,000 miles per year, and they 23 stay in the fleet for 16 years, both kinds of cars have a 24 true lifetime vehicle mileage accumulation of 160,000 25 miles. But when you do the analysis the way your staff is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 doing it, you are led to the conclusion that the lifetime 2 VMT for the fleet is 220,000 miles, because you're adding 3 10,000 miles per year for those cars that didn't get the 4 real high rates of mileage accumulation when they were 5 young and you're ignoring the cars that have been removed 6 from the road, you're not incrementing their odometers by 7 zero like you should be. 8 I know that superficially this may sound like, 9 well, it can't be a very significant effect. We've 10 submitted a very detailed analysis showing that it is a 11 very significant effect and if the true lifetime VMT, the 12 true period of time over which any fuel economy benefit is 13 going to be realized by the consumer, is much closer to 14 150,000 miles than it is to 200 or 220,000 miles, it ends 15 up having a big effect on the benefit you calculate to the 16 regulation. 17 --o0o-- 18 MR. AUSTIN: On the next slide, there's another 19 problem related to benefits that are calculated for the 20 regulation that comes from the fact that all of the 21 staff's calculations are based on modeling that was done 22 using the official test procedures for the corporate 23 average fuel economy testing, the EPA city cycle and the 24 EPA highway cycle. 25 The problem with using those cycles is that they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 no longer represent the way people are driving in 2 California. They were developed, in the case of a city 3 cycle, over 30 years ago, in the case of the highway 4 cycle, 30 years ago. And that's not the way people are 5 driving these days. 6 Average California driving is different. But 7 more importantly, the fuel economy improvement associated 8 with many of the technologies that the staff evaluated is 9 different on the actual driving patterns than on these 10 official test procedures. 11 We could go to the next slide. 12 --o0o-- 13 MR. AUSTIN: This shows an example for city 14 driving of how the official test procedure compares to the 15 way people are really driving in California. The bottom 16 figure is the speed/time profile for the official test 17 procedure that's used in the corporate average fuel 18 economy testing program and in the emissions testing 19 program. It's referred to as the EPA city cycle or the 20 LA-4 cycle by some people. 21 The top figure -- and the length is not important 22 here. It's the characteristic. The top figure is the way 23 people are really driving in California urban areas today. 24 This is based on an enormous amount of data collection 25 that we have done since the early 1990's. We developed a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 cycle for your staff back in 1992 that better represents 2 the way people were driving in the early 1990's. We've 3 updated it with this analysis to represent the way people 4 are driving now with a higher speed limit. The last time 5 we did this it was before the change in the 55 mile an 6 hour speed limit. And what it shows is that the speeds 7 that people are driving at and the acceleration rates that 8 they're using are substantially higher than on the 9 official test procedure. 10 If we could go to the next figure. 11 If we could go to the next slide please. 12 I'm sorry. There's one more -- there's one more 13 figure. 14 There we go. That was it. No, no. Go back -- 15 that's it. 16 --o0o-- 17 MR. AUSTIN: Okay. Now, this is for highway 18 driving. Again, the bottom figure is the official EPA 19 highway driving cycle. You can see -- this is one of the 20 driving cycles that I worked on when I was at EPA. You 21 can see that the top speed on this cycle is 60 miles per 22 hour. A policy decision was made back in 1974 when this 23 test procedure was developed at EPA to only collect data 24 on the way people were driving in areas where the 25 55-mile-an-hour speed limit was being vigorously enforced. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 And so all of the freeway driving came from the State of 2 Ohio, which for the last 30 years has still been enforcing 3 speed limits more aggressively than most other states. 4 And as a result, we have a relatively low speed/highway 5 cycle that's the basis for all the fuel economy testing. 6 The top figure is a composite cycle developed 7 from non-urban driving throughout California, for both 8 northern California and southern California, using data 9 that we've collected for ARB and CalTrans since 1997, 10 showing the way people really drive. And what you can see 11 is there are some dramatic differences between the way 12 people are really driving and the kind of cycles that were 13 used to model the benefits of the technologies that the 14 staff looked at. 15 The current cycles, the official cycles, they do 16 a very good job of ranking vehicles in terms of their fuel 17 economy, with few exceptions. If you go to the showroom 18 and you see a vehicle that gets 20 percent better fuel 19 economy based on what's on the window sticker, you can be 20 pretty confident that that vehicle is really going to 21 deliver better fuel economy than the vehicle with the 22 lower rating. But when you start talking about some of 23 the more advanced technologies, the degree of benefit 24 associated with implementing that technology is quite a 25 bit different the way people are actually driving in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 California these days than what you end up seeing on the 2 cycles that were used by the staff. 3 Now, If I could have the next slide. 4 --o0o-- 5 MR. AUSTIN: Here's another problem that's 6 related. It's on the benefits side. As best we can tell 7 from the data files, spreadsheet files that we got from 8 the staff, when the staff calculated what the benefits 9 were for the Light-Duty Truck II standards, it compared 10 CO2 emissions under the midterm standard to CO2 emissions 11 in the 2002 baseline case with minivans excluded from the 12 baseline. 13 The staff report explains in one section how 14 between now and 2009 there are going to be improvements in 15 the fuel economy of light-duty trucks due to a number of 16 different technology changes. And there are estimates for 17 what those fuel economy improvements are. But as best we 18 can tell, when the staff got to the final step of 19 comparing fuel economy or CO2 emissions under the proposed 20 standards to what they otherwise would be, the staff went 21 back to the 2002 baseline and forgot to account for the 22 fact that because of the new standards adopted by NHTSA 23 that come in in 2007, raising the light-duty truck 24 standards from 20.7 miles per gallon 22.2, fuel economy is 25 going to improve in the absence of any regulation by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 State of California. And that wasn't accounted for. And 2 just as importantly, that minivans were like -- a baseline 3 because minivans weren't used to set the standard, and the 4 staff didn't account for the fact that minivans have 5 higher fuel economy than the other Light-Duty Truck II's. 6 And the net effect is that the benefits that are 7 associated with the Light-Duty Truck II standards are far 8 less, we believe, than what the staff has estimated. 9 If we could go to the next slide. 10 --o0o-- 11 MR. AUSTIN: So now this kind of comes back to a 12 slightly modified version of the first table that I 13 showed, where I said that the staff analysis shows an 14 average cost of a thousand dollars and a lifetime fuel 15 savings of 3,000. And this afternoon I just talked about 16 five problems really. 17 I talked about the fact that the markup factor 18 that the staff used was a markup factor that was clearly 19 supposed to be used in the case where the vendors bore the 20 cost of engineering and R&D and warranty. But in this 21 case the vendor cost estimates that the staff analysis is 22 based on did not include those costs. And the NESCCAF 23 report makes it clear that they didn't. 24 The other problems I talked about is that the 25 staff report assumes that manufacturers are going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 employ technologies that will actually lower their costs 2 only if they're regulated. And for a variety of reasons, 3 we believe that that definitely will not happen. 4 The third point I talked about is that the 5 lifetime benefits of the standards are based on the 6 assumption that light-duty vehicles are traveling more 7 than 200,000 miles on average in their lifetime. And we 8 believe we can conclusively demonstrate that there is a 9 math error associated with the approach that was used to 10 come up with that number that results in an overstatement 11 of the benefits by 40 percent just due to that factor 12 alone. 13 The fourth thing I mentioned is that all the 14 staff's work is based on the assumption that the fuel 15 economy benefits result from people driving just like the 16 CAFE test procedures. And your staff knows from work 17 we've done for the staff in the past that is not the way 18 people drive in California. They drive much more 19 aggressively, much harder acceleration rates, much higher 20 speeds. And the benefits of many of these technologies 21 are much less in real driving. 22 And the fifth thing I mentioned is that we 23 believe there was a clear error made in the way the 24 benefits of the Light-Duty Truck II standards were 25 calculated because the staff did the benefit estimate off PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 the 2002 baseline and failed to account for the increasing 2 stringency of the CAFE standards for trucks that NHTSA has 3 just set and failed to account for minivans. 4 Those are five errors where we think that -- we 5 think it's essentially inconceivable that the staff will 6 end up concluding we're wrong about this. We think that 7 they will have to acknowledge that there were some errors 8 that were made. And with just correcting those errors, 9 the staff's numbers would change from a cost of a thousand 10 bucks per vehicle to about 1800. The lifetime fuel 11 savings would shrink from about 3,000 to about 1700. And 12 so you've already just with these five errors gotten to 13 the point where the cost of the proposal regulation exceed 14 its benefits. 15 If you look at our detailed analysis where we 16 point out other problems that we think are clear problems 17 that really need to be corrected, fixing the remaining 18 errors is how we get to our estimate, that the actual cost 19 of the regulation will be 3,000 and the actual benefits 20 will only be 1,000. 21 And I'd just like to make one concluding comment 22 here. Because the costs end up being so much higher than 23 the benefits, the economic analysis that your staff did we 24 think is not applicable and the real effect is going to be 25 an adverse effect on the California economy. And because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 of other factors, the rebound effect that you've heard 2 about being one of them, we believe that the net effect of 3 this regulation will be an increase in ozone precursors, 4 which will be more than enough to offset the essentially 5 unmeasurable change in temperature that would result from 6 the regulations, and so you're going to end up with a net 7 adverse environmental impact. 8 The last point I'd make in response to the 9 Chairman's comment about the accuracy of the cost 10 estimates provided on behalf of the automotive industry in 11 the past: The technology changes that are required to 12 comply with this proposed regulation go far beyond the 13 kind of technology changes required to comply with your 14 exhaust and evaporative emission standards. They are 15 closer to the level of changes that are associated with 16 doing something like a whole new vehicle, like an electric 17 vehicle. 18 And I would invite you to go back to the early 19 1990's and look at what your staff said about what the 20 cost of electric vehicles would be in 2003 due to 21 unforeseen innovations. And also look at what we said the 22 cost of electric vehicles would be in 2003. And you'll 23 see that the estimates we made of what was going to happen 24 with those kinds of complex technology changes were pretty 25 much on the mark. And we think we're on the mark here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 too. 2 I'd be happy to answer any questions you have. 3 CHAIRPERSON LLOYD: I think before we get staff, 4 I'd like to add two comment here, Tom. I know that you've 5 done a lot of work for ARB on I&M. The issue you mention 6 about characterizing the actual VMT, how does that impact 7 the cost effectiveness of I&M, if any? 8 MR. AUSTIN: How does it impact the cost 9 effectiveness of I&M? 10 CHAIRPERSON LLOYD: Yeah. Does it play into that 11 at all or not? 12 MR. AUSTIN: It's kind of a complex issue. But 13 one of the things you'll end up discovering is that when 14 you look at the way that impact model is used -- there's 15 not a fundamental problem with the way the model is being 16 used to estimate the cost effectiveness of certain 17 programs, and I think IM is one of them. I don't think 18 there's a problem with the cost effectiveness of IM that 19 results from this little wrinkle we found in the way that 20 cumulative VMT is being accounted for. You are accurately 21 predicting the VMT occurring for a vehicle that is 15 22 model years old. That's not a problem. And the IM 23 benefits are associated with those 15-year-old vehicles, 24 which are still on the road and subject to the program. 25 You know how many there are. You know what their annual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 VMT is. You know how much it costs for them to go through 2 the smog check program. And you know what the emission 3 reduction is. So you're doing everything right. 4 Where it ends up being a problem is when you look 5 at a regulation like this and you say, "How much are 6 people going to save over the lifetime of the vehicle if 7 instead of it getting 30 miles per gallon it's going to 8 get 40 miles per gallon?" And that's where the error ends 9 up being a problem. 10 I've always been a strong supporter of the IM 11 program, as you know, and I don't think I've done anything 12 here that's going to have an adverse effect on what we say 13 about that program. 14 CHAIRPERSON LLOYD: Well, I just wondered if you 15 thought of that. You haven't -- clearly you haven't 16 looked into it in detail, but you don't think it's a 17 problem? 18 MR. AUSTIN: I don't. 19 CHAIRPERSON LLOYD: The other question, you 20 mentioned that there's a different driving cycle in 21 California and that impacts greenhouse gases. 22 What about the criteria pollutants? How is that 23 going to affect the criteria pollutants? 24 MR. AUSTIN: Well, that's the reason why your 25 staff has been using a driving cycle we developed for them PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 for many years now, to characterize emissions of vehicles 2 that they recruit from customer service. Because the 3 official test procedure is not the best measure of what 4 emissions are in customer service. And my understanding 5 is that when you're bringing vehicles into the El Monte 6 lab from customer service and testing them, you're using a 7 cycle that we developed for you based on the way people 8 are really driving in California, so that you've got a 9 better handle on what true emissions are. 10 CHAIRPERSON LLOYD: All right. Thank you. 11 Well, I guess we'll ask staff I guess to 12 comment -- respond to Ms. D'Adamo's original question 13 there to respond to the presentation by Mr. Austin. 14 ENGINEERING STUDIES BRANCH CHIEF ALBU: Okay. 15 Based on looking at some of the Alliance comments, which I 16 did receive about a day ago, I did check with Martec on 17 some of the assumptions. And, in fact, I checked with 18 their main consultant on the matter about what these costs 19 really represented. And so I haven't really had time to 20 look into what Mr. Austin is talking about precisely, but 21 I can at least address some of it. 22 CHAIRPERSON LLOYD: Well, also I recognize 23 that -- again, I guess we've got four boxes of comments 24 come in. So I don't expect staff to have all the answers. 25 And so if you prefer to take some more time and maybe get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 back to us later, I also understand. 2 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, I 3 think we can respond to quite a bit though right now. 4 CHAIRPERSON LLOYD: Okay. 5 ENGINEERING STUDIES BRANCH CHIEF ALBU: When I 6 talked with the Martec consultant, their main consultant, 7 the point that was made is that we're talking here about 8 vendors who supply parts in high volume, 500,000 per year. 9 And, as such, these vendors are in the business to supply 10 multiple manufacturers at a time. And so what they do is, 11 for example, in developing electric water pump, integrated 12 starter generator, they take on the research and 13 development tasks themselves because they see a business 14 case to sell these parts. 15 And I also talked with some people in the 16 industry, which I'm associated with and I've known in the 17 past, just asked them how do they deal with the situation 18 when a vendor supplies a part to them as a manufacturer. 19 And it turns out that at some point in the manufacturing 20 process the part has reliability issues, warranty issues, 21 if you will. 22 As it turns out, typically the vendor pays the 23 cost of the recall. And this is even increasingly the 24 case. In fact there's been articles in automotive news 25 lately where Ford, for example, has told vendors that "you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 will not make these kinds of mistakes or you'll pay for 2 them." So increasingly, the pressure's put on the vendors 3 for investment, for research and warranty. But the fact 4 that we're talking about high volume parts being sold to a 5 multiple mix of manufacturers, that's why in fact they do 6 incorporate those costs in the parts cost that Martec 7 reported. And this was verified on the phone yesterday 8 with their chief consultant. 9 And we're talking here about the kinds of -- 10 these kinds of parts: 11 We're talking about valve train components. 12 Example of those that are used in deactivation and 13 supplied INA and Eaton. INA supplies Chrysler; Eaton 14 supplies General Motors. And we're talking about electric 15 power steering supplied by Delphi, Visteon; integrated 16 starter generators supplied by the same vendors. 17 Electric water pumps, Pierburg; electric oil 18 pumps, Pierburg. 19 Again, these are multiple make applications where 20 they take on the investment, research, development and 21 warranty costs. So that's the real answer. 22 The 1.4 factor that we applied was when the 23 manufacturer gets those parts from the vendor, we said 24 that manufacturers themselves have to integrate that 25 product in their -- that part, if you will, in their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 product line. And so there's additional work that the 2 manufacturer has to do. Then there's things such as -- 3 maybe you can show the slide... 4 This slide we'll put up will show the kinds of 5 things that we consider in the 1.4 analysis. Paul will 6 get the slide up in a minute. 7 But the point is we do acknowledge that industry, 8 manufacturers themselves have additional work to do. And 9 there's such things as even dealer profit in that 1.4. 10 And in fact -- I'll just hold off for a second 11 here. 12 This is the same kind of process we used in the 13 LEV program, which industry again objected to and said 14 that our costs were off by a factor of 8, when in fact 15 they were not. And they were pretty much a little bit 16 high in the final analysis in our estimate. 17 Anyway, the variable costs are the ones that 18 basically the component supplier gives to the manufacturer 19 at the assembly plant. From there the rest of the costs 20 are encountered in the process of selling the car at the 21 retail price level. There's research, legal, 22 administrative support costs the manufacturer has to 23 incur. There's investment recovery costs in terms of 24 machinery or equipment in the plant. Retooling and so 25 forth has to be accounted for. And we certainly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 acknowledge that. We totally agree. 2 And there's capital recovery. I mean the 3 manufacturers have to put out the investment. They have 4 the amount of return they expect in that investment. 5 Then there's dealership costs, operating costs, 6 costs of capital recovery. 7 So that's what's in the 1.4 factor. 8 In the LEV program we actually went back and 9 looked at the factor. The LEV program that we used was 10 about 1.3. In this one we pushed up a bit to 1.4 to 11 account for some of the things that Mr. Austin just 12 mentioned. 13 And Mr. Austin didn't mention that the EPA uses a 14 factor of about 1.2 something. 15 MR. AUSTIN: I'm familiar with EPA's hopelessly 16 out-of-date factor. 17 Well, what Steve is saying here -- I understand 18 the point he's making about vendors taking responsibility 19 for certain things. However, when Martec says, "Here's 20 how much it costs for these components to do cylinder 21 deactivation," you can't just bolt those on the engine. 22 There's fundamental changes to the basic engine required. 23 And MarTech's costs do not account for the manufacturer's 24 costs associated with making that engine ready to accept 25 the cylinder deactivation equipment that a vendor is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 supplying. That's why we think the most appropriate 2 multiplier is the 2.05 multiplier, not the 1.4. 3 ENGINEERING STUDIES BRANCH CHIEF ALBU: We 4 believe that that is not the case, because we are allowing 5 enough time, enough lead time so that the kinds of changes 6 that industry has to make are done when they retool the 7 engine anyway. For example, when you redo a cylinder 8 head, he can incorporate some of the valve train 9 components at the same time for next to nothing. 