AB32 Report Card: Get Your Homework Done!

That was the essence of the latest report by the California Legislative Analyst (LAO) of the progress being made on implementing AB32, the California Global Warming Solutions Act, delivered to the Legislature.[1]

The law was adopted in 2006 setting the goal of reducing greenhouse gas emissions statewide to 1990 levels by 2020.  Responsibility for implementing the legislation and its required rulemaking falls to the California Air Resources Board (CARB).  Under terms of the law, CARB is to have in place all the rules necessary to make the law enforceable by January 2012.

Speed Up Getting Rules Adopted

The LAO report issued April 14th said CARB is falling behind in its work with three of the significant rulemaking procedures not yet in place. CARB has adopted regulations for nine early action measures that it was required by the law to identify and implement as “low hanging fruit” in reducing GHG emissions including the Low Carbon Fuel Standard, setting a timetable for reducing the carbon intensity of transportation fuels used in California over time. But problems remain with three of the nine required regulations now being reviewed by the Office of Administrative Law.

JOBS, JOB, JOBS!  What Jobs?

California Air Resources Board chair Mary Nichols has said that AB32 will create 2 million jobs by 2020. [2] However, the LAO countered that CARB is seriously underestimating the law’s negative impact on jobs in response to a demand by State Senator Dave Cogdill (R-Fresno) for an assessment of AB32 impact on jobs since the law is set for full implementation in 2012.  You can read the report for yourself at the link below.[3]

Economic Impact of AB32 Implementation Still Fuzzy

The latest LAO report card also again highlighted a growing chorus of criticism that CARB is not doing enough to fully understand the economic implications of the new law on California’s economic recovery and jobs saying again that CARB’s Scoping Plan is “deficient on a number of fronts.”.  This latest report card was released after CARB Plan B was released March 24, 2010 providing an updated AB32 scoping plan which said that the goals of the California Global Warming Solutions Act can be met without adversely affecting the state’s recovery or long term economic growth. [4] CARB said it had worked closely with the Economic and Allocation Advisory Committee (EAAC) which Governor Schwarzenegger appointed to assure that the agency did not ‘cook the books’ in its analysis. But the EAAC seemed strangely silent no doubt fearing anything they said would be turned into bad headlines.

How Much Will This Cost?

The Governor’s proposed budget includes $39 million for work across twelve state agencies for to implement AB 32. But state agencies have borrowed about $84 million since the law was passed in 2006 to ramp up implementation.  That inter-fund borrowing will have to be paid back from CARB fees imposed on emitters in addition to the cost of ongoing compliance. CARB’s plan to repay the loan over four years will require an additional $27 million in fees annually for the first three years and $9 million in the fourth year to repay the roughly $90 million borrowed with interest.  After year five, fees are to be based primarily on the revenue needed to pay AB32’s budgeted costs with the fee revenue available upon appropriation by the Legislature.

So what?

The worry is that AB32 may turn into a de facto California value-added tax since the fee structure is set up administratively so that CARB will annually set fees needed to operate the program.  But if the Legislature uses the fee revenue for alternative purposes CARB could theoretically recover that lost revenue by merely raising the fees.  Opponents says this is Legislative sleight of hand allowing the Legislature to raise taxes without having their fingerprints on any official action by passing the buck to CARB to progressively set higher and higher fees ostensibly to achieve the emissions reducing purposes of AB32.  It is precisely this worry that is leading some opponents of AB32 to take action by collecting signatures to put an initiative petition on the Fall 2010 ballot to delay implementation of AB32.

[1] http://www.lao.ca.gov/reports/2010/rsrc/ab32_implementation/ab32_implementation_041410.pdf

[2] http://www.arb.ca.gov/newsrel/2010/nr032410b.html

[3] http://www.lao.ca.gov/reports/2010/rsrc/ab32_impact/ab32_impact_030410.pdf

[4] http://www.arb.ca.gov/cc/scopingplan/economics-sp/updated-analysis/updated_sp_analysis.pdf