BOARD MEETING DATE: December 5, 2008
AGENDA NO. 26

(Continued from November 7, 2008 Board Meeting)

PROPOSAL:

Adopt Proposed Rules 2700 – General and 2701 – SoCal Climate Solutions Exchange

SYNOPSIS:

These proposed rules have been developed for the Board’s consideration to assist local businesses and others by providing high quality certified greenhouse gas emission reductions for voluntary actions.

COMMITTEE:

Climate Change, September 19, 2008 and October 29, 2008

RECOMMENDED ACTIONS:

Adopt the attached resolution:

1. Certifying the Notice of Exemption for Proposed Rules 2700 – General and 2701 – SoCal Climate Solutions Exchange; and
2. Adopting Rules 2700 – General and 2701 – SoCal Climate Solutions Exchange.
    

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At the February 2008 Governing Board meeting, the Board approved development of the SoCal Climate Solutions Exchange, one of AQMD Governing Board Chairman Burke’s initiatives for 2008. The Board requested a two-step process. The first step was development of a White Paper and discussion of initial recommendations at the June 2008 Governing Board meeting. The Board then directed staff to proceed with rule development, which was the second step of the process.

This proposal represents the evolution of the concepts that were described in the White Paper. Staff is proposing Rule 2700 – General and Rule 2701 – SoCal Climate Solutions Exchange for the Board’s consideration. This will set up the administrative structure to enable voluntary greenhouse gas emission reduction projects in the AQMD. Proposed Rule 2702 – Greenhouse Gas Reduction Program, which would establish an air quality investment program where the AQMD could collect funds and solicit greenhouse gas reduction projects, is scheduled to be considered at the January 2009 Board meeting.

The objectives of the SoCal Climate Solutions Exchange are to provide high quality certified greenhouse gas emission reductions that enhance the local economy and capture needed co-benefits for Southern California as businesses achieve voluntary reductions. The SoCal Climate Solutions Exchange can assist in providing a mechanism to recognize and quantify voluntary early reductions. A local program operated by AQMD can ensure that reductions are real, additional (surplus), quantifiable, verifiable, permanent over a specific time, and enforceable. This will be of great value to facilities that need reductions for CEQA or other environmental mitigation.

Proposed Rules

The SoCal Climate Solutions Exchange would be a voluntary program where facilities in the AQMD could undertake projects to voluntarily reduce greenhouse gas emissions in advance of, or in the absence of, any regulatory requirement. These projects would follow pre-approved CARB and AQMD protocols. Currently, three protocols approved by CARB are included in Proposed Rule 2701. These protocols are briefly summarized as follows:

• Livestock Project Reporting Protocol:  Provides guidance to account for and report GHG reductions from the installation of a manure biogas control system for livestock operations.  The protocol focuses upon quantifying the net GHG reduction from decreased methane emissions with considering effects on carbon dioxide emissions.  Under this protocol captured methane used to produce electricity for the grid is considered a complimentary and separate GHG reduction.
   
• Forest Project Protocol:  Provides the California Climate Action Registry’s guide for the design, implementation, and registration of forest projects.  Forest projects adhering to the guidelines in this protocol qualify for certified GHG reductions with the California Climate Action Registry.
   
• Urban Forest Project Reporting Protocol:  The protocol provides guidelines in accounting for, reporting, and maintaining GHG offsets associated with tree planting in urban environments.  Greenhouse gas offsets are realized in the protocol from trees converting carbon dioxide into plant biomass. This document will assist project developers implementing urban tree-planting programs in registering greenhouse gas offsets with the Climate Action Reserve program.

It is staff’s intention to work closely with other agencies to develop as many protocols as practicable to encourage voluntary early actions and to be able to have those reductions quantified. AQMD staff will submit for Governing Board approval all protocols to be used for the SoCal Climate Solutions Exchange. In addition, staff will seek concurrence by CARB, through their Governing Board or Executive Officer, for any additional protocols recommended for inclusion in Proposed Rule 2701.
 

Public Process

The Governing Board established a Climate Change Committee, which has met five times this year. The SoCal Climate Solutions Exchange was discussed at most of these meetings. In addition, climate change issues were discussed as an agenda item at the Governing Board’s April 17, 2008 retreat.

Staff has been working with a Technical Advisory Group comprised of representatives from CARB, CCAR, environmental and community groups, industry, academic institutions, and local government. The working group participants helped brainstorm initial concepts and provided valuable insight and perspectives on key design elements. This group met four times before the White Paper was presented to the Board (March 19, 2008, April 2, 2008, April 23, 2008 and May 22, 2008). The Technical Advisory Group also met on October 2, 2008. The meetings were open to the public, and other attendees also provided beneficial input. A public workshop was held on September 4, 2008 as well.