10 So it's a matter of adding the components in when 11 you do the redesign process in its normally scheduled 12 point. And that's why we gave additional lead time in the 13 regulation to allow for that. 14 In fact I have quotes from Mr. -- a General 15 Motors executive in -- in engineering. It said, "Even 16 when you incorporate variable valve timing and discreet 17 variable valve lift, you don't even have to change the 18 cylinder head." It's Mr. Indra. That's his name. 19 So, you know, we're talking about here providing 20 enough lead time so they can incorporate these changes 21 with regularly scheduled updates that they're going to do 22 anyway. For example, we project that nearly all 23 manufacturers will incorporate variable valve timing and 24 some form of variable valve life by 2009 in most of their 25 product line. When they do that they can do a number of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 other things. But the parts they purchase to do that work 2 are already costs to include the warranty costs, 3 development costs, and so on. 4 So that's why we think that our factor is still 5 appropriate and still the right one. 6 CHAIRPERSON LLOYD: Are you actually going 7 through the point-by-point -- 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: Yeah. 9 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: 10 Well, while Steve's getting the slide up on the 11 transmission, I guess -- Mr. Austin made the point that we 12 were wrong on electric vehicles. And I guess I'd want to 13 differ with that. We were right on the vehicles. We were 14 wrong on the batteries. Our estimated -- 15 (Laughter.) 16 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: Our 17 estimated -- no, but you -- I guess what I'm saying is you 18 said that there was a whole bunch of new technology that 19 they had to put on electric vehicles. We understood the 20 electric vehicles well enough to understand the costs on 21 the vehicles. The batteries were always the dicey part of 22 electric vehicles, and that's why we had all the 23 consultants -- 24 MR. AUSTIN: You told the Board when the 25 regulation was adopted that by 2003 the price premium for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 an electric vehicle with the battery would be $1,350. 2 CHAIRPERSON LLOYD: Let's not debate that issue 3 again. That's -- 4 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: What 5 I'm -- just very quickly. What I understood was that 6 the -- we all agreed before the valves really got going 7 that making an electric vehicle cost about the same as 8 making an internal combustion engine vehicle. It was the 9 battery that was the big difference. 10 CHAIRPERSON LLOYD: Steve, are you going to 11 continue? 12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Could 13 I -- I just want to make one comment without getting into 14 a debate on that. 15 We think it's a very different situation. The 16 time the electric vehicle mandate was started, you know, 17 batteries needed invention. They didn't really exist in 18 the way that we see them today. And so people were 19 guessing at what the costs of something that was still 20 going through development. 21 You know, the technologies were talking about 22 here are on cars today and they're available. And when 23 you hire people to go do the analysis, you can look at the 24 parts and the materials and figure out what they cost. 25 So, you know, if there's an implication here that our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 1,000 because of the electric vehicle argument could be 2 3,000, I think that's -- that has no basis at all. 3 CHAIRPERSON LLOYD: Somebody was quoted in the 4 L.A. Times today along those lines. 5 (Laughter.) 6 CHAIRPERSON LLOYD: Steve -- 7 MR. AUSTIN: Batteries have been around a lot 8 longer than variable valve lift and timing or cylinder 9 deactivation or automated manual transmissions -- 10 CHAIRPERSON LLOYD: Please, let's see if we can 11 address the issues without getting into this banter here. 12 So I think Thomas made his points. Let Steve 13 respond where appropriate. And then if you need more 14 time -- 15 ENGINEERING STUDIES BRANCH CHIEF ALBU: All 16 right. Well, let me just say before I move on to this 17 point that one other example of one you use is 18 turbochargers. For example, Garrett has made 19 turbochargers for some time and they've been used by the 20 manufacturing industry for -- by the automotive industry 21 for some time as well. And so, again, they developed the 22 turbochargers, they absorbed the warranty, development, 23 all that cost. So it's hard to make the claim that 24 somehow manufacturers should -- or that we should add 25 another 40 percent on that cost. It just doesn't make PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 sense to me. 2 The other thing I wanted to mention too is that 3 General Motors in their -- redesign of their 3.9 liter V6 4 that they use in the Chevy Malibu and I think the new 5 Pontiac G9, I believe it's called, that replaces the Grand 6 Am, they mention that that engine in fact is already 7 capable of accepting turbocharger without being upgraded. 8 They said that they made the engine so durable to assure 9 long life, that it would withstand the pressures of 10 turbocharging. And they provide an example of the fact 11 that they're actually putting oil misters on the bottom 12 side of the pistons to make sure they remain cool in 13 operation, so that turbocharged applications can be using 14 the same engine. This is just one example of how 15 manufacturers plan ahead to incorporate new technology 16 when designing engines, so you don't have to go back and 17 redo it all again. 18 One thing I wanted to bring up -- and I thought 19 Mr. Austin would, and I'll simply acknowledge it myself -- 20 in the comments received from General Motors late 21 yesterday afternoon, they made the mention that the 22 automated manual transmission, the AVL model, apparently 23 turned out to be the direct -- or dry clutch transmission, 24 not the wet clutch, as I had assumed. In fact there must 25 have been a miscommunication because when I talked with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 AVL months ago, I asked them if they made sure that they 2 modeled the pump that had to be present in the wet clutch 3 version. And they said they had. So somewhere between 4 that question and the modeling there was a mismatch. 5 In any case, we went back and looked at the 6 benefits that we ascribed for that transmission. And 7 actually AVL ascribed about 6 to 8 percent benefit for 8 that transmission. Well, actually the Graz contingent of 9 AVL was surprised at that low number. They said it should 10 have been more like 10 to 12 percent. 11 So we got AVL North America and AVL Graz somewhat 12 disagreeing about that. 13 But the bottom line is, we estimated -- AVL 14 estimated about 7 percent. When we go back and look at 15 real data from suppliers of six-speed automatic 16 transmissions -- they can take ZF, for example, who has a 17 product in the marketplace right now. They're estimating 18 the benefit of that transmission to be about 7 percent. 19 They're in the red line on that chart in the middle where 20 it says six-speed automatic transmission. 21 So the point is, every place in our technology 22 assessment where you see six-speed automated manual 23 transmission, you can pretty much substitute six-speed 24 automatic transmission and you'll get the same result. So 25 that manufacturers don't have to tear up their automatic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 transmission designs for six-speed automatic. They can 2 keep going ahead with them. They'll be just fine. 3 They'll meet our requirements. 4 One reason that this has happened is because -- 5 I'll just mention a couple features. The ZF transmission, 6 which I am familiar, at idle -- normally an automatic 7 transmission has the engine running at a little bit higher 8 rpm against the torque converter to keep the engine idling 9 smoothly. Well, the ZF transmission actually disengages 10 the torque converter at idle to let the rpm drop and, 11 thereby, save fuel usage. 12 In addition, with the six speeds available, the 13 need for a torque converter is greatly diminished. That's 14 why in fact the six-speed automated manual transmission 15 can actually work pretty well. 16 So nowadays with the six-speed automatic, when 17 you take off from a line, the torque converter does some 18 work. But thereafter it can lock up and be pretty much 19 like a manual even in 1st -- well, in 2nd and 3rd and 4th 20 gears, and on to 5th and 6th. So that we are seeing in 21 fact that there is convergence between six-speed automatic 22 and six-speed automated manual. And in fact Martec 23 recently brought that to our attention, that industry is 24 claiming that there's really not much difference. 25 So in any case -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: So 2 the key point is that they don't have to tear up lines, 3 they can use automatic transmission lines to make a 4 transmission that will do the same thing that we modeled 5 as a six speed. 6 MR. AUSTIN: Is this -- did I miss this? Is this 7 something that's in the staff report or in the supplement? 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: No, this 9 is an analysis that we did amongst ourselves when we 10 were -- you know, AVL, Martec and ARB, NESCCAF didn't 11 always agree. We definitely had our own internal 12 arguments. And this is one of the areas where we had some 13 disagreement. And we frankly felt that the numbers from 14 AVL were somewhat low when it came to transmission 15 modeling. 16 MR. AUSTIN: But your -- the point I made is that 17 your economic analysis assumes that manufacturers will use 18 automated manual transmissions and they will save $140 by 19 doing that instead of using six speeds. 20 ENGINEERING STUDIES BRANCH CHIEF ALBU: That's 21 not true. What we said was the -- they come out 22 essentially -- 23 MR. AUSTIN: I must be misreading your 24 spreadsheets. I see a minus $140 whenever an AMT is used 25 instead of a six-speed automatic. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 LOW-EMISSION VEHICLE IMPLEMENTATION MANAGER 2 HUGHES: No, a six-speed automatic you'll find on the 3 right. 4 MR. AUSTIN: Oh, I'm sorry, a hundred dollars. 5 I'm sorry, a hundred dollars. A hundred forty dollars for 6 a five-speed automatic. 7 LOW-EMISSION VEHICLE IMPLEMENTATION MANAGER 8 HUGHES: That's around $75 to $80 if I remember right. 9 And I'll have to go back to -- 10 MR. AUSTIN: I think the difference there is the 11 1.4 multiplier. It's a hundred dollars with the 1.4 12 multiplier. With a larger multiplier, it's a more 13 savings -- greater savings than that. 14 I understand your point. You're saying if 15 there's a problem tearing up manufacturing facilities to 16 do automated manual transmissions, you can get almost as 17 good with a six-speed automatic. I don't know that I'd 18 quarrel all that much with the numbers you show here in 19 terms of the relative benefit. But your staff analysis is 20 based on the benefits of AMT, not six speed. And it's 21 based on a lower cost for AMT, not the higher cost of six 22 speed. 23 ENGINEERING STUDIES BRANCH CHIEF ALBU: All I'm 24 saying is that in terms of benefit, in terms of CO2, the 25 six-speed automatic transmission could be substituted for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 the AMT for the purpose of benefits of CO2. 2 CHAIRPERSON LLOYD: I think what we're going to 3 have to do is try to let staff address the questions, Tom. 4 And then maybe you'll work with them directly, try to 5 resolve this. Because looking at the time it's taking -- 6 and I know you'll be happy to be paid to talk all night, 7 and you could do very well, and there are issues probably 8 you've got here. 9 (Laughter.) 10 CHAIRPERSON LLOYD: But I think in fairness to 11 the other witnesses here. 12 But there are issues clearly we need to talk 13 about. And maybe then staff could come back tomorrow -- 14 Bob, you wanted to say -- 15 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: Just 16 very quickly can I cap this by saying that I -- that where 17 I would -- what I would read this debate to be was that 18 Tom's major point was that the whole industry was going to 19 have to come out and do new transmission plants to do 20 six-speed manual type -- or a six-speed 21 automatic-gear-train-type transmissions, and that that was 22 going to add a huge cost. And I think what we're saying 23 is that upon further reflection it appears that an 24 automatic transmission, which would be a son or a daughter 25 of the ones that they make now, which wouldn't require PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 plant tear-ups, could be done. And I think the point to 2 take away from that is, is that, yeah, the costs might 3 change a little bit, but they wouldn't be these humongous 4 cost changes which would cause the staff analysis to be 5 grossly in error. 6 CHAIRPERSON LLOYD: What would be helpful I 7 guess, getting back to finding out exactly what Ms. 8 D'Adamo's question was and then maybe after to getting 9 together with Tom, if you'd come back maybe, the way it's 10 going, like in the morning, with some crisp responses to 11 the comments that Tom made there. 12 EXECUTIVE OFFICER WITHERSPOON: We'd be happy to 13 do that. 14 CHAIRPERSON LLOYD: But, Ms. D'Adamo, did you -- 15 are you happy with that? 16 BOARD MEMBER D'ADAMO: Yes. 17 CHAIRPERSON LLOYD: Thank you very much, Tom. A 18 lot of thought provoking issues that you raise. 19 MR. AUSTIN: Thank you, Chairman Lloyd. 20 CHAIRPERSON LLOYD: Thank you very much. 21 What we're going to do is we'll try to take at 22 least one more witness. 23 John Cabaniss, Dorothy Rothrock, and Bob Lucas. 24 I would like to do those before we take a 15-minute break. 25 MR. CABANISS: Good afternoon. My name is John PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 Cabaniss. I am Director of Environment Energy for the 2 Association of International Automobile Manufacturers. 3 Mr. Chairman, in the interests of time I've 4 condensed my statement today, but request that my full 5 written statement be included in the hearing record. 6 AIM has several concerns with the ARB proposal. 7 I'll briefly mention just four concerns today. 8 First, climate change gases cannot be effectively 9 regulated state by state because they're fundamentally 10 different from criteria air pollutants. Throughout the 11 staff report, ARB treats climate change gases the same way 12 it treats criteria pollutants. The fundamental error 13 distorts all of ARB's analysis. 14 Air pollution is primarily a local problem, while 15 climate change is a worldwide phenomenon. California's 16 air quality needs are special in many respects. But 17 California does not have a special or unique situation 18 with respect to global climate change. 19 When the federal motor vehicle provisions of the 20 Clean Air Act were adopted, California already had its 21 motor vehicle emission standards program in place. 22 Conversely, the federal government has been regulating 23 carbon dioxide emissions from vehicles through the 24 Corporate Average Fuel Economy Program for nearly 30 25 years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 Our success in significantly reducing pollution 2 from motor vehicles has been enabled primarily by a single 3 factor, the development of catalytic converters to 4 extremely high efficiency levels. 5 Such after-treatment of carbon dioxide emissions 6 is not possible for climate change emissions. Instead 7 vehicle climate change emissions are inherently linked to 8 the amount of fuel consumed. Fuel consumption is impacted 9 by virtually every aspect of vehicle design and 10 construction, ranging from engine and transmission 11 modifications to possible changes in the shape, size and 12 materials. 13 Recent experience with the electric vehicle 14 program shows what can happen when technologies do not 15 develop as expected. 16 Vehicles are designed, built, distributed, and 17 marketed for the entire U.S. market, not just for 18 California. While it had generally been possible for 19 industry to produce vehicles with separate California-only 20 after treatment strategies, such an approach would not be 21 feasible given the comprehensive nature of the necessary 22 changes to comply with the ARB greenhouse gas proposal. 23 The past decisions of Congress on preemption should not be 24 treated simply as a legal issue. These were not arbitrary 25 decisions. Rather, they properly reflected the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 differences between air -- criteria air pollutants and 2 fuel economy and, indirectly, carbon dioxide emissions, 3 greenhouse gas emissions. 4 With the Clean Air Act Congress recognized that 5 California had special air quality concerns, differing 6 significantly from the other states, and provided 7 California the unique ability to set its own vehicle 8 emission standards. 9 Congress also correctly recognized that vehicle 10 manufacturing and marketing are necessarily conducted on a 11 national level and that varying state-to-state regulation 12 of fundamental vehicle design elements would be extremely 13 harmful to the industry and cost to the consumers. 14 Accordingly the U.S. Department of Transportation was 15 established as the sole agency authorized to set fuel 16 economy standards, expressly preempting states from 17 setting standards related to fuel economy. And that's a 18 quote from the statute. 19 A global climate program can be effective only if 20 it is at least a coordinated national effort. California 21 should instead focus on ways to complement federal efforts 22 to improve fuel efficiency and reduce greenhouse gases. 23 Second, regarding cost estimates. A primary 24 concern is that ARB's estimates were vastly understated 25 because they do not include the basic research and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 development costs associated with developing advanced 2 technologies and the investments needed to bring the 3 technologies to market. Instead ARB's cost estimates are 4 based primarily on per-unit charges estimated by component 5 suppliers for what ARB refers to as, quote, "long-term, 6 learned-out production volumes of 500,000 units in a 7 single plant using flexible manufacturing processes." 8 It is also unreasonable for California's specific 9 rulemaking to be based on assumptions about sales or use 10 of vehicles outside of California. 11 Third, regarding customers' acceptance. ARB has 12 identified a long list of technologies that could be used 13 to replace greenhouse gas emissions from vehicles. 14 However, ARB failed to adequately consider consumer 15 preferences in determining the maximum feasible emission 16 reductions. 17 Most vehicle purchasers expect to get technology 18 tailored to their particular vehicle choice, not generic 19 technology. This is especially true for engine 20 technology. Purchasers of Honda vehicles expect to get 21 Honda engines and purchasers of Fords expect to get Ford 22 engines. Given the variation in market share among the 23 auto makers, it is unreasonable to expect that all 24 technologies can be delivered in generic lots of 500,000 25 units. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 One example is the assumption about engine 2 downsizing in conjunction with turbochargers. Many 3 customers expect a certain engine configuration when they 4 purchase a vehicle. Many midsize and near-luxury 5 purchasers would balk at a smaller in-line 4 or 5 cylinder 6 engine instead of their customary V6. 7 Similarly, it would be difficult to convince many 8 consumers purchasing large pickup trucks, sport utility 9 vehicles or large passenger cars to forego the tried and 10 true V8 engine in favor of a smaller V6 turbocharged 11 engine. The realities of consumer acceptance of engine 12 downsizing are ignored in the staff report. 13 Lastly regarding environmental benefits. The 14 staff report discusses the potential adverse economic -- 15 excuse me -- environmental benefits associated -- oh, 16 excuse me -- impacts associated with the global climate 17 change, citing possible impacts on public health, air and 18 water quality and agricultural productivity. However, 19 neither the staff report nor the cited supporting 20 materials provide any evidence that such impacts would be 21 mitigated in any way by the proposed regulation. In fact 22 the staff report states the opposite view, pointing out 23 that California's greenhouse gas emissions are only a tiny 24 fraction of worldwide emissions. 25 In conclusion, AIM member companies intend to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 pursue and enhance vehicle fuel efficiency as a principle 2 design objective just as they have since the first 3 introduction of their products in the U.S. market. We 4 believe that such products constitute a positive element 5 in an internationally coordinated effort to address 6 climate change. However, efforts to address climate 7 change at the state level are doomed to be ineffective as 8 they ignore the vast differences between air pollution and 9 climate change. Congress properly recognized these 10 differences when they've preserved federal authority over 11 such regulations. 12 AIM urges ARB to work with other states to build 13 consensus for a national climate protection program and a 14 national energy policy. 15 AIM also urges ARB to work the National Highway 16 Traffic Safety Administration to develop an improved 17 national motor vehicle fuel economy program. 18 AIM is prepared to work with ARB to pursue other 19 measures to address climate change. 20 Thank you. 21 CHAIRPERSON LLOYD: Thank you very much. 22 Questions? 23 Ms. D'Adamo. 24 BOARD MEMBER D'ADAMO: Thank you. 25 Several witnesses have now raised and discussed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 the issue of these federal statutes. And I did have an 2 opportunity to speak with legal counsel regarding staff 3 analysis of this issue earlier this week. I concur with 4 the legal staff's analysis that we do in fact have the 5 authority to act in this regard, but thought that it would 6 be helpful to -- for the benefit of the rest of the Board 7 to hear from staff counsel. 8 CHAIRPERSON LLOYD: I presume that's consistent 9 with Mr. Doniger's presentation. 