BOARD MEETING DATE: November 2, 2007
AGENDA NO. 34

PROPOSAL:

Update on AB 32 and AQMD’s Role in Mandatory Reporting Program

SYNOPSIS:

Staff will give a report on AB 32 implementation, including early action measures, the Scoping Plan, and the proposed mandatory reporting regulation. As part of the report, staff is requesting the Board direct staff to proceed with implementation of the greenhouse gas emissions reporting requirements.

COMMITTEE:

Stationary Source, October 26, 2007, Reviewed

RECOMMENDED ACTION:

Direct staff to proceed with implementation of greenhouse gas reporting requirements.

Barry R. Wallerstein, D.Env
Executive Officer

Background

Assembly Bill 32 (AB 32, Nunez), the California Global Warming Solutions Act of 2006, was adopted in September 2006. This bill established a statewide emission reduction target of meeting 1990 levels of greenhouse gas emissions by 2020, and set out many specific requirements for how that goal is to be achieved. Staff plans to come to the Board in January 2008 with a proposal for an AQMD Global Warming Policy for public review and a set of initiatives on greenhouse gas efforts that can complement our mission and contribute to California’s greenhouse gas reduction goals as developed by Governor Schwarzenegger and the Legislature. This Board letter provides an update on three key CARB programs – early action measures, the Scoping Plan, and mandatory reporting requirements. This Board letter also asks the Governing Board to direct staff to proceed with implementation of greenhouse gas reporting requirements.

Early Action Measures

AB 32 required CARB to adopt early action measures by July 2007. Early action measures, defined in the legislation, are regulatory measures that can be adopted and implemented by January 1, 2010. In June the CARB Board approved three discrete early action measures and identified other measures that were already in progress or could be initiated in the next few years that would also reduce greenhouse gases. The additional measures include non-regulatory items and measures that could not meet the January 1, 2010 adoption and implementation schedule.

The CARB Board directed staff to continue working with stakeholders to consider expanding the list of discrete early action measures. In September, CARB staff proposed six additional discrete early action measures and added more measures to the list of early action measures. They also provided a schedule for bringing most of these items to their Board. The public hearing for consideration of these revisions was held on October 25, 2007 and the additional early action measures were approved.

The table in the attachment summarizes the early action measures.

Scoping Plan

One of the most significant requirements of AB 32 is for CARB staff to develop a Scoping Plan. This is analogous to an Air Quality Management Plan, because the Scoping Plan will be a comprehensive planning document that lays out all the strategies to be pursued to meet the greenhouse gas reduction goals for 2020 and beyond. The plan is due by January 1, 2009.

Early action measures will be included in the Scoping Plan, and additional ideas have been solicited. The following public meetings are planned:

• November 30, 2007 at South Coast Air Quality Management District

• December 14, 2007

• January 16, 2007

CARB staff has specifically reached out to the AQMD and other air districts for suggested measures and plan structure ideas. AQMD staff is actively participating in such discussion and will periodically update the Board during 2008 on California’s progress.

Mandatory Reporting

CARB must adopt mandatory greenhouse emission reporting regulations on or before January 1, 2008. Draft rules have been developed and are going through the public process for a public hearing in December 2007. Annual reporting of greenhouse gases (carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, and hydrofluorocarbons (HFCs)) will be required for cement plants, petroleum refineries, large hydrogen production facilities, electric generating and cogeneration facilities with 1 megawatt or greater capacity that emit more than 2,500 metric tons of carbon dioxide per year, and other facilities emitting greater than or equal to 25,000 metric tons of carbon dioxide per year from stationary combustion sources.

In August and October, CARB staff released draft proposals for mandatory reporting for the gases and sources listed above. Mandatory reporting would begin in April 2009 and includes requirements that each facility contract with a third-party verification firm. Verifiers must meet minimum qualifications and go through CARB training.

