The statements and conclusions in this Report are those of the Committee and not
necessarily those of the California Air Resources Board. The mention of commercial
products, their source, or their use in connection with material reported herein is not to be
construed as actual or implied endorsement of such products.
Recommendation of the
Economic and Technology Advancement and Advisory Committee ( ETAAC)
February 14, 2008
To: Chair Mary Nichols and
Members of the California Air Resources Board ( CARB)
From: Members of the ETAAC Committee
We are very pleased to present to you our policy and technology recommendations for
reducing greenhouse gas emissions in California. Our report includes 55 specific
recommendations for greenhouse gas reduction strategies in the areas of finance;
transportation; industrial commercial and residential end users; electricity and natural
gas; agriculture; forestry; and water policy. As requested by CARB, we also examined
the Market Advisory Committee’s Report from the perspective of how particular market
mechanisms can stimulate early action, promote innovation and establish clear price
signals.
Climate change threatens California’s environment and economy. We must move
California from its current level of 14 tons of carbon- dioxide equivalent per person down
to 10 tons/ person by 2020. As requested by CARB, we also looked towards an 80
percent reduction by 2050, which would require a level of 1.5 tons/ person by 2050. To
achieve these significant reductions will require more efficient use of energy, the virtual
elimination of all GHG emissions from the state’s energy infrastructure and a
substantially different mix of transportation systems and fuels. A key part of the
committee’s task is to expand the scope of technical and economic solutions available for
consideration.
There are also opportunities for California’s economy, environment and citizens.
Developing cleaner energy and transportation systems will give California a chance to
improve the security of fuel supplies, address stubborn air pollution concerns, and
develop more livable communities. In many cases, these solutions provide important co-benefits
by addressing difficult and long- standing problems, including the achievement of
Environmental Justice objectives.
We hope this report provides a wide and diverse range of alternatives that will inform
policymakers in their efforts to meet both the economic and environmental goals of AB
32. Our specific policy recommendations are all based on the following policy strategies
and technology opportunities that are outlined in Chapter 1 of our report:
Major Strategies:
· Accelerate GHG Emission Reductions
· Balance a Portfolio of Economic and Technology Policies
· Create Innovative Public Funding to Complement Private Investment
· Foster International and Domestic Partnerships
· Leadership Across State Agencies
Major Opportunities
· Accelerate Efficiency Measures
· Remove Carbon From Energy Sources
· Rethink Transportation to Lower Demand and Carbon Emissions
· Reduce GHG Emissions from Industry, Agriculture, Forestry and Water
· Capture Cleantech Employment, Economic, Health and Environmental Justice Co-
Benefits
After CARB convened ETAAC in January 2007, we conducted 9 public meetings across
the state. Over 200 members of the public provided comments in writing or in person.
Our committee was composed of people from a wide cross- section of California’s
business, academic, government and non- profit communities. As expected, members hold
differing opinions and unique perspectives on the topics covered in the report. However,
members are united in the effort to develop recommendations that will help meet the
emission targets of AB 32 and also yield the co- benefits of cleaner air, health benefits,
new industries and job growth here in California. It is our hope that the knowledge and
products created in response to AB 32 can strengthen both the California economy and
the state’s international leadership on environmental issues.
This final ETAAC report reflects consensus views when consensus was reached, and
reflects a range of differing points- of- views when there was general support that fell short
of a consensus. Each recommendation may not necessarily reflect the views of every
ETAAC member.
Thank you for the opportunity to serve the State of California.