10 GENERAL COUNSEL JOHNSTON: Yes, we agree that 11 these issues have been raised before. In fact, during the 12 Legislature's consideration of AB 1493, and as we've heard 13 continuing to today, some are questioning California's 14 authority to adopt and enforce regulations that control 15 greenhouse gas emissions from motor vehicles. 16 As the staff presentation pointed out and as 17 we've heard from the testimony, these questions generally 18 fall into two groups: 19 The first group challenges whether California 20 through the Air Resources Board can regulate greenhouse 21 gases as pollutants. This challenge arises because U.S. 22 EPA has yet to identify or regulate greenhouse gases as 23 air pollutants. 24 As many of you who are familiar with the history 25 of air pollution control know, California's identification PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 and control of the sources of air pollution precedes 2 federal action. 3 Recounting only a part of a long history, 4 California enacted legislation that required the 5 California Department of Public Health to establish air 6 quality standards and necessary controls for motor 7 vehicles in 1959. Similar federal legislative action was 8 not taken until 1963 and 1965, respectively. 9 Then, based on enacted state laws, California 10 established the first automotive emission controls in the 11 nation: Positive crankcase ventilation in 1961 and 12 tailpipe emission standards for hydrocarbons and carbon 13 monoxide odd in 1966. Again, these California actions 14 were the first in the nation. 15 Subsequently, because of California's pioneering 16 efforts in air pollution identification and control, when 17 the Federal Air Quality Act of 1967 was enacted, the State 18 of California was granted a waiver from federal preemption 19 for the control of emissions from new motor vehicles and 20 engines. The waiver of federal preemption continues to be 21 central to California's pioneering efforts for control of 22 vehicular emissions. 23 Here's how the California Motor Vehicle Program 24 works under the parallel state and federal statutory 25 schemes: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 The Board first adopts California's regulations 2 to control motor vehicle emissions. When these emissions 3 affect new motor vehicles or new motor vehicle engines, 4 the Board then directs staff to forward the adopted 5 regulations to U.S. EPA for what is by law a deferential 6 review of the regulations. While California typically 7 regulates most of the same pollutants as U.S. EPA, no 8 element of U.S. EPA's review requires U.S. EPA to either 9 to have first identified a particular pollutant for 10 regulation or to have actually first regulated that 11 pollutant. Rather, U.S. EPA evaluates California's 12 regulations in the context of California's motor vehicle 13 program as a whole, allowing California to blaze its own 14 trail. 15 Deference to California's program is the essence 16 of granting the waiver of preemption. In the item before 17 the Board today, California's Legislature has exercised 18 its independent authority to identify greenhouse gases as 19 air pollutants and to regulate them under California's 20 Motor Vehicle Emissions Control Program. The regulations 21 are entitled to deference under the federal waiver of 22 preemption. 23 Another group of challenges centers on 24 California's and ARB's authority under the federal law 25 known as the Energy Policy and Conservation Act, or EPCA. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 This law requires the federal government to set corporate 2 average fuel economy, or CAFE, standards for motor 3 vehicles and preempts state and local governments from 4 doing the same. The question is whether greenhouse gas 5 regulations are preempted under EPCA simply because the 6 control of greenhouse gases from vehicles may collaterally 7 or indirectly affect the amount of fuel the regulated 8 vehicles will use. 9 There are a few ways to look at possible EPCA 10 preemption. When these possibilities are examined, 11 however, we conclude that none apply to preempt the 12 regulation of greenhouse gas emissions from motor 13 vehicles. 14 First, some argue that EPCA creates an expressed 15 preemption for any action that could be, quote, "related 16 to" federal fuel economy standards. Case law, however, 17 does not support such a broad reading of the words 18 "related to" because it would create an unworkable 19 framework, making it impossible to draw a line between 20 what is and what isn't related to something else. 21 Second, some argue that EPCA implies a preemption 22 for the federal government because EPCA occupies the field 23 for setting fuel economy standards or that preemption is 24 implied if there is a conflict between federal regulation 25 under EPCA and California's Motor Vehicle Emission Control PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 Regulations. 2 Acknowledging that the federal government alone 3 sets minimum fuel economy standards, inquiry into 4 preemption should not end there. The Emission standards 5 do not in and of themselves conflict with EPCA. Rather 6 the emission standards are explicitly acknowledged and 7 referenced as one of the factors that the federal 8 government must accept as a given when setting fuel 9 economy standards. 10 Further, courts are required to harmonize 11 statutes and would harmonize the provisions of EPCA and 12 the Federal Clean Air Act to avoid repealing any part of 13 the Federal Clean Air Act by implication. Automobile 14 manufacturers can meet both sets of standards, that is, 15 they can meet both EPCA standards and the greenhouse gas 16 emissions standards without violating either. 17 CHAIRPERSON LLOYD: Thank you very much. 18 Thank you. 19 Any other questions? 20 Dr. Gong. 21 BOARD MEMBER GONG: I have a question. Actually 22 you asked it to the previous speaker. And I'm not sure if 23 I heard an adequate response. But it's sort of a general 24 question that I'd like this speaker perhaps to respond to 25 and actually all the other speakers who oppose the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 proposed regulation. 2 Basically you're opposing the regulation for 3 various reasons. But given the circumstances of the ARB 4 today, legally, politically, whatever you want to call it, 5 scientifically, what do you propose we should do? How 6 should we resolve this issue, reconcile this issue? I'm 7 interested because I always ask people who come to me at 8 work be part of the solution, not the problem. So I'd 9 just like to have your opinion as to what we could do at 10 this point in time. 11 MR. CABANISS: Well, first of all, let me say 12 that because we do not support California Air Resources 13 Board adopting greenhouse gas standards for vehicles 14 doesn't mean that we believe that the issues of greenhouse 15 gas emissions for vehicles, fuel economy should not be 16 addressed. We just simply don't support it being done 17 state by state. It needs to be done in a coordinated 18 national effort. 19 And we have had a program for over 30 years to 20 deal with -- indirectly with carbon dioxide by dealing 21 with fuel economy standards. 22 And in this case, we're -- you know, we're -- 23 despite what you call it, you look at the savings in the 24 program, this is a fuel -- you know, it's a fuel economy 25 program. There's no -- you know, as other speakers have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 said, there's no way to reduce greenhouse gas emissions in 2 any meaningful way without improving fuel efficiency of 3 vehicles. It just can't -- it can't be done, unless you 4 do the other things that -- some of which Mr. Webber 5 described. 6 There are some things that California can do. I 7 mean, first of all, California obviously is the biggest 8 state in the union, has a very aggressive congressional 9 delegation. And there's a lot politically that California 10 can do to help shape a national program in Washington 11 through the administration to focus on this issue. 12 Clearly, we all recognize that there has not been 13 the kind of leadership on this issue that we need to take. 14 But it needs to be taken for the country as a whole, not 15 state by state. 16 BOARD MEMBER GONG: Where does it begin? 17 MR. CABANISS: It begins by working with the 18 National Highway Traffic Safety Administration on fuel 19 economy issues. They have a program going right now to 20 improve their CAFE program. That's where the efforts need 21 to be if we want to improve fuel economy, in our opinion. 22 You can't do it state by state. 23 Now, there are other things that California can 24 do as well. I mean there are many fuel-efficient cars 25 that are already being manufactured and that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 available. If we could get consumers to buy those and use 2 them, then we would be better off as well in terms of 3 climate change emissions. 4 Things like incentive -- use incentives, purchase 5 incentives, better education of consumers. There's any 6 number of things that California and local governments can 7 do that they don't do to help educate consumers about what 8 they're purchasing -- the impacts of the vehicles they're 9 purchasing. 10 And, you know, another thing that California can 11 continue to do, which they've had a very strong record in 12 doing, is supporting good fuel quality programs, low 13 sulfur diesel fuel, low sulfur gasoline that enable 14 fuel-efficient technologies to be brought to market. 15 So there are any number of things that California 16 can do. We just do not support you setting standards for 17 fuel efficiency. 18 CHAIRPERSON LLOYD: So extrapolating what you 19 said before, you will be willing to go with us and work to 20 reduce greenhouse gases exactly as the staff's proposing 21 at the national level? 22 MR. CABANISS: Exactly as the staff is proposing. 23 I can't commit that. 24 CHAIRPERSON LLOYD: The numbers, the numbers, the 25 numbers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 MR. CABANISS: I can't commit today to support 2 the numbers that are being proposed. 3 CHAIRPERSON LLOYD: What numbers would you 4 support? 5 MR. CABANISS: I'm sorry? 6 CHAIRPERSON LLOYD: What numbers would you 7 support? 8 MR. CABANISS: We haven't really discussed actual 9 numbers. My association, however -- the members of our 10 association have a record of being very supportive of 11 revisions to the CAFE program. 12 CHAIRPERSON LLOYD: We're not talking about CAFE. 13 We're talking about reduction of greenhouse gases. 14 MR. CABANISS: We're talking about fuel economy, 15 which is the same thing. It's tantamount to climate 16 change emissions. 17 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 18 BOARD MEMBER DeSAULNIER: I was just going to -- 19 using your analogy of waiting for the federal government, 20 are you saying historically that if -- forget about CO2. 21 For the rest of the emission inventory, if California -- 22 if this Board had never existed, would you have made the 23 same progress in California? 24 MR. CABANISS: Again, as I -- in my statement 25 there's a completely different situation with regard to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 criteria air pollutants. 2 BOARD MEMBER DeSAULNIER: Okay. 3 MR. CABANISS: The situation -- 4 BOARD MEMBER DeSAULNIER: That's fine. I 5 understand the difference. I just wanted to see what you 6 would say. 7 Thank you. 8 ENGINEERING STUDIES BRANCH CHIEF ALBU: Dr. 9 Lloyd? 10 CHAIRPERSON LLOYD: Mr. Albu. 11 ENGINEERING STUDIES BRANCH CHIEF ALBU: I just 12 want to make one very brief comment since I've heard it 13 twice now. 14 The staff is very sensitive to drivability, 15 performance and the customer expectations. I personally 16 drive a V6 midsize vehicle. And I didn't think that a 4 17 cylinder would be an adequate replacement for my car. So 18 as a result I actually went out and borrowed one of the 19 staff's car, a 4 cylinder turbocharged vehicle to see if I 20 felt it would replace my car. I felt it wouldn't. I 21 drove it. I didn't think it was adequate. So we didn't 22 model that. We didn't include it. 23 I did go and drive the Volvo low pressure 5 24 cylinder vehicle, and I found it was every bit the equal 25 of my car in terms of smoothness, refinement, all of it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 Performance as well. 2 So I'm just saying we did encounter these kinds 3 of issues and we did address them. 4 And one other thing I wanted to mention is we 5 didn't apply turbochargers to the heavy trucks because we 6 thought there might be an issue there with, you know, 7 acceptance as well. 8 So I just want to make it clear we did evaluate 9 these issues. And, in fact, even in the Low-Emission 10 Vehicle Program, you know, we proposed a standard that 11 would make drivability at least better or the vehicles 12 performed better, and I think that's the case today. 13 CHAIRPERSON LLOYD: Thank you very much. Thank 14 you. 15 I'm going to have to take a 10-minute break now 16 for -- sorry. 17 Well, let me say -- well, let me just finish the 18 statement. I was going to say I'm going to take a 19 10-minute break. If you promise 2 minutes, you can -- but 20 also I realize that people now are -- have some maybe 21 planes to catch tonight. So what I'm going to ask you, at 22 the break to go to the court reporter, to work with staff. 23 Those who have to testify today, to let them know. Those 24 of you who can stay tomorrow, to let us know. And please 25 be honest. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 (Laughter.) 2 CHAIRPERSON LLOYD: We're not going to ask to see 3 your boarding pass to your plane. 4 MS. ROTHROCK: Thank you, Chair. My name is 5 Dorothy Rothrock. I'm with the California Manufacturers 6 and Technology Association. And while we've got a few 7 automobile manufacturers in our membership, I'm here to 8 speak on behalf of the broader manufacturing community in 9 California. 10 Let me give you a little background. This really 11 will be short. Manufacturers have suffered losses since 12 January 2001 of 350,000 jobs. That's fully 18 percent of 13 the manufacturing workforce in the state. The recovery 14 has been very slow. It's very expensive to do business in 15 California for manufacturers. It's about 28 percent more 16 expensive than the rest of the country. 17 Those costs for manufacturers include the cost of 18 our smaller business suppliers, many of whom would be the 19 purchasers of the vehicles being impacted by this policy. 20 This is important because manufacturers provide the 21 highways jobs in the state. These are the middle class 22 jobs that are available for undereducated workers; provide 23 an upward mobility for that group of citizens. And 24 manufacturers got the highest multiplier of any economic 25 segment of the economy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 So manufacturers are great, and I care a lot 2 about manufacturers surviving in this state. I think that 3 any increased costs on manufacturers should be 4 extremely -- we should be extremely reluctant to impose 5 those extra costs. And we ought to have a very high 6 burden of proof whenever we want to impose higher costs. 7 We've heard some about California leading the way 8 on greenhouse gases. And I don't have anything to say at 9 this point about greenhouse gases. I will assume that 10 it's a very important issue. Global warming needs to be 11 dealt with. And I'm going to assume that there's benefits 12 associated with reducing greenhouse gases and that this 13 policy would in fact reduce greenhouse gases. 14 But what I want to bring up is if this is not 15 cost effective -- and the legislation requires it to be 16 cost effective, that legislation says maximum feasible 17 reductions that are cost effective. So if we can't do the 18 reductions in a cost-effective way, we have to back up and 19 do less reductions in order to make them cost effective. 20 The Governor says that the economy is the number 21 one issue. It's jobs, jobs, jobs. And we agree. We need 22 revenues out of this economy in order to rebuild the 23 infrastructure, rebuild the transportation systems that 24 are going to allow our vehicles to move faster, idle less, 25 and get people where they're going quicker. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 Our concerns is that the CARB may be very 2 optimistic -- 3 CHAIRPERSON LLOYD: You promised me two minutes? 4 MS. ROTHROCK: Am I done? 5 Was I four? 6 All right. I'll wrap it up. 7 CHAIRPERSON LLOYD: But let me just ask you 8 before that. How do you conclude that what staff 9 presented is incorrect? Because they said it was cost 10 effective, will create jobs. So did you do any 11 independent analysis -- 12 MS. ROTHROCK: Well, and I know that government 13 never makes a mistake. 14 CHAIRPERSON LLOYD: Did you do any independent 15 analysis? 16 MS. ROTHROCK: No, we did not do -- 17 CHAIRPERSON LLOYD: So on no independent analysis 18 you've written off staff's extensive -- 19 MS. ROTHROCK: We did not do any independent 20 analysis. But I was listening with great interest to what 21 at least Sierra Research has said, which has some doubt. 22 CHAIRPERSON LLOYD: I understand how you can -- 23 now I understand how you reached that conclusion. Thank 24 you. So on one data point -- you were -- one listening 25 you made that -- and you signed up early on as opposing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 this with very little data. 2 MS. ROTHROCK: Well, we've always had 3 questions -- 4 CHAIRPERSON LLOYD: And clearly this Board is 5 responsible for protecting the air quality, public health 6 in California. We work for the Governor, who -- we are 7 also equally committed to balancing the economy and the 8 environment. We want to create jobs. We want to attract 9 jobs. 10 MS. ROTHROCK: Oh, I'm so glad -- 11 CHAIRPERSON LLOYD: So we've weighed all this -- 12 our job is to weigh this all out. We'll have to come to a 13 vote tomorrow. But I want just to establish on what basis 14 did you decide this was a bad regulation? 15 MS. ROTHROCK: Well, we've always been interested 16 in seeing the staff's report. And we've always known that 17 the automobile community was going to do their own 18 research. And we didn't see it until just today. We have 19 doubts. We want to see it reconciled and we want to make 20 sure that whatever you go forward with is in fact cost 21 effective. 22 We hope that California actually leads the way in 23 many other ways. In fact, we hope we can attract -- 24 continue to attract biotech, nanotechnology in the next 25 wave of manufacturing that's going to get California out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 in front again so that it can continue to afford to do the 2 things it needs to do to benefit our citizens. 3 Thank you so much for letting me speak. 4 CHAIRPERSON LLOYD: We share that goal. Thank 5 you very much indeed. 6 Now, what I'd like to do is take a 10-minute 7 break. It's -- well, till 20 of. And then please follow 8 the -- see the clerk and then staff as to who definitely 9 has to speak this evening. 10 (Thereupon a recess was taken.) 11 CHAIRPERSON LLOYD: I'd like to continue with Bob 12 Lucas and Dr. Prather. 13 Before that I -- at the break Supervisor Roberts, 14 being relatively quiet, he thought that he -- some issue 15 came up that he thought he wanted to -- So Supervisor. 16 Thank you. 17 BOARD MEMBER ROBERTS: Yeah. Thank you, Mr. 18 Chairman. If I could just -- 19 CHAIRPERSON LLOYD: Can you take your seats 20 please. 21 BOARD MEMBER ROBERTS: With all due respect to 22 the speakers, if you'd just allow me a minute. When I 23 walked in today I realized that all of a sudden I'm one of 24 the senior members on this Board. And, as you know, I'm 25 not going to be able to be here tomorrow. And I wanted to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 make a comment and perhaps just share some perspective, 2 especially for some of the newer members. 3 This is my tenth year on this Board. And over 4 that period we've covered a lot of ground. And I can 5 remember some of the issues. We've talked on -- there's 6 been a lot of talk about the electric cars here today. 7 I'm also reminded what we went through when we took a very 8 aggressive position with respect to diesel engines. And 9 it's clear to me that having done that, that we 10 accelerated change in a whole lot of places in addition to 11 California. 12 I've heard a lot of discussion today about 13 strategies, whether the appropriate strategy is to have 14 some -- either a nationwide agreement or, in the case of 15 some of the speakers, some type of international agreement 16 before we do things. And I also list as China was 17 mentioned and the issues in China. And since I've spent a 18 lot of time in China recently and over the last few years, 19 and I know for a fact that having lectured on a number of 20 college campuses, university campuses, before business 21 groups and before public officials, that air quality 22 issues are uppermost in the their minds. 23 Whatever we do here is going to accelerate change 24 in China. And I think the thought that you somehow wait 25 till there is a global settlement of all these issues as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 opposed to moving ahead, while that may be a valid 2 strategy, I just happen to think that the strategy of us 3 doing something in acting before rather than later is 4 going to bring about results globally sooner rather than 5 later. 6 I think you need to start somewhere. And the 7 proposal that is before us here, after listening to some 8 of the testimony from the auto manufacturers -- and I know 9 there are things that need to be settled out and there are 10 issues and I don't want to preclude that discussion. But 11 I think it is time to act and I think it's time to go 12 ahead. 13 There's an issue about the fuel efficiency. And 14 to some extent, when we were regulating marine engines and 15 we couldn't regulate water quality, we're kind of faced 16 with the same issue, because an inherent byproduct in 17 regulating the two-stroke engines was we were going to get 18 clean water. Clean water wasn't the primary goal, but it 19 was a byproduct of that goal. And in much the same way 20 here I think fuel efficiency is going to be a byproduct of 21 what we're attempting to regulate and attempting to 22 approve. 