In addition to participating extensively in technical discussions regarding the details of the reporting requirements by sector, AQMD staff has been involved in numerous California Air Pollution Control Officers (CAPCOA) meetings with CARB staff, and executive management to discuss how to make this program as efficient and effective as possible.

Proposed Approach

Add Greenhouse Gas to AQMD Annual Reports

The facilities that will be reporting greenhouse gas emissions for AB 32 are the same facilities that have AQMD permits, are inspected by AQMD compliance staff, and report annual emissions to AQMD. The current annual emissions reporting system includes most of the information that CARB will be requiring. For example, to calculate emissions from combustion equipment, fuel use and emission factors are the basis for nitrogen dioxide calculations. The same fuel use is multiplied by an emission factor to calculate carbon dioxide. The CARB draft rules include additional information in some cases and may also require reporting at the device level for many sectors.

The draft mandatory reporting rules allow for an air district to collect the greenhouse gas emission data required by CARB, provided CARB approves the software. The AQMD annual emissions reporting program could be modified to include additional data fields and calculations, and to require reporting at the device level, where required. The modifications would conform to the mandatory reporting requirements specified by CARB. The reporting period would also need to be adjusted from fiscal to calendar year. Staff would also take the opportunity to make the reporting tool a web-based program. AQMD staff would work with stakeholders and get their input on how to make these changes and transitions more efficient.

It is technically feasible and more efficient for AQMD to modify our existing system and have facilities simultaneously submit data to CARB than to have duplicative data entry. This would save facilities time and money by eliminating the need to input the same information into two different reporting schemes. Duplication will also be susceptible to discrepancies, which local air districts will inevitably spend time and effort to resolve.

Implementation of the proposed approach will require a re-ordering of some current management activities as well as funding of about $150,000. However, much of the funding will be used to create a new web-based tool which advances AQMD’s current reporting system.

Third-Party Verification

There is a model used internationally that employs third-party contractors to audit greenhouse gas annual emission reports submitted either voluntarily or because they are required. CARB’s initial draft rules included such requirements, but CAPCOA recommended that this function would be much better served in California by local air districts. In other venues, there is not the same structure as in California, where local air district staff has decades of in-depth experience with these facilities through permitting and compliance, frequent inspections and annual emission reporting. The draft regulations provide for local districts to become third-party verifiers if they take the required training and exams.

The draft CARB rules include requirements for minimum qualifications and training of individuals and firms wishing to provide this service. The verification process requires a minimum of one site visit to the facility and review of records to evaluate emission sources that are the largest contributors or have the most uncertainty associated with them. Up to five percent variation is acceptable. Verifiers must be changed every six years, and must disclose any conflicts of interest and meet certain requirements related to ensuring that any conflicts are minimal. AQMD could easily demonstrate meeting the minimum requirements and satisfying the other provisions.

Local air district staff has the capability and expertise to do a comprehensive and accurate job of validating emission reports. This would significantly strengthen the technical creditability of emission reports and provide a much more robust basis for determining the amount of credits from voluntary early reductions and for establishing baselines and measuring progress for any future greenhouse gas rules or trading program. Staff recommends that AQMD pursue this opportunity

Staff recommends that AQMD provide verifier services either on a mandatory or voluntary basis depending on the requirements in CARB’s future regulation.

Summary

Staff is requesting the Board’s direction for staff to proceed with amending our annual emissions reporting program to include AB 32 mandatory reporting requirements and to train and certify AQMD staff to perform audits as third-party verifiers. Facilities will have the option to select AQMD to transmit their greenhouse gas emission report to CARB and/or to be the third-party verifier. Staff also recommends development of a “green carpet” services package that includes these two elements and others for AB 32 implementation, and will return to the Board in 2008 when more information is available for final approval of the package.

Attachment
Summary of Early Action Measures to Reduce GHG in California

ATTACHMENT A

Shading indicates it is a “discrete” early action measure (to be adopted and implemented by January 1, 2010).

* One of discrete early action measures approved in June 2007.