Biofuels Proponents Hailing SB 32, AB 197 Passage as a Win for LCFS

Source: By Jordan Godwin, OPIS • Posted: Monday, August 29, 2016

California’s Low Carbon Fuel Standard (LCFS) is safe after all.

LCFS proponents are hailing Tuesday’s passage of SB 32 as a win not only for the cap-and-trade program it extended through 2030 but also for the LCFS that many feared was in danger of being sacrificed as a political bargaining chip.

LCFS supporters were sweating all summer about rumblings that California Gov. Jerry Brown might agree to end or change the program to win the oil industry’s support for extending the state’s highly profitable cap-and-trade program.

Said to be under discussion were a significant reduction in the percentage of the carbon intensity (CI) reductions beyond 2020 to outright repeal of the LCFS. Because the LCFS generates far less revenue than does cap-and-trade, many feared that it might ultimately be sacrificed to ensure the larger program’s survival.

On Tuesday, however, the state Assembly passed SB 32, a bill that would pave the way for the California Air Resources Board (CARB) to establish greenhouse gas reductions 40% below 1990 levels. Attached to that bill was a stipulation that said the bill would become operative only if a second measure, AB 197, is enacted and becomes effective on or before Jan. 1, 2017.

AB 197 passed Wednesday afternoon by a vote of 44-28 following emotional speeches and fiery debate. The measure, which was introduced by Assemblyman Eduardo Garcia, a Democrat, essentially gives the Legislature more oversight over CARB’s greenhouse gas reduction programs.

AB 197 will allow for the creation of a Joint Legislative Committee on Climate Policies, consisting of three members each from the Senate and the Assembly to make recommendations to the Legislature on California’s climate change policies. The bill also would add two nonvoting members to CARB, one each appointed by the speaker of the Assembly and the Senate Committee on Rules, among other extensive stipulations.

AB 197, which passed with one week to spare before the Aug. 31 end of the 2015- 16 legislative session, ultimately gives the Assembly more influence over how CARB allocates cap-and-trade revenues and more oversight over CARB’s structure and enforcement.

“Basically, Brown gave up a little bit of CARB’s supreme independence to sway the votes they needed,” one source said. “They found a way for everybody to win … except for the oil guys, of course.”

In a statement issued shortly after SB 32 was passed, Brown he looked forward to signing both measures.

“Yesterday, big oil bought a full-page ad in the capital city’s newspaper of record to halt action on climate,” Brown said. “Today, the Assembly Speaker, most Democrats and one brave Republican passed SB 32, rejecting the brazen deception of the oil lobby and their Trump-inspired allies who deny science and fight every reasonable effort to curb global warming.”

Biofuels advocates heralded the passage of SB 32 — and the survival of an intact LCFS, the program that incentivizes their renewable fuels over conventional fossil fuels — as a blessing of stability for the program, which has had a rocky opening decade.

“This is really a solid win for the LCFS — it takes the notion of curbing the program off the table,” one biofuels industry source said. “On the (other) side … they lost. This wasn’t a secret deal, arcane political maneuvering or some political sleight of hand. They just lost. They assumed moderate Democrats supported curbing the program when, in fact, they really just want more fair spending allocation.”

On the other hand, Western States Petroleum Association (WSPA) President Catherine Reheis-Boyd called the decision a “rushed vote … deliberately schemed in order to cover up [Tuesday’s] terrible cap-and-trade auction results,” which CARB released that day.

“Although SB 32 was rushed ahead of the results of the auction, the fact is that the passage of this measure does nothing to put the market on the right track,” Reheis-Boyd said Tuesday. “The reality remains that SB 32 fails to address fixes to cap-and-trade, which sends the wrong signals to the market. Today’s miserable auction result reflects the market’s lack of certainty.

“AB 197 also does not address fundamental cap-and-trade issues that SB 32 conveniently dodges,” Reheis-Boyd said. “In fact, it goes in the opposite direction by promoting a command-and-control system that is contrary to a market-based mechanism like cap-and-trade and would further undermine the market. Despite today’s symbolic victory for some, we will continue to do the real work required to make the appropriate fixes to cap-and-trade that can send the market real certainty.”

In what now comes across as confident foreshadowing, CARB held a public workshop in San Francisco on Tuesday to discuss its 2030 Target Scoping Plan. In the section on transportation, the presentation pointed to a need to increase the LCFS beyond a 10% carbon intensity reduction by 2030.

“LCFS will continue into 2030 and ARB has every intention of moving the CI reduction further for 2030,” one source said. “I don’t think they try to get their full target of 50% via the LCFS alone, but a reduction target of 20[%] or 30% wouldn’t surprise me. They have always been overly aggressive with these targets, and I see no reason that would change going forward.”

— jgodwin@opisnet.