Comment Log Display

July 31, 2008

Mary Nichols, Chairperson
California Air Resources Board
1001 I St., P.O. Box 2815
Sacramento, CA  95812

RE: AB 32 Draft Scoping Plan General Comments

Dear Chairperson Nichols and Members of the Board:

The Union of Concerned Scientists (UCS) is the leading
science-based nonprofit working for a healthy environment and a
safer world. UCS combines independent scientific research and
citizen action to develop innovative, practical solutions and to
secure responsible changes in government policy, corporate
practices, and consumer choices.

UCS applauds the California Air Resources Board (CARB) for
developing the nation’s most comprehensive plan to date for
reducing the pollution that causes global warming. While the plan
is still a proposal, it represents the furthest step forward any
state has taken in the fight against global warming. Many of the
plan’s policies will save consumers money and yield economic
benefits. California is showing the rest of the country how to
build a clean energy economy—creating jobs and using energy more
efficiently, while at the same time protecting the environment and
public health. 

In particular, UCS is pleased to see that CARB recommends
increasing the state’s renewable electricity standard and cleaning
up diesel engines. The Plan also indicates that CARB is considering
a feebates program for cars and trucks that would provide
incentives to consumers to buy, and manufacturers to make cleaner
cars.  We urge CARB to adopt feebates as a recommended measure and
keep its recommendation for more renewables.

The plan contains provisions for a state and possible region-wide
cap-and-trade program that would work together with other
regulations to reduce global warming pollution. The plan
appropriately recognizes that cap-and-trade is not a silver
bullet; cap and trade accounts for 20 percent of the needed
reductions, while the remaining 80 percent will come from direct
regulations. UCS has significant concerns with two important
cap-and-trade design elements: insufficient auctioning of
pollution allowances and the overuse of compliance offsets.

The draft Scoping Plan implies that the agency is considering
auctioning less than half of the pollution allowances under a
cap-and-trade system initially. Yet cap-and-trade systems work
best when as many pollution allowances as possible are auctioned.
Giving them away can create windfall profits for polluters and
reduce opportunities to use auction revenue for investments in
consumer protection and emission reduction efforts that fall
outside the reach of the cap.
 
The draft plan suggests a too large a role for compliance offsets
in AB 32 implementation.  The suggestion that firms regulated
under a cap-and-trade system could cover up to 10 percent of their
emissions through offsets creates the disconcerting possibility
that cap-and-trade would fail to produce any reductions in the
capped sectors that are the program’s primary target.  Moreover,
the draft plan proposes no geographic limits or other means to
prioritize projects in California, creating the likelihood that
some emission reduction projects would be outsourced under the
proposed approach to offsets. This would be a missed opportunity
and counter to AB 32’s call for benefit maximization for the
people of California. Carefully designed limits on offsets are
important to construction of an effective cap-and-trade program
and will promote investment in clean air, clean energy and greater
energy security in California. 

Below are more specific comments and recommendations on 33 percent
renewable energy standard, diesel standards, feebates, and
cap-and-trade design.

I.	Strong Support for the 33 Percent Renewable Portfolio Standard
UCS applauds the draft Scoping Plan’s endorsement of a 33 percent
by 2020 statewide Renewables Portfolio Standard (RPS), and urges
CARB to keep the 33 percent RPS in the final AB 32 Scoping Plan.

The passage of AB 32 underscores the need for policy measures that
will provide substantial in-state GHG reductions. A 33 percent RPS
is not only consistent with our AB 32 goal, but will bring
significant co-benefits to the state.  These benefits include
reducing air pollutants that harm public health, solidifying
California’s role as a leader in renewable energy development,
invigorating the state’s booming clean tech investment community,
and creating a new source of “green collar” jobs.  A 33 percent
RPS will also put the electricity sector on the path to achieving
the much deeper emission reductions required beyond 2020.

