Comment Log Display

March 8, 2013

Mary Nichols, Chair
California Air Resources Board
1001 I Street
Sacramento, CA 95814

Re: Allocation of Cap & Trade Proceeds

Dear Chair Nichols:

The Agricultural Energy Consumers Association (AECA) appreciates
the opportunity to submit these comments on the Cap-and-Trade
Auction Proceeds Investment Plan Draft Concept Paper.  AECA
strongly supports two key funding recommendations outlined in the
Cap-and-Trade Auction Proceeds Investment Plan Draft Concept Paper
and looks forward to working with CARB’s staff to further develop
program funding options.

Diesel to Electric Agricultural Pump Conversions
Conversion of diesel agricultural pumping engines to electric
motors is a proven, highly effective greenhouse gas reduction and
air quality improvement program.  According to the San Joaquin
Valley Unified Air Pollution Control District (SJVAPCD), the
existing conversion program is among the most cost effective
programs they have ever implemented and represents an important
opportunity to provide environmental benefits to disadvantaged
communities throughout the San Joaquin Valley. While existing
programs have been highly successful, they are set to soon expire
(the program has been closed to new applicants since 2007) and
several thousand diesel pumping engines continue to operate in the
San Joaquin Valley. Funding to extend and expand the existing
program could build on the substantial air quality benefits already
achieved.  Projects funded under existing programs by the SJVAPCD
alone account for lifetime reductions of over 18,000 tons of NOX,
503 tons of PM and hundreds of thousands of tons of CO2.
The existing Agricultural Internal Combustion Engine (AG-ICE)
Program was a joint program developed and supported by the AECA,
California Farm Bureau Federation, the state’s Investor Owned
Utilities (IOUs) and state and regional air quality officials. The
AG-ICE Program was approved by the California Public Utilities
Commission (CPUC) in 2005. The program was highly successful due to
the electricity rate certainty and conversion incentives provided
to program participants. AECA worked closely with the IOUs to
design electricity rates that were highly competitive with diesel
operating costs and minimized risk of electric rate increases in
future years (limited to 1.5% annual increases) during the 10 year
program. No other rate changes were permitted for program
participants. Additional funding was provided for “line
extensions”, based on an environmental adder (benefits) to offset
upfront capital costs of connection to the electric grid. Finally,
funding was provided by regional air districts (Carl Moyer) to
offset electric motor costs and additional line extensions needed
for conversion. The programs significant success was due to clear
price signals, appropriate incentives to reduce upfront costs and
rate certainty to ensure program benefits would not be changed for
at least 10 years. 
AECA and its member agricultural associations believe we have a
critical opportunity to extend and expand the existing AG-ICE
program, representing an important funding opportunity for CARB.
Initial discussions with SJVUAPCD officials indicate strong support
for such a program. AECA is prepared to work with SJVUAPCD and CARB
to provide the critical resources to review and re-design an
efficient and effective program expansion and extension to both
maintain existing conversions and expand the number of conversions
to the maximum cost effective extent possible. Time is of the
essence, as existing Tier 1 and Tier 2 diesel engines will begin
being required to be replaced by January 1, 2015. AECA believes a
cost effective program can be established if funding for line
extensions and motor conversions can be made available from the Cap
and Trade allowance auction proceeds during the 2013-2014 funding
cycle. Funding for this program represents a unique “clean energy”
opportunity to further achieve substantial direct reductions in
carbon dioxide (CO2), greenhouse gas, as well as criteria
pollutants such as particulate matter (PM) and oxides of nitrogen
(NOX) in the Sacramento and San Joaquin Valleys and the multiple
disadvantaged communities located there. 
Sustainable Agricultural Bioenergy Projects 
AECA also strongly supports and associates itself with the comments
submitted by the Bioenergy Association of California regarding
investment in bioenergy projects. Agricultural bioenergy projects,
including biomass gasification projects and dairy biogas projects
have the potential to provide the most direct greenhouse gas
reduction benefits of any projects being considered. Dairy biogas
projects, in particular, are among the most effective measures with
the ability to reduce as much as 6 million metric tons of CO2
equivalent emissions by capturing methane and converting it to
renewable electricity and transportation fuels. Dairy digesters not
only provide emission reductions by capturing and destroying
methane emissions at dairies but also produce substantial GHG
reduction benefits by displacing fossil fuel use for energy
(electricity) and transportation fuel. 
Equally important, dairy digesters provide one of only four
opportunities for approved carbon offsets under the Cap and Trade
program. As CARB has repeatedly recognized in the implementation of
AB 32, offsets are an important tool to provide flexibility and
cost containment for regulated entities. Finally, dairy digesters
represent an important opportunity to reduce diesel emissions in
the San Joaquin Valley as a viable transportation fuel source.
Conversion of dairy biogas to renewable compressed natural gas
(RCNG) represents an important opportunity to replace diesel
burning fleets in the San Joaquin Valley with low-carbon RCNG.
Dairy biogas to RCNG actually has the ability to create
carbon-negative transportation fuel because of the combined methane
capture and fossil fuel displacement. The resulting reductions in
diesel particulate matter emissions would also go a long way to
improving air quality for valley residents in the multiple
disadvantage communities throughout the valley. The
commercialization of dairy biogas to RCNG projects represents the
exact sort of “transformative” program CARB is seeking to fund with
revenues from the AB 32 program. 
Despite their significant benefits, dairy digesters remain
uneconomical due to high environmental compliance costs and low or
non-existent energy power purchase agreements. As a result, funding
to incubate and incentivize sustainable agriculture bioenergy
projects is critically needed to ensure commercialization of this
industry and the “transformative” clean transportation benefits
they promise. 

Conclusion
AECA again appreciates the opportunity to provide input to CARB and
the Department of Finance as you craft an investment plan for Cap
and Trade auction revenues. AECA firmly believes both of the
program funding opportunities outlined above represent unique
opportunities for CARB to invest resources in programs that have
proven and demonstrated direct greenhouse gas and criteria
pollutant reduction potential, as envisioned by AB 32. Moreover,
the air quality benefits will accrue to the numerous disadvantaged
communities identified by CARB in the San Joaquin Valley as
required under SB 535 (2012, de Leon).

Sincerely,
 
Michael Boccadoro
Executive Director