Respectfully submitted,
Table of Contents- 1
ETAAC FINAL REPORT
TABLE OF CONTENTS
1. INTRODUCTION AND EXECUTIVE SUMMARY
I. The Challenge and the Opportunity p. 1- 1
II. Major Strategies and Opportunities p. 1- 3
III. Summary Message p. 1- 12
IV. The Role of ETAAC p. 1- 14
V. Organization of the ETAAC Report p. 1- 16
VI. Mapping from Recommendation to Categories, Timeframes
and Responsible Parties p. 1- 17
2. FINANCIAL SECTOR
I. Introduction p. 2- 1
II. Central Recommendations: Carbon Trust & Cleantech
Commercialization p. 2- 3
A. Create a California Carbon Trust p. 2- 3
B. Promote Clean Energy Innovation and Commercialization p. 2- 9
III. Additional Organizational and Policy Recommendations p. 2- 15
C. Leveraging AB 32 to Spur California Job Creation
and Manufacturing p. 2- 15
D. Cleantech Workforce Training Program p. 2- 18
E. Fee and Tax shifting ( Feebates) p. 2- 19
F. Municipal Assessment Districts p. 2- 20
G. On- Bill Financing for Small Business
Energy Efficiency Projects p. 2- 22
3. TRANSPORTATION SECTOR
I. Introduction p. 3- 1
II. General Policy Recommendations for the
Transportation Sector p. 3- 6
III. Shifting Demand for Mobility and Goods Movement p. 3- 11
A. Planning: Smart Growth and Transit Villages p. 3- 12
B. Pay as You Drive Insurance p. 3- 15
C. Congestion Charges p. 3- 17
D. Employer- based Commute Trip Reductions p. 3- 18
IV. Improving Vehicle GHG Performance p. 3- 22
E. New Vehicle Technology Improvements p. 3- 23
F. Low Carbon Fleet Standards and Procurement Policies p. 3- 26
G. Vehicle Feebates, Registration Fees and
Indexed Fuel Taxes p. 3- 27
Table of Contents- 2
H. Air Quality Incentive Programs and Standards p. 3- 28
V. Low- Carbon Transportation Fuels p. 3- 30
I. Create Markets for Green Fuels p. 3- 30
VI. International GHG Sources p. 3- 32
VII. Priority Actions p. 3- 33
4. INDUSTRIAL, COMMERCIAL & RESIDENTIAL
ENERGY USE
I. Introduction p. 4- 1
II. Industrial Technologies and Policies p. 4- 3
A. Cleantech Tax Incentives p. 4- 3
B. Rebates for Load Reduction p. 4- 3
C. Improve Policies for Combined Heat and Power Plants p. 4- 4
D. Distributed Renewable Energy Generation: Solar PV p. 4- 6
E. Customer Choice of Electric Service Provider p. 4- 8
III. End User Energy Efficiency p. 4- 10
F. Building Efficiency Programs and Incentives p. 4- 10
G. Combustion Devices: Energy Efficiency p. 4- 11
H. Industry- Government Partnerships to Reduce
Industrial Energy Intensity p. 4- 11
I. Revolving Fund for Technology Demonstration Projects p. 4- 12
IV. Waste Reduction, Recycling and Resource Management p. 4- 14
J. Develop Suite of Emission Reduction Protocols
for Recycling p. 4- 14
K. Increase Commercial- Sector Recycling p. 4- 15
L. Remove Barriers to Composting p. 4- 17
M. Phase Out Diversion Credit for Greenwaste
Alternative Daily Credit p. 4- 18
N. Reduce Agricultural Emissions through Composting p. 4- 19
O. Evaluate and Improve Policies for Qualified Waste
Conversion Technologies p. 4- 20
V. Priority Actions p. 4- 22
5. ELECTRICITY AND NATURAL GAS SECTOR
I. Introduction p. 5- 1
II. Utility- Level Programs to Accelerate Energy Efficiency p. 5- 4
A. Energy Efficiency Program Coordination p. 5- 4
B. Aggressive LED Energy Efficiency Programs p. 5- 5
III. Expanding California’s Successful
Renewable Energy Programs p. 5- 7
C. Take Steps Necessary to Support an Increase in RPS
to 33 Percent by 2020 to Reduce GHG Emissions p. 5- 7