While a global warming cap-and-trade program may encourage some
additional investment in renewable resources, a higher RPS mandate
is essential to drive the changes in government policy, utility
practices, and industry investment that are necessary to overcome
the transmission, siting, and other market barriers to developing
renewable energy in the state. In addition, a 33 percent RPS will
provide a clear and long-term signal to the financial community to
continue supporting infrastructure investments that will
significantly increase the amount of renewable generation serving
California. Achieving much higher levels of renewables will not
happen organically – it requires a strengthened RPS policy that
includes both a higher renewables mandate and statutory and
regulatory reforms to encourage more renewables development.

The draft Scoping Plan’s endorsement of the 33 percent RPS is also
entirely consistent with California’s existing policy goals. In
2005, the Energy Action Plan II (EAP II) reinforced the Governor’s
stated goal of achieving 33 percent of electricity sales from
renewable energy by 2020.  Similarly, the California Public
Utilities Commission (CPUC) instructed the state’s three
investor-owned utilities to identify planning decisions that must
be made within their 2006 long-term procurement plans to achieve
33 percent renewables by 2020.  Since then, the California Energy
Commission (CEC), the CPUC, the California Independent System
Operator (CAISO), and several federal agencies have undertaken
studies and workshops to resolve the transmission, permitting, and
grid reliability issues that must be overcome to achieve
significantly higher levels of renewable energy.  

We acknowledge that reaching a 33 percent renewable energy goal by
2020 is a tremendous challenge that will require unprecedented
coordination among state agencies, policymakers, and stakeholders.
UCS is committed to working diligently with these parties to help
identify and overcome the barriers to increasing renewable energy
in California. We are working with the Legislature to establish
effective 33 percent RPS legislation that will benefit California
consumers, stimulate economic activity within the state, and help
California to achieve the goals of AB 32.

We commend CARB for its leadership in advancing clean energy to
meet the goals of AB 32, and strongly support the inclusion of a
33 percent RPS for all load serving entities (LSEs) in the final
Scoping Plan.  If necessary, we suggest that CARB make an explicit
plea to the legislature to amend the existing RPS statute to
reflect the 33% recommendation in the Scoping Plan 

II.	Diesel Standards and Goods Movement
We commend CARB for focusing attention on the goods movement
sector for both early emission reductions and long-term global
warming reductions from heavy-duty trucks, ships, and trains. 
Strategies that reduce global warming pollution from this sector
can also provide substantial co-benefit emission reductions of NOx
and particulate matter (PM), bringing significant public health
benefits.  

As noted in the staff analysis, heavy-duty trucks alone account
for about 20 percent of all transportation related global warming
emissions. CARB is moving forward with an early action measure
targeting a subset of this truck population with requirements for
improved aerodynamics and rolling resistance.  Additional measures
identified in the plan target hybrid technology and engine
efficiency improvements separately.  These measures will result in
more efficient and lower emitting truck transport in California. 
However, this approach may fail to capture the full potential of
technology advancements for heavy-duty trucks.  Overall truck
efficiency and global warming emissions are a combination of
aerodynamic drag, rolling resistance, engine, and drive train
efficiency.  CARB should consider setting a global warming
standard for new trucks that accounts for total truck performance
in addition to component efficiency.

Improvement in the goods movement system as a whole will also be
critical to meeting our 2020 and 2050 climate goals given the
rapid growth in freight that is expected in the coming decades. 
Both efficiency measures and advanced technology solutions will be
needed to meet these challenges.  We support CARB carrying out a
full assessment of emissions sources and reduction strategies for
the state’s transportation corridors, ports, and railyards.  The
focus on ports and railyards is especially important given the
potential of complimentary strategies to reduce toxic emissions
and global warming pollution.  Emission reduction plans for these
facilities must be enforceable to ensure that progress is being
made towards a lower carbon and less polluting goods movement
system in California.         