23 I don't see us saying we want fuel efficiency for 24 fuel efficiency's sake. We're saying there's an issue 25 here that we want to deal with; and as a result of that, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 yes, it's likely you're going to have fuel efficiency. So 2 it's hard for me to accept that as an argument. And I 3 understand why it's being made. And, no, I'm not a lawyer 4 either. And I think though that if I look at the past 5 actions of this Board, the proposal that's being brought 6 here before us is very well thought out. I'm concerned 7 that some of the criticisms I hear seem to echo things 8 that we've heard in the past and have proven to be in 9 error. 10 I'm also cognizant of the fact that when the 11 electric -- the hopes for the electric cars didn't work 12 out, this Board has always been pragmatic enough to make 13 the adjustments and to make the change. And we did 14 benefit from that program and we benefited from the 15 systems that were developed in the regeneration and 16 everything else that's going in to making the hybrids such 17 a success, and will make that next generation of cars a 18 success also. 19 So I just -- although I'm going to have to leave 20 prematurely here today, and you're going to come to your 21 own decision, I just -- I wanted to put some perspective 22 in this. And I feel strongly that there is a time to 23 start. And based on this proposal, I think we ought to be 24 going ahead and acting, subject to ironing out all of 25 the -- some of the minor -- what we consider to be minor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 issues and points that have been raised here. 2 But thank you for giving me a chance to make a 3 statement. 4 CHAIRPERSON LLOYD: And thank you, Supervisor. 5 And I understand from the prior commitment, unfortunately 6 you can't be here tomorrow. But thank you for those 7 helpful comments to us as we deliberate as we move ahead. 8 Thank you very much. 9 MR. LUCAS: Thank you. 10 My name is Bob Lucas. I'm here representing the 11 California Council for Environmental and Economic Balance, 12 known as CCEEB. The council is a nonprofit, nonpartisan 13 coalition of business, labor and public leaders that works 14 to advance policies that protect public health and the 15 environment and also allows for continued economic growth. 16 In general, CCEEB does not object to sensible 17 greenhouse gas rules, particularly if they're implemented 18 at the national or the international level. But we do 19 have concerns of unanticipated impacts of unilateral state 20 action. 21 I know that there is a long history here of the 22 Board stepping out, enforcing technology, and then that 23 technology being shared across the nation. But we're 24 cutting a new wake here. This is a grand new policy arena 25 for the auto manufacturers and requiring changes that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 different in nature than those that we have required in 2 the past. 3 And in this case it appears that we are to a 4 certain extent betting on the come, that these standards 5 will also be adopted nationally or by other states. I 6 know I heard New York State says they're ready to do it. 7 And once we act here let's hope that they do it and do it 8 quickly. I mean we understand the obligation that you're 9 under here today. 10 But I would like to express these concerns if you 11 don't mind: 12 My understanding of the technical estimates, the 13 cost estimates that were undertaken by the staff is that 14 there would be some efficiencies of volume because other 15 states or national standards would quickly follow 16 California action and Californians would not be the only 17 ones who would have to bear the costs of the work that 18 would have to be undertaken in order to meet these 19 standards. And that concerns us a little bit. The 20 Council in general has concerns about regulations that 21 give rise to higher cost of doing business or living in 22 California versus other places. And this is one. I 23 don't -- like I said, I'm expressing this as a concern. I 24 don't have a competing study. But I do take note of what 25 the auto manufacturers have said as to what the cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 implications to them would be. And I do note that there's 2 a large chasm between estimates here and the estimates 3 there. 4 And in part these estimates are based on the 5 assumptions that the other states will follow. So perhaps 6 consideration of some type of implementation contingency 7 that the other states or the U.S. does follow might be 8 something you may want to consider. 9 Or perhaps just ask the staff what the cost 10 impact would be if only California consumers had to pay 11 these higher costs of engineering and producing these 12 cars. Again, I don't know. 13 And, similarly, we have some concerns too about 14 staff estimates of the time frames necessary for companies 15 to integrate the new technology into their systems. I do 16 recall the testimony that was given at the workshops in 17 July, and I think we just heard some more of it today, 18 that once a new technology is adopted, it does take 19 companies time to properly design it, research, test it, 20 perfect it. Remember, these items can't just be picked 21 off the shelf and put into an integrated unit without a 22 lot of other work being done to be sure that they're going 23 to function properly and that you can actually hold up a 24 warranty with them and expect that they'll fulfill their 25 promise. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 So the industry that came forward earlier today 2 and raised the concerns -- I think it was in the context 3 of the transmissions -- I think -- these are making points 4 that resonate within the business community as these might 5 be some very valid concerns. And so there could be some 6 issues in this rule with regard to the practicality of the 7 implementation dates because of issues associated with 8 actual acquisition and the integration of this new 9 technology into the vehicles that they manufacture. 10 My final point is a positive one, although we're 11 not sure how they would be implemented. We support early 12 compliance and alternative compliance measures that are in 13 this rule and they're in your other rules, and hope you 14 continue that practice. 15 Thank you very much. 16 CHAIRPERSON LLOYD: Thank you, Bob. From your 17 testimony, did you put your cross in the wrong place? It 18 sounds more like a neutral rather than an oppose. 19 MR. LUCAS: As I said, it's expressing concerns 20 of unilateral state action. If this were happening at the 21 national level, we'd probably be there to support it or 22 perhaps we would be neutral on it. I don't know how our 23 membership would fall. But we do have some fairly strong 24 internal concerns about California making such an emphatic 25 step by itself without the assurances that the other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 states will follow or that the nation will follow, and 2 that the cost estimates will actually bear out based on 3 those types of -- 4 CHAIRPERSON LLOYD: When the legislation was 5 proceeding through the Legislature, did CCEEB support it? 6 MR. LUCAS: No, we were opposed, sir. We 7 understand that that's why you're here today. 8 CHAIRPERSON LLOYD: So you're consistent on that? 9 MR. LUCAS: Yes, our position is consistent. 10 CHAIRPERSON LLOYD: And obviously what we're 11 trying to do with the staff is to do exactly what your 12 organization -- balance in the economy and the 13 environment. 14 MR. LUCAS: Right. No, we understand. Now, we 15 also understand that the staff has done some very good 16 work in implementing the bill. We took issues with the 17 policy that underlied the bill when the bill was being 18 considered. And in looking at the staff work, we do have 19 these two reservations about some of the assumptions that 20 were used by the staff in giving rise to the cost 21 estimates and time frames. 22 CHAIRPERSON LLOYD: Thank you. I would say, by 23 the way, I know we've enjoyed working with you on some 24 other issues successfully this year, legislation. We hope 25 that we'll be able to convince you, depending how we go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 ahead, and maybe we can get you to work with us again on 2 this issue. 3 MR. LUCAS: We're more than happy to work with 4 you on this and any other issue. You may want to give 5 some thought to a contingency though, unless you have some 6 signed documents, signed commitments from these other 7 states that they're going to come on board and that the 8 volume of these products is going to be sufficient to 9 spread the costs, so that California consumers aren't 10 going to bear an overlarge -- 11 CHAIRPERSON LLOYD: Well, I think one of the 12 things, the Legislature in its wisdom gave that one year. 13 And I think before this actually takes effect, we'll be in 14 a lot better position, have some more intelligence of what 15 the other states are doing. 16 MR. LUCAS: Thank you. 17 CHAIRPERSON LLOYD: Mrs. Berg. 18 BOARD MEMBER BERG: Mr. Lucas -- 19 MR. LUCAS: Yes, ma'am. 20 BOARD MEMBER BERG: Mr. Lucas, do you have a feel 21 for how much time that automobile industry would like to 22 have? There's four years before the first regulation goes 23 in and then eight years. What would be a reasonable 24 amount of time? 25 MR. LUCAS: Actually that's a very technical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 engineering-related question. And they'd probably have to 2 back it up from -- you know, start the clock from when 3 they would have to bring a product to market, how much 4 time they would need to test it, how much time they would 5 need to examine the products and make a choice as to which 6 ones they want to pursue. I do know that in the other -- 7 and then many of the companies that I represent, that this 8 type of research is highly funded, and the research on the 9 new product lines very often do not make it to the final 10 stage. So many a good idea is initiated at the front end 11 and somewhere along the process is dropped. And so I 12 think you'd have to pose that directly to the auto 13 manufacturers. 14 BOARD MEMBER BERG: Okay. Thank you. 15 CHAIRPERSON LLOYD: Thank you very much, Bob. 16 MR. LUCAS: Thank you. 17 CHAIRPERSON LLOYD: Dr. Prather. 18 DR. PRATHER: Thank you, Chairman Lloyd. My name 19 is Michael Prather. I teach at the University of 20 California at Irvine. And I was appointed by UC Office of 21 the President as one of the formal reviewers of this 22 document. 23 Listening to the testimony, I really just have 24 one comment as perspective. The question's been asked: 25 Is it meaningful? Is what California is doing meaningful? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 And I think people have poo poo'd it by making it 2 fractions of percent and making it small numbers. But if 3 you look at what's being done worldwide, there was a major 4 effort, almost, should we say, an environmental attack on 5 civil aviation because of civil aviation's greenhouse 6 pollutant issue. 7 Civil aviation is only two and a half percent of 8 the greenhouse pollutant issue. That sounds an awful lot 9 like California. 10 There are many unilateral actions, as Supervisor 11 Roberts said. There are many people making decisions, 12 both multinational companies and countries in Europe, that 13 are already making decisions to make cuts of the scale 14 that California's proposing unilaterally. 15 And so is it meaningful and is it being done 16 elsewhere? 17 For perspective, the scale of California is the 18 scale of Kyoto almost, per nation, okay, the percentage 19 reductions. If California's reduction in emissions apply 20 to the rest of the U.S. for transportation alone, it would 21 be the scale of what the U.S. would take to meet Kyoto. 22 That won't happen. But at least that's the scale of the 23 argument. 24 So is it meaningful? Yes. These are large 25 numbers. They do have a large impact. And we're seeing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 similar multinational high quality -- you know, high cost 2 efforts being made by countries, by basically companies 3 and others. 4 So thank you. 5 CHAIRPERSON LLOYD: Thank you very much. And, 6 again, thank you for acting as a reviewer. 7 Michel Gelobter, Matt Peak, and Dan Cayan. 8 Sorry. We were trying to sort out who had to go 9 today and who could stay till tomorrow. 10 MR. GELOBTER: And I have a PowerPower -- thank 11 you very much for giving me -- and I have a PowerPoint 12 presentation. 13 I think it should be up. 14 I'll start in the meantime -- my name is Michel 15 Gelobter. I'm the Executive Director of Redefining 16 Progress, which is a nonpartisan policy think tank based 17 in Oakland, California. 18 (Thereupon an overhead presentation was 19 Presented as follows.) 20 MR. GELOBTER: Most of the findings we're 21 reporting today, we conducted a study of climate change in 22 California of the health, economic and equity impacts, 23 with the goal of understanding what the impact on low 24 income communities and people of color communities in 25 California would be of climate change. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 --o0o-- 2 MR. GELOBTER: Most of the findings we're 3 reporting today are based on a recent study in the 4 proceedings of the National Academy of Sciences, reporting 5 fine scale climate change projections for the State of 6 California. 7 I put this slide up first to show basically the 8 scenarios we used. We used two of the scenarios developed 9 for climate change in that article, using emission 10 scenarios at the high end, labeled there A1-F1, and at the 11 low end, OB1. 12 Next slide please. 13 --o0o-- 14 MR. GELOBTER: We used the climate projections 15 and climate change projections drawn primarily on a 16 midrange sensitivity general circulation model known as 17 Hadley CM-3. As reported in that article, temperature 18 increases under those two scenarios ranged from 4 to 6 19 degrees Fahrenheit in low emission scenarios, up to on 20 average for the state 7 to 10.5 degrees Fahrenheit in high 21 emission scenarios. And some of the other implications 22 include a 90-percent reduction in snow cap and the snow 23 cap reservoir by the end of this century as more 24 precipitation arises rain than as snow. 25 Next slide please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 --o0o-- 2 MR. GELOBTER: The maps we present there -- and 3 you can click again down -- show average temperature 4 change for California under high the emission scenario in 5 the years 2070 to 2099. And you can see there are a 6 number parts of the state where although the average high 7 is 10.5 degrees in these scenarios, the actual impacts 8 could range over 16 degrees Fahrenheit. The percent 9 change in extreme precipitation events is on the 10 PowerPower slide to the right. 11 Our study answers the question: What are the 12 impacts of these and other scenarios on low income and 13 communities of color? 14 Next slide please. 15 --o0o-- 16 MR. GELOBTER: The key finding really is that 17 climate change is in fact a widespread and growing risk 18 for all Californians. This chart juxtaposes a percentage 19 distribution of people of color -- I'm sorry -- for people 20 living in poverty with climate change. Although you can 21 see patterns -- next slide please -- 22 --o0o-- 23 MR. GELOBTER: -- the following picture shows the 24 percent people of color in communities with the 25 temperatures projected in the high emission scenario. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 Although there are patterns in general, 2 communities are fairly evenly exposed to the risks of 3 climate change or to the impacts -- to the risks of 4 climate change by income and by race. There are in fact 5 gradations by income, but they are what we would estimate 6 to be within the noise of a study that projects climate 7 impacts 100 years out. They're quite severe for all 8 Californians is the bottom line. 9 Significant increases in temperature for all 10 Californians. A mild pattern by race and class does 11 exist, but again it is somewhat lost in the noise. 12 Next slide please. 13 --o0o-- 14 MR. GELOBTER: Now, when you factor in both 15 health and economic vulnerability, the story changes 16 dramatically. This graph, for example, shows the asthma 17 hospitalization rate by race for adults and children. And 18 you can see vast disparities by race in those rates across 19 the state. 20 Next slide please. 21 --o0o-- 22 MR. GELOBTER: You can also see that the economic 23 vulnerability to different energy regimes re quite 24 significant. Although those are total dollar figures 25 across the top of those bar charts, I draw your attention PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 to the Y axis or the vertical axis to show the percentage 2 of expenditure for the lowest quintile compared to the 3 highest quintile. 4 So, for example, gasoline, lowest quintile spends 5 about 4.5 percent of their income in this state on 6 gasoline compared to the highest quintile which spends 7 more like 2.5 percent. Electricity, the difference is a 8 little less, with the lowest quintile spending a little 9 under 3 percent and the highest quintile a little under 2 10 percent. And there's a similar projection for water 11 expenditures. 12 We recently released a national study where data 13 is of higher quality for the -- with the Congressional 14 Black Caucus of the impact on African Americans, who are a 15 different income group, spend between 17 and 24 percent of 16 their income on energy across the board, including 17 gasoline and electricity, compared to 11 to 14 percent for 18 whites. And that study's available nationally on our 19 website as well as that of the Congressional Black Caucus 20 Foundation. 21 This economic vulnerability today translates into 22 fairly significant impacts for the -- of the future 23 economic impacts of climate change. 24 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 MR. GELOBTER: The next slide briefly documents 2 in text some of these impacts. And Los Angeles blacks 3 today are twice as likely to die of heat-related causes 4 than whites. And African Americans and Hispanics are more 5 exposed to unhealthy ozone levels. And there are a series 6 of risks associated with water that I don't need to get 7 into today, but are documented in the executive summary 8 that we're submitting with my testimony. 9 What does this preexisting vulnerability mean 10 when overlaid on projected climate change? And this is 11 really where our key findings come in. 12 Next slide please. 13 --o0o-- 14 MR. GELOBTER: Unfortunately -- and we were able 15 to conduct a pilot study of the impacts on heat wave 16 mortality for Los Angeles. We were not able to conduct 17 this study for the state as a whole. But in Los Angeles 18 under the low-emission scenario you see increases, for 19 example, for African Americans and Asians upwards of 20 six-fold from present mortality rates. The vertical axis 21 is the relative mortality rate increase in the last decade 22 of this century in a low-emission scenario. 23 Next slide please. 24 --o0o-- 25 MR. GELOBTER: In a high-emission scenario you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 see everybody going up very significantly by the end of 2 the century, with whites facing eight-fold potential 3 increases in mortality from heat -- extreme heat 4 incidents; and African Americans preserving a two-fold 5 additional vulnerability, leading to numbers in 6 high-emission scenarios as high as 16 times the rate of 7 heat deaths projected in 2090 as they are today from 8 climate change alone. 9 These are of course the most stark mortalities, 10 of course the most stark of disparate impacts one could 11 can report. And heat deaths are directly related 12 obviously to climate change and temperature increases, 13 such as those projected on the maps. 14 Next slide please. 15 --o0o-- 16 MR. GELOBTER: We also looked at the economic 17 impacts of climate change on communities of color and 18 low-income communities. And here we used not only a 19 survey of existing literature, but a detailed analysis of 20 the consumer expenditure survey, which is based -- which 21 is a quarterly survey of consumption of a statistical 22 sample of the U.S. population, and used 23 western-region-specific numbers with some tweaking to try 24 to get to the California-specific data. 25 It's clear that climate change will lead to a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 projected increase in consumer spending on energy as 2 consumers adapt with air-conditioning, as fossil fuel 3 prices change with climate change, that water is likely to 4 become more expensive, and food is likely to become more 5 expensive. 6 Industry impacts, we chose -- we looked at across 7 industry sectors. I'm going to highlight in this 8 presentation the agricultural and tourism industry are 9 clearly most affected by climate change. Water scarcity 10 alone is projected to reduce agricultural income by 1 to 11 $1.5 billion annually. 12 Shocks from extreme weather events leading to 13 crop loss would reduce agricultural employment, with 14 primary impacts on the Hispanic community. And the next 15 chart shows some of those vulnerabilities. 16 And shortened ski seasons and sea level rise 17 would reduce those -- the attractiveness of tourism. And 18 it also is a heavy employer of people of color and low 19 income folks. 20 Next slide please. 21 --o0o-- 22 MR. GELOBTER: This is just a short -- just a 23 graphic depiction under the high-emission scenario of 24 drought projections and the changes in drought expected in 25 different parts of the state. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 Next slide please. 2 --o0o-- 3 MR. GELOBTER: So what you see there is a 4 breakdown as a way to project from present conditions what 5 the potential impacts on these industries are likely to be 6 for communities of color. You see agriculture- and 7 tourism-generated employment and the number of people of 8 color employees in each of those industries. And you see 9 they're all heavily dependent on communities of color for 10 their base employment. To the extent that agricultural or 11 tourism is impacted by climate change is projected in 12 almost all studies for California. It will have a 13 disproportionate impact on communities of color, who are 14 heavily dependent on those industries for employment. 