D. Competitive Renewable Energy Zones p. 5- 9
Table of Contents- 3
E. Renewable Energy Technology Assessments p. 5- 12
IV. Enabling Technologies for Zero Emission Electricity
and Vehicles p. 5- 15
F. Electricity Storage as an Enabling Technology for
Renewable Energy p. 5- 15
G. Plug- in Electric Drive Vehicles as Storage Devices p. 5- 18
H. Smart Grid as Enabling Technology for Renewables
And Clean Vehicles p. 5- 19
V. Carbon Capture and Storage p. 5- 21
I. Carbon Capture and Sequestration in Geological
Formations p. 5- 21
VI. Low Carbon Electricity Generation Plan p. 5- 24
J. Low and Zero Carbon Electricity Generation Plan p. 5- 24
K. Unifying Standards for Climate- Related Programs p. 5- 24
VII. Priority Actions p. 5- 27
6. AGRICULTURAL SECTOR
I. Introduction p. 6- 1
II. An Agricultural Global Warming Solutions Program p. 6- 3
A. Manure- to- Energy Facilities p. 6- 3
B. Enteric Fermentation p. 6- 6
C. Agricultural Biomass Utilization p. 6- 7
D. Dedicated Bio- Fuels Crops p. 6- 9
E. Soil Carbon Sequestration p. 6- 11
F. Riparian Restoration and Farmscape Sequestration p. 6- 16
G. Fertilizer Use and Water Management Efficiency p. 6- 17
III. Priority Actions p. 6- 19
7. FORESTRY SECTOR
I. Introduction p. 7- 1
II. The Policy Context p. 7- 3
III. Key Policy Principles p. 7- 4
IV. Key Overriding Themes p. 7- 6
V. Recommendations p. 7- 8
A. Link Forest Fuels Management and Biomass Utilization p. 7- 8
B. Reforestation and Forest Management for
Enhanced Carbon Storage p. 7- 9
C. Urban Forests for Climate Benefits p. 7- 11
D. Endorse “ California- Grown” Climate Solutions p. 7- 12
Table of Contents- 4
8. WATER SECTOR
I. Introduction p. 8- 1
II. Recommendations p. 8- 4
A. Establishing a Loading Order for Water p. 8- 4
B. Establish a Public Goods Charge for Funding
Water Improvements p. 8- 5
9. ETAAC REVIEW OF MARKET ADVISORY
COMMITTEE REPORT
I. Introduction p. 9- 1
A. Scope of Carbon Cap p. 9- 2
B. Point of Electricity Regulation p. 9- 3
C. Allowance Allocation Method p. 9- 3
D. Use of Auction Revenues p. 9- 4
E. Offsets p. 9- 5
F. Banking p. 9- 6
G. Borrowing p. 9- 7
H. Cost Containment Mechanisms p. 9- 8
APPENDICES
Appendix I: ETAAC Member Biographies p. 10- 2
Appendix II: ETAAC Committee Schedule p. 10- 8
Appendix III: Inventory of Current State Funding Programs
Related to Climate Change p. 10- 9
Appendix IV: Background Status Report on Energy Technologies p. 10- 30
Appendix V: Background Status Report on Transportation p. 10- 77
Appendix VI: Summary Table of Public Responses to Request for
Climate Change Emission Control Technologies p. 10- 95
Appendix VII: Glossary p. 10- 102
Acknowledgements
Lead ETAAC Staff:
Steve Church, P. E. ( CARB)
Diane Doucette ( E2)
Ed Pike, P. E. ( ICCT)
The Committee would like to acknowledge the following individuals who helped with the
Committee’s work ( in alphabetical order):
Dan Adler, Sam Blodgett, Kate Blumberg, Rebecca Boyer, Louie Brown- Kahn, Mark
Brucker, Paul Buttner, Matt Byrne, Carolyn Casavan, Lucinda Chipponeri, Ronnie Cohen,
Neil Cohn, Michaell Cox, Sophia Curel, Kendra Daijogo, Kyle Davis, Rick Degolia,
Carla Din, Allen Dusault, Kevin Eslinger, Rocky Fernandez, Victoria Fleming, Guido
Franco, Karl Gawell, Don Gordon, Kelly Gordon, Dr. Larry Goulder, Jamie Hall, Bob
Hambrecht, Bryan Hannegan, Sarah Harris, Joseph Heinzman, Raymond Hobbs, P. E., Dr.