III.	Include Feebates as a Recommended Measure
UCS urges CARB to move feebates from a “Measure Under Evaluation”
to a “Recommended Greenhouse Gas Reduction Measure” in the
transportation sector of the Scoping Plan.  Feebates is a
powerful, yet flexible incentive program that affects both buyers
and makers of automobiles.  Economic studies have shown that
feebates have the following benefits, which will lead to
significant emissions reductions and consumer savings:

•	A feebates program can work as a compliment to existing and
future global warming regulations.  Because a feebates program
provides financial incentives for automakers to install clean
technology, it motivates automakers to meet California’s GHG
regulations sooner.  
•	Feebates can achieve significant emission reductions in the
medium duty passenger vehicle fleet, which are not covered by
existing global warming regulations. Currently, the auto companies
do not have any requirements to install emission reduction
technologies on these vehicles.
•	A feebates program will not only encourage automakers to make
improvements in their vehicle fleet, but can engage the general
public in the battle to combat global warming by offering direct
incentives for consumers to make choices that help the
environment.  
•	A feebates program is self-financing and, according to the CARB
Scoping Plan, provides over a billion dollars in savings due to
reduced fuel consumption.

Based upon these benefits and the 2-6 MMTCO2E in emission
reductions from a vehicle feebates program, we strongly encourage
CARB to adopt feebates as a “Recommended Greenhouse Gas Reduction
Measure” and include medium duty passenger vehicles in the
program.   If necessary, we suggest that CARB make an explicit
request to the legislature to authorize CARB to enact a feebates
program. 

IV.	Cap-and-Trade Proposal Needs Strengthening
The draft Scoping Plan provides a strong set of sectoral policies
to do much of the “heavy lifting” to reach the state’s 2020 and
2050 goals.  With approximately 80% of the reduction coming from
other measures, the draft Scoping Plan uses a broad cap-and-trade
program to sweep up the last increment of reductions and to
provide enhanced certainty that the needed economy-wide reductions
will be achieved.  The draft plan provides a cogent explanation of
how sectoral polices can work in harmony with cap-and-trade as
part of an economy-wide effort.  In this way, the draft Scoping
Plan advances the state of the art.

Though cap-and-trade is not a silver bullet, a well designed
program could be a useful component in AB 32 implementation. 
Global warming has been called “the greatest market failure the
world has ever seen” because markets currently ignore the costs
imposed by the heat-trapping emissions that arise from our
production and consumption choices. A cap-and-trade program would
put a price on those emissions. This would “internalize” pollution
costs, providing an incentive to find the most effective and
affordable solutions for global warming.    

We have two major concerns about the proposed cap and trade
structure. First, the proposal gives an overly expansive role for
compliance offsets, undermining the integrity of the cap and the
ability of CA to capitalize on the co-benefits of investment in
clean technologies. Second, the proposal does not go nearly far
enough with respect to auctioning as a method of distribution for
allowances.  The draft plan implies that auctioning will start at
less than 50 percent.

Need for Effective Limits on Compliance Offsets
The outlines of a cap-and-trade program presented in the draft
Scoping Plan are a step in the right direction, but there is
substantial room for progress.  Our greatest concern stems from
the overly expansive role for compliance offsets that the draft
plan proposes.  The use of compliance offsets should be limited to
a small fraction of the emission reductions that the cap and trade
program is expected to achieve.  Using a “limit” of ten percent of
a firm’s total emissions could allow 100 percent of the reductions
from cap and trade to be achieved through offsets.*  Potentially
all of the reductions that cap-and-trade seeks to achieve could be
done through offsets, and no emission reductions whatsoever would
necessarily occur in capped sectors. This would undermine what
should be a guiding principle of cap-and-trade design: the program
should yield meaningful reductions in capped sectors.  

UCS supports a quantitative limit on offsets to be set at no more
than 10 percent of estimated reductions from cap and trade. 
Whereas 10 percent of emissions implies that up to 40 million
metric tons of reductions of carbon dioxide equivalent could be
achieved through compliance offsets in 2020, a limit of 10 percent
of reductions would imply an upper bound of about 3.5 million
metric tons of carbon dioxide equivalent for offsets, or about one
percent of allowances.