15 In the agricultural sector you see 77 percent 16 across the board employment for Latinos. And impacts in 17 that sector also are likely to be heavily felt by that 18 community. 19 Next slide please. 20 --o0o-- 21 MR. GELOBTER: So to summarize the projected 22 equity impacts, increases in heat waves would most affect 23 people of color and the urban poor. The air pollution -- 24 increases in air pollution are likely to exacerbate 25 existing health problems and raise health exposure -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 unhealthy exposures unequally among vulnerable communities 2 and low-income people -- low-income and people of color 3 disproportionately employed in industries most sensitive 4 to climate change; thus leading us to conclude that the 5 economic impacts are also likely to be quite disparate. 6 Policy implications -- next slide please -- 7 --o0o-- 8 MR. GELOBTER: -- which we didn't do a lot of 9 detailed analysis. And some of this is drawn for our 10 national study. 11 Disparities already exist in the impacts of 12 climate change, both economically and in health impacts 13 today. The risks of climate change and, therefore, of an 14 action are quite high to these communities as they are to 15 all Californians. Policies that use the market to reduce 16 the use of fossil fuels and greenhouse gas emissions are 17 win-win solutions, as well as policies that seek to reduce 18 overall emissions levels in the United States. 19 It turns out if you look at the economics of this 20 that the best kind of policies for low-income and people 21 of color communities, the ones that reduce the 22 vulnerability of those most vulnerable in our country and 23 in this state also turn out to be those most effective and 24 fair to workers, businesses and communities as a whole. 25 These are the efficient ways to solve problems. And the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 legislation being considered today -- the regulation being 2 considered today fall into that category in the national 3 analysis we did with these policies. 4 That concludes my comments. I want to say this 5 is a draft executive summary. We now have submitted the 6 full report, which ranges about 100 pages, to peer review, 7 both scientifically and in a series of community meetings 8 that we've started around the state. And we expect to 9 report our final -- a final long report in mid-November. 10 CHAIRPERSON LLOYD: Thank you very much. And 11 fascinating data there. 12 Questions? 13 Thank you, Mike. Appreciate it. 14 Dr. Gong. 15 BOARD MEMBER GONG: Just a comment. 16 Looks like we're going to need a lot of doctors 17 and nurses in the year 2090's. And I bring that up -- I 18 mean looking at your graph, but also in the sense of 19 health care costs. It's already bad out there. And with 20 this trend, if we do nothing, it seems like it's going to 21 get worse. 22 MR. GELOBTER: Yeah, I mean one of the 23 difficulties in this field is projecting disease impacts. 24 For example, the West Nile Virus, encephalitis -- the 25 spread of encephalitis, because in fact, you know, we do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 adapt, and we adapt by spending more money on public 2 health, by spending more money on drugs and medicines and, 3 unfortunately, sometimes pesticides to deal with the 4 vectors of these diseases. So it's actually quite hard to 5 project the impacts of specific diseases from climate 6 change because adaptation -- government expenditure on 7 these things usually follows quickly. 8 BOARD MEMBER GONG: Right, there's uncertainties. 9 But we know now that there's disproportionate exposures -- 10 environmental exposures to low-income communities, higher 11 asthma rates, poor access to medical care. Just add it 12 up. 13 MR. GELOBTER: Yeah, the heat deaths particularly 14 show that. It's really quite stunning. And it's really 15 about not just actual physical vulnerability, but, again, 16 very much lack of access to health care, quality of the 17 housing stock. And the energy bills that ensue from 18 adapting to hot days or just your ability to buy and apply 19 can sometimes save the life of an elderly relative. 20 BOARD MEMBER GONG: I assume you support the ARB 21 proposal? 22 MR. GELOBTER: Well, we're really here showing 23 the implications -- showing basically that we have to do 24 everything possible to drive to that low emission 25 scenario. We don't really necessarily take positions on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 public policies. But it's clear that these -- that the 2 kind of policies represented in this regulation are the 3 kind you need to drive emissions down and go to the low 4 end of those pretty horrific impacts that we project. 5 CHAIRPERSON LLOYD: Thank you very much. 6 MR. GELOBTER: Thank you. 7 CHAIRPERSON LLOYD: Matt Peak, Dan Cayan, Bob 8 Epstein. 9 What I would like to suggest to you, that we're 10 running into -- potentially running into -- given the time 11 of the last witness, I ask people to keep things as crisp 12 as possible. If we could closer to five minutes, the 13 better. 14 MR. PEAK: Chairman Lloyd, members of the 15 Board. Thank you very much for giving me the opportunity 16 to speak before you today. My name is Matt Peak. I am a 17 project manager at CALSTART and I'm also the principal 18 investigator for the report that I'm going to give you 19 information about today. 20 (Thereupon an overhead presentation was 21 Presented as follows.) 22 MR. PEAK: Many of you are familiar with 23 CALSTART. For those that aren't we can go to the next 24 slide, please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 MR. PEAK: We are an industry-affiliated 2 nonprofit organization that is dedicated to creating an 3 advanced transportation technologies industry. 4 Next slide please. 5 --o0o-- 6 MR. PEAK: We work with over 100 participating 7 organizations on a state, national, and international 8 level, ranging from the largest multinational 9 organizations to the small start-ups, with most of the 10 organizations that we work with falling in between. 11 Next slide please. 12 --o0o-- 13 MR. PEAK: Our work is particularly relevant to 14 the portion of AB 1493 that requires Air Resources Board 15 to evaluate economic impacts to California that are 16 brought about by this regulation. 17 Next slide please. 18 --o0o-- 19 MR. PEAK: In response to this requirement 20 CALSTART recently released a report that examines the 21 California clean vehicle industry. As a result of this 22 report we found three major findings. 23 Next slide please. 24 --o0o-- 25 MR. PEAK: The first finding is that the skills PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 present in California that have made it a worldwide 2 recognized leader on many different technological fronts 3 are the same skills that are required for greenhouse gas 4 reducing technologies. 5 Next slide please. 6 --o0o-- 7 MR. PEAK: The second finding that we found is 8 that there are already over 100 manufacturers operating in 9 California working on these technologies and that overall 10 there's a strong and vibrant California clean car 11 technology cluster. 12 Next slide please. 13 --o0o-- 14 MR. PEAK: This cluster -- the third finding that 15 we found is that this cluster has significant growth 16 potential. While they're already moving forward with 17 these technologies without any greenhouse gas programs in 18 place, in response to a survey that CALSTART administered, 19 these organizations -- this cluster indicated that 20 requirements to significantly increase the use of 21 greenhouse gas reducing tailpipe emission technologies in 22 vehicles could prompt significant increases in employment 23 and investment over current projections. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 MR. PEAK: Additionally, when asked specifically 2 about 1493 requirements, the overwhelming amount of survey 3 respondents stated significantly positive -- stated 4 significant positive impacts in California investment and 5 hiring could result for their California operations. 6 Next slide please. 7 --o0o-- 8 MR. PEAK: Now, the various technologies that 9 make 1493 technically feasible are the same that have a 10 strong presence in California. Additionally, these are 11 the same technologies that we see as having tremendous 12 export potential. 13 Next slide please. 14 --o0o-- 15 MR. PEAK: Other studies have already established 16 that programs that address automotive pollution can also 17 expand technological markets and create economic benefits. 18 We believe that the new greenhouse gas pollution program 19 proposed by the Air Resources Board has similar potential. 20 Next slide please. 21 --o0o-- 22 MR. PEAK: Furthermore, California regularly 23 leads the nation and the world. Applying this to the 1493 24 requirements could eventually open up a $20 billion 25 domestic market alone. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 Next slide please. 2 --o0o-- 3 MR. PEAK: In conclusion, California strongly -- 4 CALSTART strongly urges the California Air Resources Board 5 to adopt the 1493 greenhouse gas program in its entirety. 6 This program is a good fit for industry and skills that 7 California already has. It will provide significant 8 benefits for this California industry as well as create 9 jobs and investments within the state. 10 The final slide states that this report that I 11 discuss is available on our website, calstart.org. 12 CHAIRPERSON LLOYD: Thank you very much. And 13 thank you for your crisp presentation. 14 Are you a member of the California Manufacturers 15 and Technology Association? 16 MR. PEAK: Are we a member? 17 CHAIRPERSON LLOYD: Yes. 18 MR. PEAK: No, we are not. 19 CHAIRPERSON LLOYD: Okay. Thank you. 20 Any questions? 21 Thank you, Matt. 22 MR. PEAK: Thank you. 23 CHAIRPERSON LLOYD: Dr. Cayan, Bob Epstein, and 24 Cynthia Rojas. 25 DR. CAYAN: Thank you, Chairman Lloyd, and thank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 you, members, for allowing us to present. 2 (Thereupon an overhead presentation was 3 Presented as follows.) 4 DR. CAYAN: I'm here on behalf of a group of 5 scientists, whose names are on this slide, who conducted 6 the study that was alluded to in the talk that proceeded 7 the one you just heard that explored the impacts of 8 climate change on California under two scenarios: One 9 being a relatively high carbon emission scenario and the 10 other being one that was more restrained, more innovative, 11 you might say, in which global societies managed to 12 curtail their emissions. 13 I'm Dan Cayan. I'm the Director of Climate 14 Research Division at the Scripps Institution of 15 Oceanography, which is a component of the University of 16 California at San Diego. My coauthors represented other 17 institutions in California and nationally. 18 Next slide please. 19 --o0o-- 20 DR. CAYAN: So, as I mentioned, the point of the 21 study, unlike others that preceded it, were not only to 22 look at impacts in California but to look at the impacts 23 from two rather divergent scenarios, one which was at the 24 upper range of projected carbon emissions as estimated by 25 the international body who's looking at climate change. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 We can go to the next slide. 2 --o0o-- 3 DR. CAYAN: That scenario is shown as the upper 4 dotted line in this figure at the left, the so-called 5 A1-FI fossil-intensive scenario, in which global carbon 6 emissions rise from today's levels of approximately seven 7 gigatons per year to as much as four times that much over 8 the next century. 9 Carbon dioxide levels under this scenario would 10 reach something like three and a half times pre-industrial 11 levels, that being over 900 parts per million CO2. 12 In comparison, the other scenario, which is the 13 green trace at the bottom of this scenario, actually does 14 have an increase in CO2 as economies continue to function. 15 But as transitions were made to alternative energies and 16 other technologies, which is a theme here, those emissions 17 level off at approximately ten in mid-century and then are 18 reduced optimistically to below the present level at the 19 end of the century. 20 Next slide. 21 --o0o-- 22 DR. CAYAN: The results are markedly different, 23 as you heard in the talk of two ago. The differences 24 begin to express themselves in mid-century. But because 25 greenhouse gases have long lifetimes that accumulate in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 the atmosphere, the differences at the end of the century 2 are remarkable. 3 We used two models, as was mentioned. So there's 4 a range of the temperature changes that are estimated. 5 But the lower scenario ranges from approximately 4 degrees 6 to 8 degrees Fahrenheit over today's level. That by no 7 means is trivial, by the way. But in comparison, the 8 higher emission scenario, the A1-FI ranges from 9 approximately 7 to above 15 degrees Fahrenheit. These are 10 summer mean temperatures. One of the surprises in these 11 relatively recent climate runs was the degree to which 12 summer temperatures had warmed in these newer model runs. 13 Next slide. 14 --o0o-- 15 DR. CAYAN: It was already mentioned that there 16 would likely be an impact on heat-related mortalities in 17 the state. Estimates were done city by city using 18 mortality statistics to train a statistical model. The 19 short condensed result is that we -- by following the 20 lower scenario pathway, we would avert something in the 21 neighborhood of hundreds to thousands of deaths annually 22 if these estimates are correct. 23 Next slide. 24 --o0o-- 25 DR. CAYAN: The water system in California is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 vitally dependent on snow pack, which provides almost half 2 of the manmade reservoir, the built reservoir storage of 3 water that's accumulated over an annual period. Under 4 climate change because much of our precipitation will form 5 as rain instead of snow and because snow that does 6 accumulate will melt earlier, we are likely to see 7 significant reductions in snow pack through the time 8 period. 9 To give you a measure of the impact of the two 10 different scenarios, again using two different models, the 11 loss in snow pack at the end of the century amounts to 12 between 30 and almost 70 percent of today's levels of 13 spring snow accumulation. But in the higher emissions 14 scenarios, that loss ranges from 70 to 90 percent of 15 today's level. 16 This is going to present a great challenge to 17 water resource managers. Water is going to be coming off 18 earlier and faster than today's climatological normals. 19 Our reservoir systems in California are dual-purpose 20 facilities, made to withstand floods as well as store 21 water. We're going to have to provide more flood storage 22 under both of these scenarios, but particularly if the 23 higher greenhouse emissions pathway is followed. 24 It was mentioned that sea levels are likely to 25 rise. With greater greenhouse gas forcing of course we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 are much more likely to have excessive rises of sea 2 levels. Our coastlines are already rising at the rate of 3 over half a foot per century. And much of our water 4 supplies are vulnerable to saltwater intrusion, including 5 both coastal aquifers and the San Francisco Bay and Delta 6 through which much of the fresh water for Californians is 7 derived. 8 Next slide. 9 --o0o-- 10 DR. CAYAN: There's likely going to have to be a 11 rearrangement of vegetative ecosystems in California. If 12 you look at the slide in detail, what you see is that 13 alpine vegetations in the state under high greenhouse 14 emissions are very likely to be strongly decimated. 15 That's also true of lower evergreen conifers and some of 16 our shrub chaparral systems, at the expense of deserts and 17 mixed wood lands. 18 So as well as with human systems, we're likely to 19 see major changes in our natural setting. 20 Next slide. 21 CHAIRPERSON LLOYD: Can you begin to summarize. 22 Oh, great. Thank you. 23 DR. CAYAN: So in summary -- 24 (Laughter.) 25 DR. CAYAN: -- the -- I beg your forgiveness, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 Chairman Lloyd. 2 -- the changes that we could see under high 3 global emissions will be great. I think a take-home 4 message is that a lot of the effects that we will see 5 because greenhouse gases will accumulate will be seen by 6 subsequent generations, our kids, their kids. The choices 7 and the actions that we take today, we may not see a 8 strong effect of. But if the science is correct, it's 9 likely that subsequent generations will. 10 The other thing to say I think is that to 11 mitigate the higher end of the changes is going to be far 12 more difficult. 13 Thank you. 14 CHAIRPERSON LLOYD: Thank you very much indeed. 15 Thank you for coming again after your presentation earlier 16 this year. Thank you. 17 Bob Epstein, Cynthia Rojas, Dave Modisette. 18 (Thereupon an overhead presentation was 19 Presented as follows.) 20 MR. EPSTEIN: Chairman Lloyd and supervisors, 21 thank you very much. My name is Bob Epstein. I'm a 22 software entrepreneur. I'm currently in my fourth 23 software company in California. That's what I do by day. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 MR. EPSTEIN: I also, along with a number of 2 other executives in California, created a group called 3 Environmental Entrepreneurs, or E2, which Assemblywoman 4 Pavley mentioned earlier. 5 Our interests -- we're a nonpartisan group. 6 We're interested in the interception of growing the 7 economy and the environment concurrently. It's relevant 8 to today's discussion and we want to talk about jobs. Our 9 members have collectively built more than 800 companies, 10 created more than 400,000 jobs, and currently manage about 11 $20 billion in venture capital. 12 So there's two things we really know: How to 13 build companies. And also, more importantly, most of our 14 companies come from technology changes, either driven by 15 the marketplace or driven by regulation. One unique 16 aspect about E2 is we never hire professional lobbyists to 17 represent. I'm here as a volunteer, as all our members 18 are. 19 Next slide. 20 --o0o-- 21 MR. EPSTEIN: I've built billion dollar 22 companies, I've done lots of interesting things in 23 business. But nothing made me more proud than to be there 24 two years ago for the sign ceremony. Dr. Lloyd, you were 25 there, I think, Supervisor DeSaulnier, you were there, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 probably many of the others. The clouds cleared as we 2 went to sign it. And I view that as a sign that I 3 interpret as the fact that we're on the right track here. 4 What I want to focus on in my brief presentation 5 is specifically the aspect of creating jobs and what this 6 may do for new business in California. 7 Next slide. 8 --o0o-- 9 MR. EPSTEIN: To do that we did a survey which 10 was included as written testimony that looks at what's 11 currently happening in venture-backed jobs in 12 environmental technologies, something we call clean 13 technologies. 14 So we surveyed 25 different venture capital firms 15 that invest in California startups with environmental 16 technologies. Last year $339 million of venture capital 17 flowed into California startups. That represents 29 18 percent of the North American total. Our estimate is if 19 we assume that that just stays at its current rate, by 20 2010 that will create between 52,000 and 114,000 jobs at 21 about $11 to $25 billion in revenues to these 22 California-based companies. 23 Now, the key findings we had was asking these 24 venture capitalists what were the drivers behind them 25 considering California for making their investments. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 the top two criteria listed by them: First, quality of 2 management team that's available; and second is California 3 public policy. 4 Their view, looking at a decision such as you're 5 making this week, is the continual driver of California of 6 establishing performance standards, is going to encourage 7 innovation in business and make them more likely to stay 8 in California or increase their investments in California. 9 Correspondingly, a decision to go in another direction, of 10 saying maybe it's no longer California's role, is going to 11 be sending a very clear signal to the venture capital 12 community that other states may be picking up the mantle 13 and it won't be California in the future. 14 Next slide please. 15 --o0o-- 16 MR. EPSTEIN: You asked to keep it short. Here's 17 my summary slide. 18 The reasons why I feel that AB 1493 is the right 19 direction -- and I agree strongly with the staff report -- 20 is, first of all, it's based on proven technology, it is 21 cost effective. I would like to remind you that if you 22 look back at the LEV program and some of the research that 23 we did, that Sierra Research estimated a cost of 24 implementing the LEV program at $788 per vehicle. They 25 did that in 1994. The staff estimate at that time was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 $114 per vehicle. The actual ended up being $83. So I 2 was very encouraged by the gentleman's estimate, because 3 if he's still off by a factor of 10, that says your staff 4 has grossly overestimated the cost of making this bill 5 work. 6 So, in summary, you are an international body. 7 Your commission for the California -- you're here to do 8 the public good of California. But if you're interested 9 in transportation-related improvements in greenhouse gas 10 emissions, you are the only game in town. That's why I'm 11 here today, to let you know. Keep it up. Strongly 12 recommend you accept the staff report. Business is behind 13 you, and jobs will be created. Consumers will thank you. 14 And I thank you. 15 CHAIRPERSON LLOYD: Thank you very much. 16 (Applause.) 17 CHAIRPERSON LLOYD: Thank you very much, Bob. 18 And, again, that impressive track record. You and 19 companies have got real credibility. 20 And I think the point you make is a good one. 21 I've seen in trying to always get involved with pushing 22 technology is that certainty is a big factor in getting 23 investments in that piece. And as you indicated there, a 24 continued direction on looking at performance-based 25 standards provides us an opportunity, because sooner or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 later this is going to be required worldwide given all the 2 prediction we saw from previous speakers, et cetera. 