Senate Select Committee on Climate Change and AB 32 Implementation December 3, 2013

AB 32 enacted in 2006 Outlines State’s strategy to achieve 2020 GHG goal Built on a balanced mix of strategies Acknowledges need for long-term strategy 2 AB 32 and the Initial Scoping Plan

Success of Scoping Plan Comprehensive suite of strategies applied to all sectors Renewable energy currently accounts for 22 percent of state’s electricity Global leader in energy efficiency Most comprehensive Cap-and-Trade program in world 3

Success of Scoping Plan (continued) Renewable fuels, with the help of the LCFS, displaced more than a billion gallons of gasoline and diesel Zero emission vehicle regulation and Governor’s Executive Order transforming vehicle fleet Major strides in sustainable transportation, land use, and housing planning 4

AB 32 Scoping Plan Update Update shows progress to steadily drive down GHG emissions to 2020 target Sets framework to move beyond 2020 Progress will be through regulations, partnerships, and incentives Update is part of Administration’s overall climate strategy – Environmental Goals and Policy Report – Safeguarding California – Climate Change Research Plan 5

AB 32 Scoping Plan Update- Process Key Questions – How have we done over past 5 years? – What is needed to continue progress to 2020? – What steps are needed to continue emission reductions? Process developed in consultation with many stakeholders – Climate Action Team – Local and regional agencies – Business, environmental, EJ, and community-based organizations Workshops and opportunities for comment on discussion draft 6

Next Steps—Scoping Plan Update Late January - Revised Update and Environmental Assessment Released – EA will be prepared according to requirements of ARB’s certified program under CEQA – 45-day comment period February Board Hearing EA comments due mid-March 2014 Respond to EA comments and Board consideration Spring

Cap-and-Trade Program One of a suite of measures to reduce GHG emissions under AB 32 The “cap” limits total GHG emissions from all regulated sources The “cap” declines over time—reduces emissions Participants are allowed to “trade” state-issued GHG emissions allowances—creates flexibility, reduces costs of compliance Works together with command-and-control measures (e.g. traditional regulation) 8

Offsets Offsets represent real, rigorously quantified, additional greenhouse gas emissions reductions Two new protocols to reduce emissions of methane, a short lived, high global warming potential greenhouse gas Mine Methane Capture Protocol – Capture and destruction of fugitive mine methane – Potential domestic offset supply of 60 million metric tons (MMtCO 2 e) Rice Cultivation Protocol – Reduce methane emissions from rice cultivation 9

Cap-and-Trade Program-Next Steps Linkage with Québec effective January 1, 2014 Québec auction December 3, 2013 Next California auction February 2014 Finalize current amendments Spring 2014 Anticipated California-Quebec joint auction in

Cap-and-Trade Auction Proceeds Purpose: Facilitate GHG reductions and where feasible maximize environmental and economic co-benefits. Benefits to disadvantaged communities Funding source: Auctioning of State-owned allowances from Cap-and-Trade Program. – Funding amount varies by auction – $532M generated from five auctions to date 3-year Investment Plan Annual budget process 11

12 Investment Plan Recommendations for Priority Investments Sustainable Communities & Clean Transportation Energy Efficiency & Clean Energy Natural Resources & Waste Diversion

September 2013 IPCC Fifth Assessment Report California particularly vulnerable – Extreme heat and storms – Drought and wildfires – Coastal flooding and erosion Underscores need to accelerate GHG emission reductions 13 Latest Understanding of Climate Science

Continuing Progress Beyond 2020 Need for Midterm Target Science supports continued reductions California’s 2050 goal Establishing a 2030 target would: – Ensure continued progress toward goal – Provide greater levels of market certainty in the near term – Frame the next suite of emission reduction measures Coordination with other agencies, Legislature, stakeholders 14