Additionally, though the Scoping Plan suggests that CARB might
allow offsets to be used to comply with direct regulations, we
urge CARB to state that offsets will not be necessary for
compliance with any of the direct regulations included in the
Scoping Plan.

Ineffective limits on compliance offsets such as those included in
the draft Scoping Plan could lead to large outflows of capital
through the outsourcing of emission reduction projects and related
losses in economic and environmental benefits for the people of
California.  In contrast, carefully designed quantitative and
geographic limits will demonstrate the benefits of climate action
and will allow the Golden State to become a model of climate
action, thereby inspiring action throughout the world.  Effective
limits on compliance offsets will promote:

•	Clean air and public health benefits from investments in global
warming solutions 
•	The realization of benefits from clean-tech investments and
innovation in key (capped) sectors 
•	Meaningful reductions in high-emitting capped sectors and
avoidance of costly lock-in of long-lived fossil-fuel technology 
•	The preservation of the option of linkage to other cap-and-trade
programs that have chosen to limit offsets.

We provide additional information below on the potential
co-benefits of limited offsets. Carefully limited offsets:

•	Provide clean air and public health benefits for residents of
California and the West. While reducing global warming pollution
offers valuable climatic benefits in its own right, it will also
provide many other important environmental benefits. When
electricity providers, oil and gas companies, and other industrial
sources reduce the amounts of global warming pollution that they
produce, Californians will be exposed to lower levels of
conventional smog-forming and toxic air pollutants as well. This
improved air quality will in turn lead to better public health,
lower health care costs, and higher levels of worker productivity
and student performance.  If offsets are allowed from anywhere in
the world, which would be equivalent to the outsourcing of
emission reductions project, then valuable health benefits will be
lost.  

At present, Californians are quite literally dying from dirty air.
 The state has three of the five most polluted air basins in the
country and the Los Angeles air basin has the worst year-round
small-particulate pollution and the worst ozone levels in the
country. CARB estimates that the policies cited in its draft
Scoping Plan would reduce nitrogen oxides (NOx) emissions by 50
tons per day and the most dangerous kind of particulate matter by
10 tons per day. These reductions, according to CARB estimates,
would result in 340 premature deaths avoided and a range of other
public health benefits, with a combined economic value of
$1.5–$2.4 billion in 2020. The Natural Resources Defense Council,
which recently released its own assessment, concludes that the
improvement in air quality and reduction in health care costs
would be even larger, preventing more than 700 premature deaths
and saving $3.2–$5 billion in 2020.

•	Spur clean-tech investment, green-job development, and
innovation. A 2004 survey of venture capitalists by Environmental
Entrepreneurs found that one of the main reasons why they are
motivated to invest in California’s clean-technology industry is
the state’s strong climate policies. As a result, that sector is
surging. In 2007, California garnered 45 percent of North
America’s venture capital investment in clean-energy technologies,
or $1.8 billion, up from $1 billion in 2006. California last year
attracted more venture capital in clean tech than did all of
Europe combined. Carefully designed offset limits will help
maintain this momentum, thereby preserving the rates of investment
and innovation in California’s clean-tech industries that will be
the foundation of the future’s low-carbon economy. 

By contrast, overly permissive offset policies would shift
emissions reductions from capped sectors to other sectors or to
other geographic areas. Investor expectations on the future
profitability of technological advances in the capped sectors
would be reduced, thereby depressing investment. Moreover, the
learning-by-doing and economies of scale that come with increased
utilization would be lost. California’s competitive advantage in
the rapidly growing clean-tech global market should not be
squandered; it makes much more sense to prioritize investment and
innovation in clean tech—within the state, as opposed to
essentially outsourcing—to take advantage of present
opportunities.  Another related ancillary benefit that results
from progress toward a clean energy future is reduced reliance on
imported fossil fuels, greater insulating from volatile oil and
gas markets and  improved energy security. 

