CARB recently held an informal workshop preparing for the upcoming Cap-and-Trade regulatory amendments. It followed the standard format of 1) Staff Presentation and 2) Stakeholder Q&A. The staff presentation lasted about 30 minutes, and the Q&A lasted another hour. Quebec was also participating in the workshop, answered a question, but did not make a presentation. The focus of the meeting was squarely on the ‘smoothing’ options that were presented to address the potential discontinuity that has been shown in the past workshops due to the point in time requirements of SB 32 (2030 GHG mandated target), and the 2022 Scoping Plan target of 48% reduction and AB 1279 (2045 net zero GHG target). These fixed mid and end points contrast with how CARB is now describing the heart of the program—cumulative tons.
The presentation went to great efforts to show that the cumulative tons of each of the options were equivalent—SRIA Option A, Smoothing Options 1 & 2. In CIPA staff’s view, CARB’s presentation flipped back and forth between the ‘cap’ (total tons) and the number of tons being ‘removed’. All three scenarios meet the SB 32 2030 goal, the SP target and the AB 1279 goal (more clearly defined as a number of tons in 2045 through the Scoping Plan). The difference was in the pre- and post-2030 slopes, and how they connected in between.
As was recently stated in reading the preview, Option 1 seems more realistic and historically the way CARB has viewed the world. During the presentation, CARB gave equal weight to both and asked for stakeholder feedback—comment submissions are due July 31st. But stakeholder questions were primarily focused on Option 1.
There were a few recurring questions and CARB answers that I will highlight here:
These proposals differ from the SRIA in that they don’t propose to remove any allowances from the APCR or Ceiling accounts.
CARB was clear they feel those cost-containment accounts need to be protected in case prices rise.
CARB was also clear that because the removals were just coming from future auction/allowances, that the proposals were equally as stringent.
The timing ‘slip’ really isn’t a major concern. CARB staff stated that in the scheme of things, pushing adoption a few months and implementation to 2026 will not impact the overall program goals.
Stakeholders pushed back a bit, at which point CARB offered to accept comments on having removals start in 2025 but warned it would add significant complexity to the program.
It was clear CARB would rather start the new budgets in 2026.
One note is that CARB didn’t rule out additional workshops. When asked if they could have more, they did not specifically answer.
The trigger price levels for the APCRs and Ceiling were not discussed initially, but upon stakeholder questions, CARB admitted they are still under review.
Offsets only came up once. CARB stated there is no proposal to change the offset usage limit.
Several stakeholders asked about ‘facility level caps.’ CARB reiterated their position that such an idea is inconsistent with statutory direction in AB 398.
In general, it seems the informal process is close to an end. CARB is starting to solidify around the concepts presented at the workshop—cumulative tons are the driver along with mileposts. There are several other issues that have been workshopped and are not fully explained to where CARB landed, e.g. corporate association issues.
With a 45-day package (proposed regulation, environmental document, initial staff report) coming out by ‘late summer’, CIPA’s staff view is that many of these policy points have been decided and are already written out, at least in draft form. Comments on this final big issue will be incorporated into the ISOR, and then we will all get to see it most likely before October 1.
For more information, contact Jon Costantino or Sean Wallentine.