3 MR. EPSTEIN: Absolutely, I agree. 4 CHAIRPERSON LLOYD: Questions? 5 MR. EPSTEIN: Thank you for your time. 6 CHAIRPERSON LLOYD: Thank you for your support on 7 this. 8 We have Cynthia Rojas, Dave Modisette, John 9 DeCicco. 10 MS. ROJAS: Good afternoon. My name is Cynthia 11 Rojas and I am an organizer with the Labor Community 12 Strategy Center and the Bus Riders Union based here in Los 13 Angeles. 14 We are the legal and the political 15 representatives of half a million bus riders here in L.A. 16 and we represent their interests. They're primarily 17 low-income working-class black, Latino, and Asian Pacific 18 Islander peoples. 19 We're here to commend the work of your staff, 20 first of all, and to urge you to approve the 21 recommendations that they have placed before you. 22 In August of 2002, a group of us went to the 23 world summit on sustainable development in Johannesburg, 24 South Africa. And we were able to meet and work with 25 environmentalists from all over the world, including from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 the small island nations of Tuvalu, Samoa, and Fiji. And 2 that was an enormous breakthrough in our own consciousness 3 as far as how much we are integrated into the world, not 4 just as far as an economical power, political power, but 5 our actions here on the ground everyday that we drive or 6 that we do anything in our daily lives affects our 7 international community. 8 And so as a result of that we came back and have 9 continued our efforts to build public transportation for 10 the civil rights needs of the working class in Los 11 Angeles. But also -- or in addition to that we are 12 looking at ways and have always looked at ways actually to 13 expand it so that more people can take public transit. At 14 the same time we're looking at how do we start to restrict 15 the automobile. And we know that hand in hand with 16 regulating the emissions we need to look at how do we 17 start to encourage people to drive less, which we had -- 18 you all had talked about earlier: If it's cheaper for 19 people to drive now, then are they going to be driving 20 more? But essentially we've been driving more even if it 21 hasn't been cheaper for the last three decades. 22 So we want to be able to again support very much 23 the efforts of the staff, encourage you to approve the 24 regulations, because essentially this is very much focused 25 on California but, as the last speaker said, very much PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 part of an international effort to address a worldwide 2 crises. 3 And thank you very much. 4 CHAIRPERSON LLOYD: Thank you very much indeed. 5 You highlight an issue that is very, very important to us. 6 And I hope that you will work with staff as we look at 7 increasing mass transit. I know that Supervisor 8 DeSaulnier particularly has got an interest in pushing 9 that. So please work with us. And congratulations. And 10 thanks very much for coming. 11 MS. ROJAS: Thank you. 12 CHAIRPERSON LLOYD: Dave Modisette, John DeCicco, 13 and Felix Kramer. 14 MR. MODISETTE: Thank you, Mr. Chairman and 15 members of the Board. 16 (Thereupon an overhead presentation was 17 Presented as follows.) 18 MR. MODISETTE: I am Dave Modisette. I'm the 19 Executive Director of a group called the California 20 Electric Transportation Coalition. Maybe for the new 21 Board members, we're a nonprofit business association of 22 companies working on the many issues involved in the full 23 spectrum of electric drive technologies. I'll keep my 24 remarks very brief. 25 I also want to thank staff for the landmark PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 document that they've produced. Our organization fully 2 supports the proposed regulations, and we would urge you 3 to adopt them. 4 There is one small aspect of existing regulations 5 that we would urge you to correct, however. Existing 6 regulations contain a disincentive for what we think is an 7 extremely promising new vehicle technology. It's been 8 mentioned a couple of times today, grid-connect hybrids, 9 also known as plug-in hybrids. I think the members of the 10 Board know how that technology operates. But if not, I'd 11 be happy to describe that. 12 The disincentive in the regulation is that in the 13 first year of model introduction the vehicle -- or the 14 auto maker, I guess, gets no credit for the actual amount 15 of time that the vehicle's operated on the grid-supplied 16 electric power. 17 We agree with a need to accurately determine the 18 percentage of time the vehicle is actually operated on 19 electricity. We have no objection to that. And we don't 20 object to using the first year of that model introduction 21 to actually collect the -- collect the data. But once 22 that data is collected and evaluated, in the second year 23 we believe that auto makers should be credited with this 24 amount of time for the first year operation of that 25 vehicle on the grid-supplied electricity. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 And I just -- I did summarize the information 2 from the ARB staff report that shows the percentage 3 reduction in greenhouse gas emissions from these various 4 technologies. Here I listed the alternative fuels 5 technologies and the hybrid technologies based on the 6 information in the staff report. And you can see the 7 plug-in Hybrid 20. That's a vehicle that gets 20 miles of 8 all-electric range. It has a very, very high reduction in 9 greenhouse gas emissions, 62 percent, fully double what 10 your fully phased-in standard would require. 11 Plus, you can see it beats out all the other 12 technologies with the exception of one. And that's the 13 pure electric vehicle. 14 So we would urge you to via policy direction to 15 staff to make this correction as part of the 15-day 16 changes, and then we'd urge you to adopt the regulations. 17 Thank you. 18 CHAIRPERSON LLOYD: Thank you, Dave. And thanks 19 for being crisp. 20 And my understanding from discussions with 21 staff -- and I'm certainly supportive of what you're 22 suggesting. Is that correct? 23 EXECUTIVE OFFICER WITHERSPOON: Yes, we've met 24 several times with Mr. Modisette. And we are prepared to 25 make the change he's recommended with such direction from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 you, the Board. 2 CHAIRPERSON LLOYD: Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Well, I'd encourage that, 4 yes. But I appreciate you keeping the pressure on us. 5 And I don't think we should do anything that would provide 6 for a disincentive. It seems just technical modifications 7 necessary. 8 CHAIRPERSON LLOYD: And thank you, Dave, as 9 usual, for doing a thorough job on providing us with 10 additional information. 11 MR. MODISETTE: Thank you very much. 12 CHAIRPERSON LLOYD: All right. Now we have John 13 DeCicco, Felix Kramer, and Paul Wuebben. 14 And I know Paul has a long commute, so he can't 15 come tomorrow. 16 MR. DeCICCO: Thank you. My name is John 17 DiCiico. I am a senior fellow with Environmental Defense. 18 We're a national nonprofit green group representing over 19 50,000 members here in the State of California, 300,000 20 nationwide. 21 It's my privilege to address you in support of 22 the proposed regulations and commend the staff on what I 23 consider to be a very exemplary job in developing this 24 proposal. 25 We urge the adoption of the regulations without PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 delay. We find it a conservative proposal. And, yeah, we 2 could identify some areas where we could see it being 3 strengthened. We have submitted written comments already. 4 Submitted them last week. They're in the record, so I 5 won't go into that detail. But I'll just hit on a few 6 points very briefly. 7 My own background is mechanical engineering. 8 I've been studying motor vehicle issues and in particular 9 greenhouse gas emissions control for motor vehicles for 14 10 years, and have looked at this issue, have done studies 11 myself, and am very familiar with the studies out there. 12 And we have looked at the work that the staff 13 did. We reviewed the estimates. We've reviewed your 14 methodologies. And we find it to be extremely well 15 grounded in the engineering and the economics of this 16 issue. 17 These estimates are very consistent with the 18 kinds of potential technology-based reductions of 19 greenhouse gas emissions that we've seen that are really 20 well known in the engineering community. 21 You've heard a lot about the different 22 technology. You've seen some of them on the street. Many 23 of them are on the road. 24 These proposals can be met with essentially 25 design refinement. Evolution of conventional technology PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 doesn't require anything exotic. That's one of the 2 reasons why these costs are so low and so cost effective 3 from a consumer point of view. 4 In looking at the proposal, I think the staff, in 5 fact, you know, made some concessions to the industry in 6 the structure, in the two-part fleet, the passenger car, 7 LET I, and then the heavier vehicles. And also their 8 approach of working from the manufacturer with the highest 9 baseline emissions levels. So I mean there's an inherent 10 caution in this work that I think contributes to its 11 robustness. 12 Touching on the lead-time issue. I know that's 13 been a question. We supported the earlier draft with the 14 shorter lead time for the out year and would still support 15 that. So we think that this is another area where the 16 staff proposal has been very generous. 17 We've reviewed the lead-time issue, in fact, two 18 different ways that come up with results that both support 19 the type of framework, your framework here. We've looked 20 at historical adoption rates of engine technology 21 refinements and design refinements in transmissions and so 22 on, what the historical adoption rates are in the 23 industry. This proposal is very consistent with that. 24 We've also looked at the issue of product 25 redesign cycle, how long it takes the auto makers to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 redesign products. In fact, competitive pressures have 2 compressed their cycle. You can't keep old product on the 3 street competitively. This proposal was very much in line 4 with the competitive redesign of vehicles that is driven 5 by market forces. 6 Because this technology-based proposal it will 7 not limit consumer choice in any way. And I think that's 8 important to keep in mind over one here some of various 9 objections that have been raised. 10 On cost effectiveness, we think those numbers are 11 also robust, certainly in line with our own review of work 12 that's been done on the issue. Again, one of the 13 important things to keep in mind is these are not exotic 14 technologies to achieve these reductions. And, therefore, 15 it's very much in line with the current capability of 16 automotive engineering. And, in fact, if you look 17 historically -- and I know we've even used Air Board 18 staff's own documentation of past costs of other emission 19 regulations. I think it's well known that the Board makes 20 very cautious costs. And the costs we hear from industry 21 I think without exception have historically been 22 overstated, often many-fold. And so, again, I think 23 that's another reason for robustness in these estimates. 24 Bottom line is this proposal is cost effective 25 for the consumer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 Another thing to keep in mind in this regard is 2 the -- vehicles for just market reasons the price goes up. 3 There's been a real price trend averaging about $230 a 4 year marketwide in this country for many years. It's 5 amazingly linear. If you project that trend out over the 6 time periods of this proposal, both the midterm targets 7 and the 2016 -- or the near-term targets and the 2016 8 midterm target, and look at the implied cost just under 9 market conditions, this proposal comes in under that. 10 What that means is that this cost analysis is really in a 11 sense examining, as it should, the opportunity cost. It 12 is very likely that these changes can be made without a 13 noticeable effect on the prices that consumers will 14 actually see. We know it's already been very close to 15 that experience in other areas of regulation. 16 So in many ways for the actual consumer in terms 17 of gasoline prices, this is likely to be even more cost 18 effective to the individuals than is even documented in 19 the regulation. 20 So, in summary, Environmental Defense is pleased 21 to support this proposal. Again, commend the staff on a 22 very excellent job. And we urge the Board to adopt this 23 without delay. 24 Thank you. 25 CHAIRPERSON LLOYD: Thank you very much, John. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 appreciate your letter co-signed by Kate Larson. And, 2 again, with your background, and I know all the excellent 3 work you've done over the years, it's good to have your 4 support there. So thank you very much. 5 Questions? 6 Thank you. 7 Felix Kramer, Paul Wuebben, and Russel Long. 8 MR. KRAMER: Thank you, Chairman Lloyd, board 9 members. I think I'll come under three minutes. 10 My name is Felix Kramer. I'm a former 11 entrepreneur. And I'm the founder of the California Cars 12 Initiative. We're a nonprofit startup formed by a group 13 of entrepreneurs, engineers, environmentalists, and 14 consumers to bring to market the cars we need for the next 15 10 years or more. We're focused on California, which can 16 pioneer in the necessary market transformation. 17 I'll be brief. 18 I support the proposed regulations and urge their 19 adoption. Your staff has evaluated a number of excellent 20 approaches that can reduce the greenhouse gas emissions of 21 vehicles. Most of them are not controversial, have been 22 proven to work, don't cost much to implement, and aren't 23 mutually exclusive. I hope you'll recommend incentives 24 for a great package of interim steps. 25 But there's an elephant in the room, which keeps PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 coming up, only to get put off as unrealistic. It's 2 plug-in hybrids or grid-connected hybrids. 3 As Dave Modisette's slide showed, the Board 4 staff's report ably shows that PHEV's reduce carbon 5 dioxide more than any other vehicle type except 6 all-electrics. 7 And last year's California Energy Commission 8 report on reducing oil dependence, which of course tracks 9 reducing CO2 closely, also put PHEV's right on top of the 10 list. 11 On top of this documented advantage is the 12 reality that from a technical standpoint PHEV's could be 13 on our roads in a year or two as modifications of existing 14 hybrid lines. They need no new technology, no new 15 infrastructure, and no promise that all will somehow fall 16 into place in a decade or two. 17 Proof of their feasibility. This week Cal Cars 18 finished building and is now debugging our first prototype 19 conversion, which we call Prius Plus. 20 Cal ETC and the Bluewater Network and others 21 testifying today emphasized the importance of removing 22 regulatory disincentives to PHEV's and the potential of 23 positive incentives to speed their commercialization. 24 I'm concerned that PHEV's may continue to be 25 overlooked. My written testimony explores why and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 explains how that can be addressed. My three main points: 2 1) Over a car's lifetime PHEV's save money. 3 2) If we can agree that they're a highly 4 effective solution, we'll find ways to deal with a larger 5 initial cost. And I would say that they may be the only 6 way to go beyond reduction to mitigation to that A1-F1 or 7 B1 scenario, which I don't see any reason why we shouldn't 8 really make a worldwide effort to get there with reducing 9 emissions and planting a lot of vegetable matter around 10 the world. 11 3) We can prove to auto makers that people will 12 buy these much better cars. That's what Cal Cars is all 13 about. 14 That concludes my verbal statement. 15 You can get copies of the whole haul statement 16 from me or outside or at calcars.org or at priusplus.org. 17 Thank you. 18 CHAIRPERSON LLOYD: Thank you very much. I think 19 you heard from the previous response to Dave Modisette 20 that the plug-in hybrids will not be forgotten and we'll 21 make sure they're included. 22 What is your Prius Plus? Is that a modification 23 of a Prius or -- 24 MR. KRAMER: Yes, it is. It's a Prius Plus, with 25 additional batteries under the deck in the back and grid PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 connectibility. And we're working on three generations of 2 it. 3 The first is just to develop our battery 4 configuration. We're using lead acid batteries. We 5 expect to get a maybe 5 to 10 mile range. 6 Then we're moving to nickel metal in about month 7 or two. 8 And then to lithium ion. Lithium ion, over a 20 9 mile range. And that's a neighborhood plug-in hybrid 10 vehicle. Because of the limitations of the Prius, it 11 won't give you all-electric at low speeds, but it will 12 contribute electric capability at higher speeds. 13 CHAIRPERSON LLOYD: So have you convinced Toyota 14 that this is a good way to go? 15 MR. KRAMER: Well, we would really like Toyota to 16 build them. We're not interested in building them 17 ourselves. And we would like them to do it on their Lexus 18 RX400 and their Highlander. And we'd like Ford to do it 19 on the Escape. And we think the -- it's about -- it's 20 going to cost -- we may do it maybe 2 or $3,000 more than 21 an existing hybrid. And I think there are resources in 22 this society to pay for that and make a huge difference. 23 And then you add photovoltaics. Thin film photovoltaics 24 are about two years away from being commercialized. And 25 you've got a whole different model for powering cars. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 Thank you. 2 CHAIRPERSON LLOYD: Thank you very much. 3 BOARD MEMBER D'ADAMO: Just a quick question. 4 CHAIRPERSON LLOYD: Ms. D'Adamo. 5 BOARD MEMBER D'ADAMO: How long do you expect 6 it's going to take to recharge the battery on your -- 7 MR. KRAMER: How long will it take -- 8 BOARD MEMBER D'ADAMO: -- to recharge. 9 MR. KRAMER: To recharge. This is 115 volts in 10 your garage, no special circuit, overnight, like any 11 plug-in hybrid. As Toyota says, you don't have to plug it 12 in. As we say, you get to plug it in. And if you get to 13 plug it in and you have a 20-mile range, that means you 14 may go to a gas station once a month or just when you want 15 to go to Tahoe. So you get all the benefits of an 16 electric vehicle, but you're not tethered. 17 The reason people didn't want to plug in -- they 18 didn't care about the inconvenience of plugging in. They 19 didn't want to worry about plugging in and worry about 20 losing their juice somewhere along the way. That's the 21 advantage of plug-in hybrids. You can drive them either 22 way. They're technically a mixed fuel vehicle, as you 23 described them. 24 But I just would say one other thing. It's not 25 simply the incentives. I'm concerned that -- in a couple PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 of places in the report, in one place in particular, it 2 talks about how a full evaluation of hybrids will happen 3 in a few years. The Board will do that. And with the 4 exploding popularity of hybrids and with if becoming clear 5 now that a two propulsion system is not necessarily either 6 more complex or more expensive than a one propulsion 7 system, then these vehicles are now much more feasible. 8 CHAIRPERSON LLOYD: Thank you. 9 BOARD MEMBER DeSAULNIER: Maybe we should revisit 10 this at another Board hearing. 11 CHAIRPERSON LLOYD: Okay. 12 BOARD MEMBER DeSAULNIER: Sounds like a ZEV. 13 CHAIRPERSON LLOYD: Thank you. 14 Paul Wuebben, Russel Long, and Larry Allen. 15 MR. WUEBBEN: Good afternoon, Mr. Chairman. 16 Thank you for your typical generosity. Members of the 17 Board. I'm Paul Wuebben, Clean Fuels Officer with the 18 South Coast Air Quality Management District. 19 We appreciate the opportunity to comment, and 20 strongly urge the passage and adoption of this. We'd also 21 like to first focus on the real diligent efforts that your 22 staff have made in developing a comprehensive report. We 23 think that it reflects a lot of careful thinking. It's a 24 lot of detailed analysis. And they've got a lot of 25 balanced judgment that they reflected. And it really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 helps us proceeding. 2 I'd like to really focus briefly on a few points: 3 First, of course is that there is a very spurious 4 and in fact growing need for the regulations. 5 Second, the analysis that was done by your staff 6 has done really an extensive and compelling amount of 7 analysis and even in the supplemental analysis. And we 8 think that those reflect a lot of conservative 9 assumptions, which serve you well in this regard. 10 There is substantial net benefit to the 11 regulations proposed, especially in terms of consumer -- 12 from the consumer perspective. And that's only going to 13 be enhanced as gasoline prices increase. 14 A third point would be that we do think that 15 there are a few opportunities for additional emission 16 reductions as we go forward, particularly with respect to 17 looking at reductions beyond -- below levels that exist 18 currently in the 2004 base year. 19 The staff, as you know, assumes that hybrid 20 technology will not be a mainstream technology option 21 until after 2016. Now, we appreciate the conservative 22 rationale underlying that judgment. 23 And we also think that there are strong market 24 signals which indicate a surging demand poll, if you will, 25 for electric hybrid technologies today. There are already PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 9,000 back orders for the 2006 model year Lexus hybrid 2 SUV, the Ford Escape is getting similar consumer reaction. 