•	Ensure meaningful reductions and avoid lock-in to
higher-emitting capital. The broad reach of the cap-and-trade
program proposed in the draft Scoping Plan means that almost all
fossil-fuel combustion (in transportation, electricity generation,
and other industrial activities) will be capped. Carefully designed
offset limits promote technological changes in capped sectors by
forcing emissions reductions within those sectors instead of
diverting the reductions to other sectors of the economy or to
other geographic areas. The draft plan recognizes this important
objective, stating that “[C]ARB is considering limiting the use of
offsets… to help ensure a significant portion of required
reductions come from within the state and within the regulated
sectors” (p. 44). 

However, the suggested quantitative limit does not square with
this objective, as it implies that all of the reductions produced
by capped sectors could come through offsets. The draft plan’s
suggested allowable quantity of offsets (40 MMT) is actually
greater than the reductions that the program is designed to
achieve (35.2 MMT). With such an offset policy, opportunities for
promoting investment in clean technology could be lost, resulting
in costly lock-in to high-emitting capital that would make the
eventual task of curtailing emissions far more expensive in the
short timeframe we have left to avoid dangerous climate change.

•	Preserve the option of linkage to other cap-and-trade programs
that have chosen to limit offsets quantitatively. But linkage is
unlikely in the absence of harmonization with those programs’
offset policies. The European Union Emission Trading Scheme in
particular has signaled its intention to sharply curtail offsets
in order to ensure that cap-and-trade provides the necessary
impetus for a transition to a clean-energy future. 




Support for 100% Auctioning of Allowances
UCS supports 100% auction as the preferred method of distribution
for allowances under the cap.  This position reflects the
principle that the public owns the sky and that the pollution that
causes global warming should have a price. 

The draft plan does not go nearly far enough with respect to
auctioning as a method of distribution for allowances.  The draft
plan implies that auctioning will start at less than 50 percent. 
While it suggests that auctioning will increase over time, the
draft only commits to achieving a “majority” by auctioning in
2020.  UCS recommends auctioning 100% of allowances.  At a minimum
we would hope that the final Scoping Plan will call for auctioning
to be the primary method for distributing allowances from the
outset and that it will call for a quick transition to 100%
auctioning. 
 
By distributing allowances via auctions, we can:

•	Avoid Windfall Profits to Polluters 
The allowances created under a tight cap are a valuable, scarce
commodity that commands a market price.  The European experience
under cap-and-trade has shown that free allocation leads to
windfall profits in competitive markets.   Giving away allowances
to covered emitters does not protect consumers from price rises in
competitive markets.  Electric utilities and other covered emitters
in Europe have been able to raise prices to consumers to reflect
the market value of the allowances, even though they received them
for free.  The total value of allowances will far exceed the
adjustment costs that business may face, and this is why unfair
windfall profits result from giving away allowances.  The National
Commission on Energy Policy explains how windfall profits can come
about: “Economic analysis and experience with Europe’s trading
system suggests that energy companies can and will pass most
program costs through to consumers and businesses at the end of
the supply chain. If the same companies get a large allocation of
free allowances, the value of those allowances is likely to
substantially exceed any actual net costs they incur as a result
of the policy.” 

•	Offer an Efficient Source of Revenue for the Public Benefit
Revenue gained from auctioning permits enhances economic
efficiency because it is gained by correcting the “externality”
that has been associated with the lack of a cost for emitting
global warming pollution.  The revenues generated by an allowance
auction can be used to invest in emission reductions outside of
the cap-and-trade program, in particular measures that will assist
energy consumers.  It is particularly important the lower income
households not endure disproportionate impacts, as these are the
most economically vulnerable households.  CARB lists a number of
appropriate possible uses of revenue generated under AB 32 in the
draft plan. 