Staff has also been working with CAPCOA and CARB regarding protocol development. There is a commitment to work cooperatively to prioritize protocol development and to have many air districts work on additional protocols. This will take advantage of resources and expertise, and result in more protocols available for use in multiple programs.
 

Key Issues

Staff worked closely with the Technical Advisory Group to address issues and incorporate suggestions. However, there are a few remaining issues which are summarized below. The key issues are listed here. Attachment B and the staff report provide additional information.

While many see benefits of this voluntary program, one industry group questions whether a local greenhouse gas reduction program is needed. Staff believes that there is benefit to having a program in the Basin where high quality emission reductions certified by AQMD staff will give confidence that reductions are real and verifiable. In addition, there is great potential for bringing local investments, jobs, and clean technologies into this area. Since many greenhouse gas reduction strategies also result in reductions of criteria or toxic pollutants, such strategies can offer co-benefits for the Basin’s air quality.

Another concern expressed is that AQMD is assuming too many roles and there are insufficient checks and balances. For Proposed Rule 2701, District staff would verify and then list certified greenhouse gas emission reductions on the AQMD’s web site. In other greenhouse gas programs, verification is done by contractors who are not in the same organization that registers reductions. AQMD staff does not believe that handling verification and listing would create any problems. The staff report details how the various functions of credit programs are handled in other circumstances, including many different current or past AQMD programs. Staff is not taking on additional responsibility as compared to similar functions in the past. A transparent public process and recommended oversight for this voluntary program should help alleviate this concern. In addition, an appeals process has been added to Proposed Rule 2701.

A packet of comments and information related to Rules 2700 and 2701 was submitted to staff and the Governing Board on October 30, 2008 from the California Environmental Justice Movement. The materials included a declaration against carbon trading as a means to address climate change, a related news release, a fact sheet with reasons why trading is not a solution to climate change and an article and several postings relating to carbon offsets in EJ Matters for Climate Change. This information stresses that previous experience with carbon trading in the European Union has been problematic, and that emission reductions are not being realized. These stakeholders are opposed to carbon trading and offset use, and the continued use of fossil fuels. They support direct regulations, conservation, and other measures that will move us away from fossil fuel and nuclear power, and that do not impact environmental justice communities.

Staff appreciates the concerns about the validity of some offsets, which is why Rules 2700 and 2701 are being proposed. Staff believes that adopting a local program can help address some of the concerns about the validity of reductions. Proposed regulations do not in themselves authorize or prohibit the use of these certified reductions. Placing use restrictions on credit generation would significantly limit the effectiveness of the District program by directing sources to non-AQMD greenhouse gas verifiers or registers. The adopting resolution includes analysis to ensure that there are no adverse impacts in environmental justice communities as additional protocols could be added to the rule.
 

CEQA

The proposed project has no potential to adversely impact air quality or any other environmental area. Proposed Rules 2700 and 2701 are administrative in nature and include protocols that have already been approved by the CARB, so projects could occur in the District in the absence of the proposed rules. AQMD is not involved with funding or generating greenhouse gas emission reductions under these two rules. As a result, the proposed project is exempt from CEQA pursuant to state CEQA Guidelines §15061(b)(3) – Review for Exemption. A Notice of Exemption will be filed with the county clerks of Los Angeles, Orange, Riverside and San Bernardino counties immediately following the adoption of the proposed project.
 

Socioeconomic Analysis

Proposed Rules 2700 and 2701 represent a voluntary program. Businesses and individuals will not participate in the proposed program if there is no perceived benefit. As such, no negative socioeconomic impacts are expected. Since the rules do not significantly affect air quality or emissions limitations, the law does not require a socioeconomic assessment.
 

AQMP and Legal Mandates

There are no AQMP or legal mandates that require adoption of these rules, however staff anticipates that many of the greenhouse gas emission reduction projects will have concurrent air pollution benefits.
 

Resource Impacts

Existing resources should be sufficient to implement Proposed Rules 2700 and 2701. Fees will be charged to support implementation of the program.
 

Attachments (ZIP, 2.5m)

1. Summary of Proposal
2. Key Issues and Responses
3. Rule Development Process
4. Key Contacts List
5. Resolution
6. Rule Language
7. Staff Report
8. Notice of Exemption
9. Livestock Project Reporting Protocol
10. Forest Project Protocol
11. Urban Forest Project Reporting Protocol