3 Virtually all the OEM's are accelerating their programs in 4 electric drive train development. And, as I mentioned, 5 rising gasoline prices are also very much changing and 6 propelling consumer interests in their valuation of that 7 kind of technology. So we think that it would be useful 8 perhaps to consider at the earliest feasible date to take 9 full advantage of those market trends. 10 The fourth consideration I just briefly touch on 11 would be that the advanced technology alternative fuel 12 vehicle group -- and there's quite a few of those options 13 as Dave Modisette noted. Those could play a stronger 14 role. Plug-in hybrids and natural gas vehicles are being 15 developed, as you know, by original equipment 16 manufacturers. There could be some additional credit 17 mechanisms employed to perhaps enhance their utilization. 18 Alternative fuel hybrids, for example, could 19 provide a significant opportunity for diversification of 20 our energy supply and set the stage for what you might 21 consider a net zero carbon fleet average standard. And 22 while I appreciate that a net -- a zero net carbon 23 strategy or a renewable fuel standard, if you will, is 24 somewhat beyond rulemaking today. But when you look at 25 the role of upstream and downstream emissions, that it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 would be an important adjunct in the future perhaps to 2 pursue. 3 Fifth, we would suggest that the regulations not 4 encourage the increased dieselization of a fleet. From 5 our perspective we think fundamentally that there is 6 insufficient data on emissions system's durability and 7 in-use emissions to adequately judge whether or not 8 diesels can truly reach parity with gasoline technology. 9 So in terms of the current knowledge based from our 10 standpoint, we think that increasing dieselization to meet 11 these greenhouse gas emission goals would be poor public 12 policy. 13 Finally, I'd like to just point out that this 14 could be an important juncture in all of our efforts to 15 address global air quality issues, and that there would be 16 I think a real value to the state enunciating the need for 17 climate stabilization, and as we've noted in our formal 18 remarks in the record. 19 So, in conclusion, we strongly endorse the 20 adoption of the standards. Your staff have used very 21 cautious assumptions. They've designed standards that are 22 extremely prudent, while they embrace a no-regrets policy. 23 And we certainly recommend that there not be any delay. 24 And so we congratulate you on your anticipated action. 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 CHAIRPERSON LLOYD: Thank you very much. 2 A couple of questions. 3 When you talk about climate stabilization, what 4 sort of CO2 number are you looking at? 5 MR. WUEBBEN: Well, there's a recent paper being 6 developed by Dr. James Hanson, for example, that looks to 7 440 ppm. I think the figure of 450 ppm CO2 has been 8 thrown out. We wouldn't have any specific target I think 9 at this stage for global CO2 concentrations. But there 10 does seem to be a growing base of data in terms of the 11 importance of stabilizing carbon emissions to get to some 12 kind of stable level of greenhouse gas in the atmosphere. 13 CHAIRPERSON LLOYD: So you're using 450 as -- 14 MR. WUEBBEN: -- as kind of a benchmark. And, as 15 I say, Dr. James Hanson is ready to -- I've seen some of 16 his early drafts of this number. But I think there's 17 other analysis that's been out there that suggests 18 somewhere between 450 and 550 would be a very prudent 19 first -- 20 CHAIRPERSON LLOYD: Well, is it 450 or is it 550? 21 MR. WUEBBEN: I don't think I'm prepared to 22 answer that, Mr. Chairman. But I appreciate that the 23 number is -- 24 CHAIRPERSON LLOYD: Well, I was taken aback a 25 little bit. Four fifty seems to be a pretty aggressive PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 target. 2 MR. WUEBBEN: Well, it is, certainly. 3 CHAIRPERSON LLOYD: South Coast -- to be 4 commensurate with South Coast. 5 Which I would just need another question. Again, 6 since -- quite tough enough, are you going to go it alone 7 in terms of South Coast proposing some standards here? 8 (Laughter.) 9 MR. WUEBBEN: No, we fully embrace the Board's 10 role in this activity. 11 CHAIRPERSON LLOYD: On the serious side, Paul. 12 One of the things we've seen -- and I am in big support of 13 all-fuel vehicles. You mentioned here -- I think you make 14 a good point about the plug-in hybrids. And then at least 15 we're aware of at least one OEM, maybe others, interested 16 in that. 17 Now, meeting with the Natural Gas Vehicle 18 Coalition -- are you saying that plug-in hybrids are 19 growing or being pursued? What we heard from the 20 association, the partnership there, that in fact they're 21 worried about manufacturers getting out of the light-duty 22 market. Do you see anything different in that? 23 MR. WUEBBEN: Well, we certainly have concerns, 24 that this is a very challenging point in the evolution of 25 both of those industries, particularly in the natural gas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 arena. But at the same time, we think that there could be 2 mechanisms perhaps in terms of documenting fuel use for 3 the first several years of their use as credits, that 4 until you reach a 20 or 30,000 vehicle threshold, that 5 there's a lot of risk taking to bring the technology to 6 that point of the penetration. And in the outfitting or 7 in the upfitting industry, that there may be some 8 opportunities for taking advantage of the expertise and 9 modifying some of those standards. 10 But generally there still are auto manufacturers, 11 both in the heavy duty and in the light duty, which are 12 exploring those technologies, particularly like natural 13 gas, both LNG and compressed gas. And we think that -- we 14 have to be probably more surgical in understanding the 15 needs and the barriers that exist right now. 16 But Honda, for one, as you know, has made very 17 strong commitments and is bringing forward a refueling 18 appliance that they call "fill" which will give the 19 consumer market for the first time exposure to that. So 20 while there's still some great challenges there, it seems 21 that there's still a lot that could be taken advantage of 22 and reinforced. 23 CHAIRPERSON LLOYD: And, again, on the point of 24 dieselization, I didn't see anything in the regulation 25 which would either encourage or discourage that. Do you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 have any data also to support your other point about -- 2 since they're not legal to sell in California at the 3 moment, you have any data to back up what you're saying 4 here? 5 MR. WUEBBEN: Well, it was just really a caution, 6 because diesel options were identified as one of the 7 technologies that could conceivably be employed. But it 8 was essentially our view that because of some of the -- 9 the stringency of the future standards, that there are 10 going to be some very high hurdles in terms of durability 11 and particularly off-cycle emissions that when we look at 12 certifying the trap technologies or really any of the 13 technologies, that in-use emissions can fall prey to some 14 cycle differences outside the conventional test cycle 15 regime. So I think it's just really a precautionary 16 principle we were trying to articulate. 17 CHAIRPERSON LLOYD: Okay. Thank you very much, 18 Paul. 19 MR. WUEBBEN: Thank you. 20 CHAIRPERSON LLOYD: Russel Long. 21 DR. LONG: Chairman Lloyd, members of the Board. 22 I'm Dr. Russel Long. I'm the Executive Director 23 of Bluewater Network, a national nonprofit organization 24 based in San Francisco. We're the organization which 25 originally drafted and sponsored this bill which led to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 the rulemaking. 2 Well, it's been a long, arduous journey to get to 3 this point. And we applaud the work of ARB staff, which 4 involved an extremely thorough evaluation of all available 5 technologies to reduce greenhouse gas emissions. We 6 believe the proposed regulation is really an excellent 7 start, that it will result in the rules which are -- which 8 we believe are fair to manufacturers and in vehicles which 9 are better for both the environment and consumers' 10 wallets. 11 That said, we do believe the measures being 12 considered are quite conservative, allowing substantially 13 more greenhouse gas emissions than could have been 14 achieved under more vigorous interpretation of the 15 legislation. The result: The regulations will only slow 16 the increase in greenhouse gas emissions from California's 17 expanding fleet of passenger vehicles, not stop them. 18 To reiterate this, the regulation reduces 19 emissions about 30 percents from what they would otherwise 20 be from new vehicles in 2016. But the bad news is in 25 21 years greenhouse emissions from passenger cars will 22 increase 9 percent from today's levels due to increasing 23 numbers of cars on the road driving further every year. 24 So in absolute terms the regulation doesn't reduce 25 emissions. It merely slows down the huge increases that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 we're guaranteed to have in the next two and a half 2 decades. And the Air Board has not really focused on that 3 problem yet. 4 Well, in recognition of that the Air Board must, 5 we believe, at some point consider instituting a program 6 that would ultimately create absolute reductions in 7 greenhouse emissions from cars. And that means also, we 8 believe, it requires the regulation of greenhouse gases 9 from all other source categories as well and all other 10 greenhouse gases, for example, black carbon and 11 tropospheric ozone. 12 Clearly there's no intention here to pick on a 13 single industry. Progress is being made on all fronts as 14 fast as we can. And we need to continue to put the 15 pressure on, not just the auto industry, but other 16 industries as well and other pollutants as well. 17 Now, my third point, I'd like to mention that the 18 Board ran all their cost estimates using only a dollar 19 seventy-four per gallon of gasoline. And there were 20 some -- also some numbers run at two thirty. But a buck 21 seventy-four is what -- the basis was for everything. 22 We believe those values, which are really based 23 upon earlier findings by the CEC, are substantially 24 underestimated, especially because the CEC numbers were 25 generated at a time when we certainly didn't have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 political instability in the Middle East. And for that 2 reason, we would like to see those numbers run again at 3 some point using values that are far higher than that, 4 perhaps even up to $5 or $7 a gallon. We think that's 5 actually justified from the standpoint that there's a 6 number of petroleum geologists today, top geologists 7 around the world who are indicating that we could be 8 seeing the price of a barrel of oil by the end of this 9 century reaching as high as a hundred dollars a barrel or 10 even higher, considering that we're now getting very close 11 to peak oil demand where production and demand are more or 12 less commensurate and we cannot produce any more than we 13 are today. 14 So if that turns out to be true, at 82 million 15 barrels a day, then that is certainly going to drive oil 16 prices up in the future. We need to be cognizant of that. 17 We should probably take a look at those numbers again to 18 make sure that we've done them right, because there's a 19 lot of arguments to be made for much higher oil prices in 20 the very near future. 21 CHAIRPERSON LLOYD: When did you say you expect 22 the hundred dollars a barrel? 23 DR. LONG: Well, C.J. Campbell in England, who 24 was just featured in the Wall Street Journal last week -- 25 and he's the one who began making these predictions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 relatively recently. Some other top petroleum geologists 2 have come on board and made similar predictions. So these 3 used to be considered rather fanciful notions. But now a 4 number of more respected geologists are following suit. 5 So it is a concern. 6 CHAIRPERSON LLOYD: No, I thought you said there 7 was a hundred dollars a barrel. What year would that be 8 reached? 9 DR. LONG: Oh, they're saying that could happen 10 by 2010, believe it or not. 11 So add to that the geopolitical instability 12 and -- 13 CHAIRPERSON LLOYD: I thought you said by the end 14 of the century. Maybe I misunderstood. 15 DR. LONG: If I did, I misspoke. I got up at 16 4:30 this morning. You'll have to excuse me. 17 CHAIRPERSON LLOYD: No, that's fine. 18 DR. LONG: My final point is this: We hope to 19 work with the Air Resources Board in the coming year to 20 establish a greenhouse gas standard, at least to consider 21 one, for motor fuels themselves, as Chairman Lloyd had 22 mentioned previously. And this is very important because 23 they're the other half of the vehicle global warming 24 problem. 25 Consider of course that all four fuels that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 vehicles use have a cleaner greenhouse gas version. 2 Gasoline obviously has cellulosic ethanol. Much 3 better. 4 Natural gas vehicles can operate on biogas from 5 the sewage treatment plants as well as landfills. And 6 this is being done in Sweden today, with Volvo involved in 7 that. 8 Diesel can be replaced or supplemented with 9 biodiesel. 10 And hydrogen can be made not just from fossil 11 fuels but from winds and solar. And we all know that's an 12 important distinction. 13 So the Board has the authority to move the state 14 in the direction of cleaner fuels, just like the Governor 15 is now attempting to do with this hydrogen highway. It 16 would only be natural for us to take his lead and to 17 target cleaner fuels for all of our cars. It's the right 18 thing to do and it will further enhance the excellent 19 start being made with this regulation today. 20 And just one caveat here. I wanted just to echo 21 the comments made on plug-in hybrids that were made by two 22 of the previous speakers. Thank you for helping to clean 23 that language up. 24 Thank you very much. 25 CHAIRPERSON LLOYD: Thank you very much, Russel. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 And, again, I'll echo a previous statement I 2 made. I'll ask staff to at the end of the hearing to 3 address the issue of fuels and how we advance that part of 4 it. I know Mr. Scheible is the expert on that. He can't 5 wait to answer that question. So wait until tomorrow. 6 Ms. D'Adamo. 7 BOARD MEMBER D'ADAMO: And then I think the 8 witness makes an interesting point about the economic 9 analysis and the cost of gasoline. Maybe tomorrow when 10 staff addresses the economic impact, if they could also 11 address that issue as well. 12 CHAIRPERSON LLOYD: As you know, they did do 13 scenarios. But it would be a good thing so we can address 14 that tomorrow. 15 Larry Allen and then Sujatha -- I won't get into 16 the last name yet -- and then Martha Arguello. 17 MR. ALLEN: Good evening, Chairman Lloyd, members 18 of the Board. My name's Larry Allen. I'm the Air 19 Pollution Control Officer for San Luis Obispo County. And 20 I'm here today representing CAPCOA, which is the 21 California Air Pollution Control Officers Association. 22 And for the benefit of the new Board members, that's an 23 association of all 35 air pollution control districts 24 throughout the state. You'll hear a number of individual 25 districts testifying before you today. But the comments PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 I'm making represent the collective comments of all of 2 those agencies together. 3 And we'd like to start by saying that we strongly 4 support the strategies outlined in the staff report for 5 this rulemaking. And we would like to echo the 6 commendation for staff on the comprehensive technical 7 evaluations that they have taken into account, and also in 8 being able to accommodate all the new information that 9 came in at such a late date. 10 This is a critical first step for dealing with 11 one of the most significant environmental issues of our 12 time, because there is no question that global warming is 13 occurring. There is strong scientific consensus worldwide 14 that the warming is largely the result of accumulation of 15 greenhouse gases in the atmosphere. 16 But it's not just the scientists that have 17 reached that conclusion. It's becoming a much broader 18 part of the public discussion now. As you see in these 19 recent issues of National Geographic and News Week, it's 20 becoming part of the public dialogue now. 21 And unless adequately addressed, climate change 22 is going to have significant impacts worldwide, especially 23 in coastal areas like California. You've heard a lot of 24 testimony today on the type of impacts that could occur. 25 I won't repeat that. I was particularly impressed and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 alarmed by Dr. Cayan's presentation to you just a little 2 while ago. Just suffice it to say that I believe that 3 this is a significant, most environmental issue of our 4 time, with the greatest potential for pretty much 5 catastrophic impact and that we do need to act now to deal 6 with this. 7 In California emissions from light-duty vehicle 8 fleets are a significant contributor to the problem, 9 representing more than 30 percent of the greenhouse gas 10 emissions from all sources statewide. The proposal today 11 acknowledges the significance of those emissions through a 12 suite of emissions-based control strategies with phased 13 implementation schedule. And that proposal we believe 14 gives industry not only flexibility but adequate time to 15 adjust to the new standards, while also providing the 16 opportunity to earn emission reduction credits through 17 early implementation. 18 As shown in the staff report, the controls that 19 are recommended are highly cost effective, with the 20 projected increases in purchase price is more than offset 21 by long-term consumer savings in vehicle operations. And 22 I think it's really important to note that ARB staff 23 estimates of control costs have historically been quite 24 high. And it's likely that the actual costs that lead 25 into regulations will be lower than what's presented in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 staff report and, therefore, provide a greater savings to 2 consumers. 3 We would like to compliment the staff for 4 including the latest costs data in their analysis and for 5 updating that analysis accordingly. There have been some 6 speakers today I believe that have used the issue of new 7 data as a rationale for your Board to defer action and 8 allow more time for study. CAPCOA would challenge that 9 rationale. That new data has not and we don't believe 10 that -- will not materially affect the overall conclusions 11 regarding the need for or the appropriateness of the 12 proposed standards. 13 There's been a lengthy public debate process for 14 this regulation, and the full scope of the staff 15 recommendation has been clearly articulated for a number 16 of months and a number of workshops. Thus, we don't 17 believe there's any procedural or substantive basis for 18 any delay in adopting this rule. And it's important for 19 California to take this sanction now and realize that 20 we're not acting alone. Other cities, other states, other 21 nations have already implemented measures to reduce 22 greenhouse gas emissions from a variety of emissions 23 sources. And there are others that are planning to do so. 24 Yet progress has been far too slow, especially in 25 the United States. California has long been recognized as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 a pioneer in air pollution control. And on this vital 2 issue we must lead, we must show leadership, because 3 others will follow. As you heard the representative from 4 the State of New York saying they're waiting on our action 5 so that they can follow suit. 6 The standards proposed today are not as 7 aggressive as past programs such as LEV II or the ZEV 8 Program. The structure of the regulation has been 9 designed to accommodate the United States auto 10 manufacturers that have the highest greenhouse gas 11 emission levels. That will generally result in less 12 aggressive controls needed for fleets with lower 13 greenhouse gas emissions such as those of the Japanese and 14 the foreign manufacturers. 15 ARB should consider future strengthening of the 16 regulation to ensure that there are no incentives to 17 increase the manufacturer of the heaviest of the SUV class 18 vehicles. 19 Additional emphasis in incentives could also be 20 provided for more aggressive introduction of lower 21 emitting greenhouse gas vehicles such as the plug-in 22 hybrids that have already been mentioned. 23 The most recent data presented by staff indicate 24 that there are more upstream criteria emissions benefits 25 than originally expected. It's also likely, as mentioned PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 by Dr. Long previously, that the $27 per barrel cost used 2 in the cost-effectiveness analysis is actually quite 3 conservative given the current and expected future 4 gasoline prices out there. Given those distinctions, 5 there are even greater economic benefits associated with 6 the lower greenhouse gas emissions targets than have been 7 assumed in the staff report. So your Board could choose 8 to set more stringent goals and still be within the bounds 9 of the cost effectiveness intended by the staff. 10 But in summary, CAPCOA believes that the 11 strategies recommended by staff represent a 12 cost-effective, feasible, and critical first step in 13 addressing greenhouse gas emissions from the light-duty 14 motor vehicle fleet. We believe that much more remains to 15 be done in order to reduce the threat posed by global 16 warming, not just in California but throughout the world. 17 And we would recommend that your Board direct staff to 18 return within a reasonable timeframe to provide an update 19 on progress in implementing the regulation, as well as a 20 proposal for the next steps to be taken in addressing this 21 vital issue. 22 And CAPCOA commends your Board and your staff for 23 moving forward on this front, and we stand ready as an 24 organization to support your efforts. And we appreciate 25 the opportunity to provide the input and look forward to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 working with your staff on this. 2 CHAIRPERSON LLOYD: Thank you very much, Larry. 