•	Reward Early Action
A policy of 100 percent auction will reward those who have taken
early action to reduce their emissions. Businesses that create
less global warming pollution per unit of production would have to
purchase fewer allowances, placing them at a competitive advantage.
By contrast, a system that allocates free allowances based on
emissions could fail to reward these “good” actors. 

•	Create a Level Playing Field
Auctions allow new firms entering the market to compete on a fair
and equivalent basis with existing firms, with the same access to
allowances. 

•	Help Create Administrative Simplicity and Lower Transactions
Costs
Allocating allowances for free would set in motion a
time-consuming and costly process of lobbying and negotiation over
which businesses, institutions, and individuals would get how many
allowances. 

•	Support a Transparent, Well-functioning Market and Price
Discovery
The auction of allowances is an effective way to provide clear,
timely information about the market value of these allowances,
which helps firms make informed decisions about future production
and investments.  Moreover, auctioning should contribute to lower
price volatility.  Suppliers of allowances (those who may have
received or purchased excess allowances) can be late in entering
the market, or they may simply hold onto their excess allowances
as a hedge against the possibility that allowance prices might
rise in the future.  On the other hand, those who need to buy
allowances (the “demanders”) would tend to enter the market first
and place an immediate value on allowances. This can quickly
create a price spike due to a mismatch in market information. Once
suppliers see the high price, they may enter the market in large
numbers, causing a price crash. This kind of scenario and the
resultant price volatility have been observed in the EU ETS
context.  Price stability and early price discovery will be
important to developing a successful, smoothly operating market. 

The design of a California cap-and-trade program can benefit from
lessons learned from the experiences of other similar programs.
When the European Union launched its Emissions Trading System in
2005, virtually all the allowances were distributed for free. In
the U.K., this lead to electric power generators reaping windfall
gains of about $2.5 billion in 2005. A World Wildlife Fund report
estimates that in Germany windfall profits in the electricity
sector will range from $46 billion to $94 billion by 2012.  In
contrast, as ten states in the U.S. Northeast prepare to launch
the Regional Greenhouse Gas Initiative (RGGI) in January 2009,
almost every state that has decided how to distribute allowances
under the program has wisely opted for 100 percent auctioning of
emission allowances.  The minimum amount of auctioning that will
occur under RGGI is 90% in Maryland.  

Free allocation does not dampen price effects; auctioning does not
increase allowance prices.  The European experience with emission
trading has shown that regulated entities will pass along the
value of an allowance, the opportunity cost of not selling it,
when possible regardless of how it was acquired.  Allowance prices
will reflect the number of allowances and the underlying demand for
allowances, which in turn will reflect the relative ease of making
reductions.  And it is this allowance price that is independent of
the method of allocation that will determine the opportunity cost
associated with using a permit.  How to understand this
intuitively?  Consider the cost of a ticket to the World Series. 
Would you expect a scalper to sell a ticket to you for a lower
price if s/he got it for free?  Almost certainly not.  Therefore,
the public interest will be served by auctioning allowances and
using this revenue for the benefit of consumers.

UCS supports 100% auction in the electricity sector, which is a
patchwork of publicly or consumer-owned utilities and
investor-owned utilities operating under cost-of-service
regulation.  Auction revenue can be substantially returned to
consumers via the utility that serves them for investments in
efficiency and other investments that reduce the pollution that
causes global warming.  NRDC/UCS have conceptualized a “use it or
lose it” approach to revenue recycling that returns some auction
revenue to the service area from which it originated, thereby
avoiding geographic wealth transfers. 

Scope
UCS supports a broad cap-and-trade program including
transportation fuels from the start. There are at least four
advantages to a broad scope for cap-and-trade that includes
transportation fuels.  

•	It extends a hard cap across a much larger part of the economy.
•	The price response increases over time and is significant in the
long run.  
•	A larger market with more actors will be more resistant to
attempted manipulation. 
•	Encourages efficiency via a consistent price signal across all
high emitting sectors.

