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Solimar Research

Insight: New Climate Bills Likely to Put Pressures on SCSs

William Fulton on
Sep 11, 2016

Gov. Jerry Brown and the California Legislature have moved the goalposts again on climate policy, meaning the state’s metropolitan planning organizations and local governments are going to have to go into stretch mode again in focusing land use policies and transportation investments on reducing greenhouse gas emissions. 

Furthermore, the pressure on the MPOs and the local governments will depend on lot on whether California retains the embattled cap-and-trade program or ditches it. No cap-and-trade will almost certainly mean bigger targets in the MPOs’ sustainable communities programs.

In early September, Brown signed two climate change bills: SB 32, the long-awaited successor to AB 32, and AB 197. The first bill will put a lot of pressure on the regional sustainable communities strategies by essentially doubling the GHG emissions reduction target between 2020 and 2030. The second is designed to protect low-income communities from bearing too much of the brunt of the cap-and-trade program – meaning the bill could alter or threaten the cap-and-trade program altogether.

Up to now, the state’s SCSs have been focused on AB 32’s target of reducing GHGs back to 1990 levels by 2020 – approximately a 20% reduction. And the evidence is that this effort is actually working. The ARB recently reported that the state’s inventory of greenhouse gas emissions dropped from 484 million metric tons of CO2 equivalent (MMTC02e) in 2007 to 441 MMTC02e in 2014. The 2020 target is 431 MMTC02e.

There has been a lot of legal wrangling about what the state’s MPOs should do in the years after 2020, with environmentalists arguing that an 80% reduction target by 2050 should be taken into account even though it is contained only in an executive order, not state law. (This dispute is still pending before the California Supreme Court in a case involving the San Diego Association of Governments.)

SB 32 moots this argument in part by codifying the goal of a 40% reduction by 2030 – a target that would almost certainly require the state to be on a trajectory toward 80% by 2050, no matter what the Supreme Court rules in the SANDAG case.

In the second round of SCSs, as Josh Stephens recently reported, the big MPOs have been focusing mostly on incremental changes, not major shifts that would move toward 40% by 2030 or 80% by 2050. Moving to the SB 32 target will almost certainly require a much bigger shift.

How big a shift, however, depends in large part on how the Air Resources Board decides to implement SB 32. In the wake of AB 32 in 2006 and SB 32 in 2008, the ARB implemented a system that required the various MPOs to hit certain per-capita GHG targets in their regional transportation plans. This system has driven transportation investments in the RTPs (which are usually combined with the SCS) and, indirectly, may be affecting land-use decisions at the local level.

It is not clear, however, how much of the SB 32 burden ARB will require the SCSs to bear. In June, the ARB issued a concept paper in anticipation of SB 32’s passage, which highlights four possible approaches to hitting SB 32’s 2030 target. The concept paper states that increased emissions reduction will have to come from the sustainable communities strategies but does not seek to quantify that amount.

The paper does, however, make it clear that the SCS targets will depend a great deal on the state’s overall approach – and especially whether the state’s cap-and-trade pollution reduction program stays in place. Cap-and-trade is under increasing pressure from both polluting industries and environmental justice advocates.

Under the cap-and-trade program, polluting industries – especially those that burn fossil fuels and therefore contribute to GHG emissions -- bid in an auction to purchase “allowances” that permit them to pollute. Cap-and-trade revenues currently fund a wide variety of state programs relevant to planning and development, including high-speed rail and the Strategic Growth Council’s affordable housing and sustainable communities program, which has $400 million for development grants this year. But the fossil-fuel industry is always targeting the program and revenues from this year’s auction were anemic. 

Meanwhile, AB 197 could threaten the cap-and-trade program from the opposite end of the ideological spectrum. From the beginning, environmental justice advocates have feared that cap-and-trade could harm poor neighborhoods disproportionately because ARB’s goal is to reduce the overall amount of emissions, not reduce emissions in specific locations. This question is always an issue in cap-and-trade programs. The Environmental Protection Agency’s cap-and-trade program for acid rain pollutants is always running into resistance from specific states that fear they will be at a disadvantage. For example, Ohio’s emissions might actually go up if Ohio polluters can buy pollution rights from locations, such as Florida or Pennsylvania, where pollution is cheaper to build up.

Similarly, EJ advocates fear that polluting industries which purchase cap-and-trade allowances in California might choose to distribute those pollution allowances in a way that reinforces existing pollution patterns by focusing on existing older facilities near poor neighborhoods. 

AB 197 seeks to mitigate that problem by requiring ARB to take “social costs” into account in setting up the cap-and-trade program. How, exactly, ARB is going to implement AB 197 is anybody’s guess. But it could mean that the cap-and-trade program is changed, reduced, or eliminated.

And that will inevitably put pressure on the SCSs. Although the ARB concept paper does not quantify SCS emission reduction under different scenarios, it does generally characterize the degree of difficulty in each case. If cap-and-trade is retained, ARB reports, 2035 SCS targets will be subject to “increased stringency.” The same would be true of the state adopts a carbon tax, which is essentially a different way as the cap-and-trade program to get to the same goal. 

Take away cap-and-trade or an equivalent policy, however, and the lift for SCSs becomes bigger. ARB outlined two alternative scenarios without a cap-and-trade program. The first focuses on reducing industrial pollution and requires “more ambitious targets” for SCSs. The second focuses on reducing transportation-related pollution – the other big contributor to GHG emissions – and, not surprisingly, calls for “ambitious stringency” in SCS targets. It’s not clear what “ambitious stringency” means, but it sounds pretty ominous. And that means more SCS fights ahead.

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