3 Thank you. 4 Sujatha Jahagirdar, Martha Arguello, and Tim 5 Carmichael. 6 I hope I didn't mess up too much. 7 MS. JAHAGIRDAR: No, that was pretty good. 8 My name is Sujatha Jahagirdar. I am a clean air 9 advocate for the Environment California Research and 10 Policy Center. We're a statewide nonprofit, nonpartisan 11 environmental group of about 55,000 members across the 12 state. 13 And I'm here -- you've heard many comments today 14 talking about the economic reasons to adopt this proposal, 15 the technological reasons, the public health reasons. But 16 I'm here to talk about potentially the most important 17 reason, which is this is what Californians want. 18 This summer the Environment California Research 19 and Policy Center staff went out into communities all 20 across the state. We didn't stick to the safe areas of 21 San Francisco and the liberal areas of L.A. We went out 22 to the Central Valley, to Fresno, to communities around 23 Sacramento. Really took an extensive sampling of public 24 opinion out there and found out that the support for the 25 implementation of strong regulations to deal with global PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 warming is really overwhelming. 2 In just I'd say about 12 short weeks we were able 3 to mobilize 109,000 -- and let me just say that again -- 4 109,000 public comments from Californians of all stripes 5 in support of the implementation of this measure. And if 6 there had been more public comments submitted in favor of 7 a regulation in California history, we couldn't find out 8 about it. So I'll leave that up to you as a challenge. 9 But I think it's fair to say that the response has really 10 been unprecedented in California. 11 I hold here just a small subset of the public 12 comments. I can barely lift that bag, and there are 15 13 more outside. 14 And so really all I'd like to say as part of my 15 comments is that on behalf of the 109,000 Californians 16 that took the time to talk to a perfect stranger that 17 they'd never met before and sign a public comment to send 18 to the Governor and to your staff in support of these 19 regulations, I urge you to adopt the staff proposal with 20 all due speed and let's get the show on the road. No pun 21 intended. 22 Thank you. 23 CHAIRPERSON LLOYD: Thank you. So you're 24 responsible for plugging up some of my e-mail? 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 MS. JAHAGIRDAR: Actually 109,000 doesn't even 2 count the E-mails. 3 (Laughter.) 4 CHAIRPERSON LLOYD: Thank you very much. 5 Congratulations. 6 MS. JAHAGIRDAR: Thank you. 7 CHAIRPERSON LLOYD: Thank you. 8 Martha Arguello, Tim Carmichael, and Dr. Trisha 9 Roth. 10 MS. ARGUELLO: Good afternoon. Thank you. 11 (Thereupon an overhead presentation was 12 Presented as follows.) 13 MS. ARGUELLO: Oh, first do no harm. Well, 14 clearly with global warming we're a little bit too late. 15 We've done quite a bit of harm already. 16 Can I get the next slide. 17 --o0o-- 18 MS. ARGUELLO: Okay. Here's some of the costs 19 that we're currently paying. And keep in mind that we've 20 done a very bad job of really documenting the full extent 21 of what this costs us in health care. $480 million in 22 California. For a hospital stay -- one hospital stay is 23 $13,000. Ten percent of children in California under the 24 age of 18 have been diagnosed with asthma. I am part of a 25 coalition of 12 organizations throughout the State of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 California called Community Action to Fight Asthma. They 2 were all very concerned with this issue. Currently asthma 3 is a leading cause of school absenteeism. So when we 4 think about the impacts of global warming and health, we 5 haven't really thought about what those impacts are if so 6 many children are missing school and what that means for 7 our productivity and the future of our society for having 8 folks who are being kept out of school. 9 The next slide please. 10 --o0o-- 11 MS. ARGUELLO: This is a map of emerging 12 infectious diseases in the world. And as an expert said, 13 if tropical weather's expanding, we can expect the 14 tropical diseases will also expand. 15 Next slide. 16 --o0o-- 17 MS. ARGUELLO: It's a mosquito. 18 Next slide. 19 --o0o-- 20 MS. ARGUELLO: I'm doing this really fast. 21 So warmer temperatures -- and have had a lot of 22 coffee. 23 (Laughter.) 24 MS. ARGUELLO: So warmer temperatures encourage 25 mosquitos to move upward. Mosquitos carry malaria as well PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 as other vector-borne disease. 2 The next slide. 3 --o0o-- 4 MS. ARGUELLO: So this is another tropical 5 disease, which I actually had when I lived in Latin 6 America. And for those of you who want to wait, I hope 7 you get dengue. Dengue is a -- it's bone-breaker fever 8 and it's growing and it's expanding. But also we're 9 starting to see them in places where we wouldn't expect to 10 see them, such as Texas and parts of Baja, California. 11 Next slide. 12 --o0o-- 13 MS. ARGUELLO: Now, this is Hanta Virus in 1996. 14 You can see that there's three cases in California. 15 Next slide. 16 --o0o-- 17 MS. ARGUELLO: Nineteen cases in 1999. And 18 that's the most current slide I've worked on, so we 19 probably have more. 20 Next slide. 21 --o0o-- 22 MS. ARGUELLO: My very complicated slide here. 23 This is a slide on what we're expecting with West 24 Nile Virus. So milder weather, you see an increase in 25 vegetation and then you see increases in tick populations, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 in bird populations and -- and so basically it all works 2 so that you have more West Nile. So as of September 3 21st -- I've just pulled this off the California 4 Department of Health Services -- 5 The next slide. 6 --o0o-- 7 MS. ARGUELLO: -- this is what's happening with 8 West Nile Virus as of two days ago in the State of 9 California. We have 56 cases were first detected in 10 asymptomatic individuals. We now have 16 fatalities. And 11 about 586 West Nile Virus infections have been reported in 12 the State of California, the first one happening in San 13 Luis Obispo. 14 Interestingly enough, two of the programs that 15 PSR works on a lot is pesticides, trying to reduce the use 16 of pesticides, and improving air quality. And what we're 17 now facing, our communities in east parts of Los Angeles 18 who are being sprayed with pesticides to control West 19 Nile. And they are being told that there's no impact from 20 the pesticides. So, again, there's the consequences that 21 we know of and then the unintended consequences. 22 The next slide please. 23 --o0o-- 24 MS. ARGUELLO: So we've talked about some of the 25 projections that Redefining Progress talked about. Well, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 we know what happened in Chicago with the heat-related 2 deaths. 3 Keep going. I'm going to do this really quickly. 4 --o0o-- 5 MS. ARGUELLO: Again, these are the spread -- 6 this is the spread of malaria. As temperatures rise, 7 the -- and we've already seen in some places malaria's 8 occurring further north, in parts of Africa and Latin 9 America. 10 Next slide. 11 --o0o-- 12 MS. ARGUELLO: Hanta Virus first emerged in 1993. 13 Nearly all the cases were fatal. And this is very similar 14 to what's going on with West Nile, is that deer rouse, 15 they're carriers of the disease and they spread with 16 contact with road droppings. And then there's -- it keeps 17 going. 18 Next slide. 19 --o0o-- 20 MS. ARGUELLO: Dengue fever. 21 Keen going. 22 Keep going. 23 --o0o-- 24 Cholera. This is another one that we don't 25 expect to see. But as temperatures in the water rise, we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 saw that certainly this is what happened in the cholera 2 epidemic in South America, because they're able -- 3 phytoplankton is able to survive in warmer temperatures. 4 So we may see more cholera. 5 But also flooding and natural disasters are also 6 often accompanied by -- keep going -- by outbreaks of 7 cholera. 8 --o0o-- 9 MS. ARGUELLO: Heat-related diseases, heat 10 cramps, heat exhaustion. They may aggravate existing 11 conditions. And, again, the most vulnerable would be 12 elderly, children, folks in urban areas, very similar to 13 what we saw with Michel's presentation from Redefining 14 Progress. The most vulnerable will be the elderly, folks 15 who are already sick, folks who can't afford 16 air-conditioning. 17 Keep going. Next slide please. 18 --o0o-- 19 MS. ARGUELLO: Keep going. 20 --o0o-- 21 MS. ARGUELLO: Here we go. 22 So this is kind of the chain of effects that we 23 can expect to see. Climate will affect -- may affect 24 productivity in altered foods. We may be -- may lead to 25 then regional malnutrition and hunger. Extreme events in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 weather can result in deaths, injuries, psychological 2 disorders. We talked to the folks at the Red Cross who 3 are already starting to talk about what are the emergency 4 responses going to be if we begin to see these extremes of 5 weather. 6 Of course you already know the rest. 7 The next slide. 8 --o0o-- 9 MS. ARGUELLO: So do we act now or do we continue 10 to wait? Do we call -- do we say that economic interests 11 are more important than health consequences? And do we 12 continue to fail the people of California by not moving 13 quickly and swiftly to enact these? But I think what we 14 have to begin to see, that we have -- our time lines need 15 to be shorter and the regulations need to be stronger. 16 Folks are already feeling the impacts. And we've waited 17 too long. And we've allowed companies who are doing 18 outdated, unsustainable practices to keep in practices. 19 As Sujatha said, the people of California want 20 this. We depend on you to implement this and to do it 21 now. 22 Thank you. 23 CHAIRPERSON LLOYD: Thank you very much. 24 Questions? 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 We've got two more witnesses today, Tim 2 Carmichael and Dr. Roth. 3 MR. CARMICHAEL: Good evening. It's been a long 4 day. And I'm glad to be here. 5 I'm Tim Carmichael. I'm the President of the 6 Coalition for Clean Air. And I'm going to attempt to 7 summarize a few thoughts from the environmental community 8 and what I heard today. 9 I think one of the most important things that we 10 sought throughout this process and an abbreviated version 11 today was the breadth of support for this regulation and 12 the need for California leadership. 13 Not just a group of tree-hugging 14 environmentalists coming to the Air Board and saying, "We 15 need to work on this." The Coalition involves a variety 16 of industries, an estimated 80-plus percent of 17 Californians polled, the Legislature and the Governor. 18 The last time that we were all on the same page I wasn't 19 alive. 20 (Laughter.) 21 MR. CARMICHAEL: I mean this is significant, to 22 realize how diverse the interests are, that believe that 23 California should act on this issue. 24 Second key point is the staff proposal is 25 thorough and clearly conservative. Some would say PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 appropriately conservative. I'm almost willing to say 2 appropriately conservative. But the radical in me want -- 3 always believes that we could do a little bit more, a 4 little bit further -- go a little bit further. But this 5 is a critical step in addressing this issue. And as long 6 as we all recognize that this is not the last step but an 7 initial step to take this on, it's a good first step, and 8 the environmental community strongly supports it. 9 You know, I want to remain as positive as 10 possible. But I was truly disappointed in the auto 11 industry's participation in this process. I've been 12 working on air issues in California for nine years. And 13 for the new members of Air Board, for the industry to 14 suggest that they were engaged in this process is really a 15 misrepresentation compared to what we've seen from them in 16 past regulatory processes. I mean it really -- I think 17 it's fair to say that they were missing in action from 18 this process. And that's not taking anything away from 19 Tom Austin's Sierra Research engagement. 20 But in the past we've seen every company come 21 before the Board, every company come in and meet with the 22 staff, not just once, but on a repeated basis. That 23 didn't happen this time. And, you know, it's discouraging 24 because this is arguably the most significant 25 environmental regulation affecting the automobile industry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 in the world today. And for them not to be more engaged I 2 think is discouraging at best. 3 You know, I think Dr. Lloyd asked a very 4 important question earlier today of the automobile 5 industry: "Fair enough, be critical of this proposal. 6 But what are you proposing instead?" And there was no 7 response to that. And to suggest that the alternative 8 approach is to work through Washington is only a 9 commitment to inaction. It is not a commitment to act on 10 this. 11 And one of the things that was striking was the 12 discord, the disconnect between what was represented today 13 by the industry trade association and what we've heard 14 from executives in the industry over the last few years. 15 At a minimum -- these are just references I could find 16 today on the fly -- the presidency of Ford, the presidency 17 of Toyota, and the presidency of Honda have all 18 acknowledged the importance and the reality of global 19 warming and the need for their companies to take action to 20 help address this issue. 21 That was not what was communicated by their 22 representatives today, and I think that was discouraging. 23 One of my fears based on their inaction is 24 instead of the, you know, Apollo approach or the, you 25 know, much more positive glass full, can do attitude, what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 we're seeing or, you know, what we're anticipating and 2 fearing is not "can do" but like a "will sue" approach. 3 And that is the too common an approach from the automobile 4 industry in recent years. And it's not productive. It 5 does nothing to address a very real environmental threat 6 to the planet. 7 Finally, two key questions that I want to leave 8 you with. And I'll give you my take on the answer. The 9 debate's clearly going to continue. And at the end of 10 tomorrow, the middle of the day tomorrow, one of the key 11 questions that each of you is going to have to answer is, 12 when it comes right down to it: Whose credibility are you 13 going to give more credit to, the staff that has spent two 14 years working on this or the auto industry which has a 15 checkered past on representing costs and impacts relative 16 to environmental regulation? 17 Obviously it shouldn't surprise you that we would 18 give more credibility to the ARB staff in this context. 19 The second point, and I think Supervisor Roberts 20 addressed this as well as anybody: You know, should 21 California be a leader on this? And without, you know, 22 any hesitation Supervisor Roberts said it is time to act. 23 And I think that is just so right on, and that is what 24 Californians believe, and in fact the majority of the 25 globe believes. So we're taking a leadership role, but it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 is time to act. 2 Thank you very much. A pleasure to be here. 3 CHAIRPERSON LLOYD: Thank you very much, Tim. 4 Dr. Gong. 5 BOARD MEMBER GONG: I just wanted to thank Tim. 6 I thought it was very eloquently stated. Thank you. 7 No question. 8 DR. ROTH: Good afternoon -- or good evening, 9 ladies and gentlemen. My name is Trisha Roth. I'm a 10 pediatrician. And I'm reward you for staying this long, 11 because this is the picture, hot off the press, of my new 12 granddaughter, who's two weeks old. 13 CHAIRPERSON LLOYD: Congratulations. 14 DR. ROTH: And the reason I brought her picture, 15 her grandfather died prematurely, in his early thirties, 16 from asthma. And I'm hoping that other people don't have 17 to go through that. 18 As a member of the American Academy of 19 Pediatrics, I'm representing the 5,000 pediatricians in 20 California and of course the children that they take care 21 of, and on behalf of the Health Network for Clean Air, 22 which is a network of statewide health care organizations 23 in California, coordinated by the American Lung 24 Association that are involved in air pollution and health 25 issues. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 As Chair of the American Academy of Pediatrics 2 Chapter 2 on Substance Abuse for the last six years, I 3 have testified on issues such as the effects of 4 environmental tobacco smoke chemicals, not only in terms 5 asthma, ear infections and a host of other respiratory 6 illnesses; and I've also testified before the EPA on Prop 7 65, which is the regulation that requires posting of 8 chemicals which are either cancer-causing agents or 9 reproductive toxins. 10 Today I'm here to emphasize -- to communicate the 11 strong support of health professionals for the proposed 12 CARB regulations to receive maximum feasible reduction in 13 greenhouse emissions from motor vehicles. We support 14 these regulations because they are an integral part of the 15 statewide strategy to achieve clean air and approve public 16 health in California. 17 Statewide health organizations supporting the 18 proposed regulations include the American academy of 19 Pediatrics, the California Academy of Family Physicians, 20 the California Medical Association, the American Heart 21 Association, the Western States, the Fresno-Madera Medical 22 Society, the Health Officers Association of California, 23 Medical Advocates for Healthy Air, the Regional Asthma 24 Management Preventive initiative, and the American Lung 25 Association. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 As you know, California's air is so polluted that 2 thousands of individuals die prematurely each year from 3 breathing bad air. Increased air pollution leads to many 4 hospitalizations, more emergency room visits, and more 5 school and work absences. In study after study air 6 pollution has been shown to increase problems of heart and 7 lung, impair the quality of life, and decrease life 8 expectancies. 9 The fact is, we also have an epidemic of obesity 10 in our pediatric population. When kids can't go out and 11 exercise, they're decreasing their activity. We know that 12 exercise is one of the most effective ways of decreasing 13 obesity. 14 The reductions achieved by the proposed 15 regulations, approximately 23 percent by 2011 and up to 30 16 percent in 2014 across the motor vehicle fleet, would be 17 an important step forward in the effort to curb global 18 warming pollution, and improve the air quality. 19 Again, in closing, on behalf of the health 20 professionals I urge you to move forward to adopt the 21 proposed regulations. The regulations are well 22 researched, scientifically sound, cost effective, readily 23 available and, most importantly, they are health 24 protective. California has an obligation to address the 25 global warming problem, to protect the air we breathe, to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 reduce the suffering of adults and children with asthma 2 and other lung illnesses and to help children grow up with 3 healthy lungs. 4 Thank you so much. 5 CHAIRPERSON LLOYD: Thank you again for 6 continuing to draw our attention to the relationship 7 between climate change, public health and to preserve the 8 health of state children and your granddaughter there. 9 So thank you very much. 10 DR. ROTH: Thank you. 11 CHAIRPERSON LLOYD: Before I call this to a 12 close, do my colleagues want to say anything? 13 Supervisor DeSaulnier. 14 BOARD MEMBER DeSAULNIER: I just -- I wanted to 15 make one comment, and I was going to make it even before 16 Tim brought it up. 17 Earlier in the day when we got the list of 18 speakers I went over to the Chairman and I said, "Why are 19 none of the auto manufacturers on the list?" And I know 20 the Chairman has been trying to engage them for at least 21 two year in this discussion, and I know the secretary has 22 been trying to engage them. So for me personally, I hope 23 tomorrow you get up and try to join us in answering the 24 question that the Chairman has asked of you. It's the 25 last chance of course in front of this Board. And your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 absence I think, for me at least, and your presence here 2 with your attorney, speaks volumes. 3 Thank you, Mr. Chairman. 4 CHAIRPERSON LLOYD: Thank you. And, Supervisor, 5 as we discussed -- and I could verify that Kelly Brown 6 didn't have laryngitis earlier today. 7 BOARD MEMBER DeSAULNIER: I went out and talked 8 to him. He does not have laryngitis. 9 BOARD MEMBER RIORDAN: Mr. Chairman, what time 10 are you convening tomorrow? 11 CHAIRPERSON LLOYD: I was just going to 12 officially -- I'd like to adjourn for the day. We will 13 reconvene tomorrow at 8:30 a.m. When we reconvene we will 14 hear additional testimony. And we will start at least at 15 this stage with Laura MacCleery, John Perez, and Bahram 16 Fazeli. 17 EXECUTIVE OFFICER WITHERSPOON: Excuse me, 18 Chairman. Also, first thing in the morning we'll start 19 with a staff recap of the issues that were heard today 20 from the Auto Alliance and others. We sort of kept a list 21 of them, and we'll do a quick summary of staff's response. 22 CHAIRPERSON LLOYD: Do you want to do that first 23 thing rather than wait for the witnesses? That's up to 24 you. That's fine. 25 EXECUTIVE OFFICER WITHERSPOON: Yeah, I don't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 expect that we'll get more out of them from the testimony. 2 At least while everyone's fresh. 3 CHAIRPERSON LLOYD: That would be great. 4 EXECUTIVE OFFICER WITHERSPOON: We'll lead off 5 with that and then go to the witness list. 6 CHAIRPERSON LLOYD: That will be great. 7 Thank you again. Thank you, staff. 8 And we'll see you all in the morning. 9 (Thereupon the California Air Resources 10 Board meeting recessed at 6:40 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 7th day of October, 2004. 15 16 17 18 19 20 21 22 JAMES F. PETERS, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 10063 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345