•	Creates a specific quantitative cap for a key sector  
An advantage of including transportation fuels is that it extends
a hard cap to this important sector.  This feature can be
contrasted with other policies that can improve energy intensity
but do not guarantee a particular level of reductions. 

•	Provides the right long run incentives  
The long-term price response can be expected to be significant. 
In a recent working paper that he submitted to the WCI, UC
Berkeley Professor Lee Friedman makes the point that with the
increasing availability of alternate fuels, both the long run and
short run elasticity should increase over historical experience. 
We add that the addition of public transit options would have the
same effect, making it easier for people to change their behavior
in response to a change in prices.  In the long run, including
transport fuels can play a useful role in contributing to smart
growth.  In this way, including transportation fuels can
contribute to putting us on a path to meeting our long run
objectives.  2020 is an arbitrary milestone along in a longer
journey toward much deeper reductions.  Moreover, including
transportation in cap-and-trade program early on when the
reductions are more modest could help keep costs relatively low in
these initial years.  

•	Creates a more secure market 
The larger market would make market manipulation more difficult as
more players and more allowances would be involved.

•	Efficient investment across sectors.  
As the Cal EPA Market Advisory Committee (MAC) observed, a program
with comprehensive coverage of all major emitters will send a price
signals across all relevant sectors of the economy.  This will
encourage efficient investment decisions.  There is also an
element of fairness in equal treatment (i.e. inclusion) of all
high emitting sectors.  

Though we present these arguments for including transportation
fuels, we cannot emphasize strongly enough that the most cost
effective strategy for achieving significant emissions reductions
will combine inclusion of the transportation sector in a cap and
trade program and complementary policies such as low carbon fuel
standards, light duty vehicle efficiency standards, heavy duty
efficiency improvements, anti-idling enforcement, alternative fuel
promotion, and specific smart growth policies.

Cap Level within Cap-and-Trade
The draft offers a preliminary recommendation for the 2020 cap
level: 365 MMT for capped sectors. Our initial assessment suggests
that such a cap level would provide a good foundation for achieving
AB 32’s mandated reductions for the economy as a whole.  We urge
CARB to ensure that the initial 2012 cap is set below 2012 BAU
projections and is based on emission levels in some year prior to
2008. Given problems of over-allocation in previous cap-and-trade
programs (RECLAIM, EU ETS Phase 1, possibly RGGI), this is a
crucial decision. 

The proposal from the WCI recommends that the level of the cap for
the first compliance period be set at the level of emissions
expected in 2012 under a business as usual scenario, meaning that
capped entities could avoid any emission reductions through 2012.
This raises great concerns.  The path to the 2020 reductions will
be smoothed by getting started on the task as early as possible. 
There is no time to waste.

V. Cumulative Impacts
UCS is pleased that the draft Scoping Plan commits to analyze all
of the measures in the plan for impacts they will have on air
pollution and public health (ES-2, 4, p.10).  We look forward to
seeing the results of those analyses and any subsequent revisions
made to the plan based on the results.

Before the Scoping Plan is finalized, we encourage CARB to do the
following:

•	Assess, as accurately as possible, the co-pollutant increases or
decreases associated with the five scenarios that have thus far
been the subject of economic modeling.  Based on these
assessments, estimate the statewide and, to the extent feasible,
local health impacts that may occur as a result for each of the
five scenarios.    We concur with the EJ Advisory Committee
recommendation that outside health experts should be consulted to
assist with the assessment of health impacts.

•	Determine, as accurately as possible, the co-pollutants changes
and resulting health impacts associated with each policy under
consideration for the Scoping Plan (as would be required for
determining cost-effectiveness).  Use this information to
determine how impacts would differ amongst mixes of policy
choices.

•	State in the Scoping Plan how CARB plans to accomplish the more
detailed screenings that are required for each proposed regulation
and market mechanism before it is implemented. (These screenings
are spelled out in Health and Safety Code 38562 (b) (1-9) and
38570 (b) (1-3) and include not disproportionately impacting
low-income communities, not interfering with achieving air quality
standards, maximizing total benefits to California, etc. ). 

