On September 26, 2006, Governor Schwarzenegger signed landmark legislation in California designed to reduce greenhouse gas emissions in the state to 1990 levels by the year 2020 (an estimated 30 percent reduction in greenhouse gas emissions from business-as-usual estimates). The bill, known as Assembly Bill 32 (AB 32) requires the California Air Resources Board (CARB) to adopt rules and regulations in an open public process to achieve the maximum technologically feasible and cost-effective greenhouse gas emissions reductions. AB 32 also authorizes CARB to adopt market-based compliance mechanisms to achieve the emission reduction goals. To accomplish its mandate, CARB must meet several milestones prior to the 2020 deadline.

Since the adoption of AB 32, CARB has move swiftly to approve discrete early action measures to reduce greenhouse gas emissions. In June, CARB approved three specific measures designed to cut emissions from California fuels, reduce refrigerant losses from automotive maintenance, and capture methane losses from landfills. In October, CARB approved six additional measures that are expected to reduce greenhouse gases from the trucking and port industries, cement and semiconductor industries, and consumer products. All of these measures will result in new regulations by January 1, 2010. In addition, CARB staff has compiled a list of 35 other early action measures that it plans to develop for possible approval between 2007 and 2012.

These actions, as well as later developed regulations, will significantly alter the way that business is conducted in California. Businesses will need to become more cognizant of their greenhouse gas emissions, and look for ways to improve their energy efficiency or maximize their pollution controls. Businesses may also be required to evaluate and mitigate greenhouse gas emissions for new projects pursuant to the California Environmental Quality Act (CEQA).

Now is the time for active involvement in the regulatory shaping process. CARB currently has several scheduled meetings and workshops on early action measures, as well as industry specific activities. CARB has also started the process of formulating a scoping plan for its overall plan to reduce greenhouse gas emissions. The scoping plan, when complete, will set forth a range of emission reduction actions such as direct regulations, alternative compliance mechanisms, monetary and non-monetary incentives, voluntary actions, and market-based mechanisms such as a cap-and-trade system. The next public workshop is scheduled for December 14 in Sacramento, California.

For further information about this topic, please contact Akin Gump.