•	State in the Scoping Plan that analytical tools and data sets
needed will be updated periodically in consultation with outside
experts and the EJ Advisory Committee.

•	Clearly state in the Scoping Plan that no regulation or market
mechanism included in the Scoping Plan will be implemented unless
it has undergone the aforementioned screenings and meets the
requirements established in 38562 (b) (1-9) and 38570 (b) (1-3).

Cumulative Impacts Screenings
CARB should conduct a cumulative impacts assessment to identify
geographic areas that currently bear a higher pollution burden
using the best available data and tools, including the Cumulative
Impacts Screening Tool being developed by a team of university
researchers in conjunction with CARB.  This will give CARB a
snapshot of communities that will need to be protected from
potential increases in pollution due to future implementation of
climate policies.  Such a screening is only a first step in the
design of state climate policies.  CARB should use currently
available information to identify communities with a higher
pollution burden prior to the completion of the Scoping Plan.

Additional cumulative impacts screenings for the areas identified
in an initial screening as disproportionately burdened
communities--using a new tool or an adaptation of an existing tool
that can extrapolate the future impacts of a proposed policy or set
of policies-- will need to be conducted before any regulations are
implemented.  These screenings should inform decisions about which
climate policies are implemented and how such policies are designed
to assure that already-burdened communities will not be impacted by
increases in pollution.

VI. Incentives for Expansion of the Voluntary Renewables Market
UCS supports an “off-the-top” rule similar to that included in
RGGI to ensure that voluntary renewable energy generation and
purchases will result in global warming emission reductions.  We
support the proposal put forth by CEERT and CRS on this topic: 
“With this approach, providers of voluntary renewable energy
products (such as utilities with voluntary green pricing programs,
competitive marketers of renewable electricity or RECs, individuals
and organizations who generate some or all of their own electricity
demand using onsite renewable generation technologies) will notify
the Program Administrator of their projected voluntary demand for
the upcoming year.  The Program Administrators will convert the
MWh sales projection to tons avoided carbon dioxide and remove
this quantity of allowances from the entire pool available.  Each
year, parties providing voluntary renewable energy would document
their actual sales or generation and the Program Administrator
would retire a commensurate amount of allowances. At the end of
the allowance compliance period, any difference between projected
renewable energy sales and actual renewable energy sales would be
trued up.  As the market for renewable energy is a regional and
national market, each state should adopt consistent policies in
order to not create barriers or market anomalies that reduce the
incentive for the development of new renewable energy facilities.
There should be no caps on the amount of allowances available for
the voluntary renewable market.”

VII. Reporting, Monitoring, and Enforcement
While we understand that the Scoping Plan development process is a
large undertaking and in this context it is reasonable to expect
that some details will remain undecided, the extent to which the
cap-and-trade program does its job will depend on many specific
yet to be decided with respect to enforcement, monitoring, and how
AB 32’s "no back sliding" provisions for market mechanisms will be
guaranteed.  These are just a few important areas where much more
work needs to be done.   

Finally, because of the magnitude of the emissions reductions
called for under AB 32 and the varying levels of certainty
attributable to each emissions reduction program, we call on CARB
to develop a total set of emission reduction programs that will
reach the AB 32 cap while taking into account that possibility
that some programs may fall short as to their expectations.  The
broad scope of the proposed cap-and-trade program reduces the risk
in this regard.  Nonetheless, CARB should address the role of
uncertainty and how unexpectedly high emissions in uncapped
sectors such as forestry and agriculture would be managed.   

In summary, we commend CARB for its tremendous effort implementing
AB 32.  We welcome the opportunity to work together as this
extremely important and cutting edge work on global warming
proceeds.  Please don’t hesitate to contact us on any of the
matters discussed in these comments.  

Sincerely, 


Erin Rogers
California Climate Program