Will Horwath, Dr. Richard Howitt, Roger Isom, Dr. Louise Jackson, Dr. Bryan Jenkins,
Dr. Steve Kaffka, Fanta Kamakate, Camron King, Dr. Gabrielle Kirkland, Hal La Flash,
Duane Larsen, Amber Leonard, Amy Luers, Steve Mara, Paul Martin, Jan McFarland,
Aimee McKane, Rachel McMahon, Ray Minjares, Dr. Jeff Mitchell, Dr. Frank
Mitloehner, Irving Mintzer, Larry Myer, Rob Neenan, Justin Oldfield, Luis Pando, Noel
Perry, Renee Pinel, Lynn Price, Dr. Greg Rau, Dr. Chuck Rice, Josh Richman, George
Robin, Jean Roggenkamp, Bob Rose, Karen Ross, Dan Rutherford, Dr. William Salas,
Steve Shaffer, Laura Shenkar, Dr. Johan Six, Dr. David Smart, Paul Sousa, Dr. Dan
Sperling, Ronald E. Stoltz, Dr. Matthew Summers, Andy Thornley, Joe Turnage, Brian
Turner, Andy Van Horn, Matt Vender Sluis, Lynn Walters, Dr. Charlie Walthall, Mona
Yew, and others. Any omissions from this list are unintentional.
The Committee also appreciates the many individuals and members of the public who
submitted public comments, commented on the draft reports, or spoke at the Committee
meetings.
Technical Writer: Peter Asmus
Cover Photo: David Amster- Olszewski
The Chair would like to acknowledge the generous financial support of the Energy
Foundation, Environmental Entrepreneurs and the William and Flora Hewlett Foundation.
ETAAC FINAL REPORT
1- 1
Figure 1- 1: California Per Capita
CO2- Equivalent ( tons per person)
1. INTRODUCTION AND EXECUTIVE SUMMARY
I. The Challenge and The Opportunity
Global climate change presents California with serious challenges to the health of its people and
ecosystems and the vitality of its economy. Properly implemented, the solutions to climate
change can also present enormous opportunities. The California Legislature and Governor
Schwarzenegger approved AB 32, the California Global Warming Solutions Act of 2006, which
requires the state to cut total greenhouse gas ( GHG) emissions such as carbon dioxide ( CO2) by
25 percent by 2020 ( compared to “ business as usual”
economic activity.)
Prior to the passage of AB 32, Governor
Schwarzenegger issued a 2005 Executive Order that set
an even more ambitious climate change response
program: an 80 percent GHG emission reduction by
2050. Other nations and states are now adopting this
aggressive reduction target in light of recent scientific
findings that suggest the world may soon be reaching a
tipping point on climate change impacts. Given
California’s expected population growth, this 2050
reduction target creates great challenges for the state, as
it requires a 90 percent per capita reduction in GHG
emissions ( see Figure 1- 1). Meeting this target will
require a sense of urgency for vastly more efficient use of
energy and the virtual elimination of all GHG emissions from the state’s energy infrastructure.
Despite these seemingly daunting challenges, California’s climate change policies can benefit the
state’s economy, environment, and residents. Developing cleaner energy and transportation
systems will give California a chance to improve the security of fuel supplies, address stubborn
air pollution concerns, and develop better designed communities and buildings. The
development of better methods of moving people and goods throughout the state is another
opportunity to improve economic efficiency and reduce pollution and congestion in the
implementation of our climate change response program. In many cases, these solutions provide
important co- benefits by addressing difficult and long- standing problems. Among them is the
inequitable distribution of the environmental costs associated with California’s electric power
and transportation infrastructure.
Continuing California’s long- standing tradition of innovation on environmental issues, AB 32
has given the California Air Resources Board ( CARB) a leadership role in forging new
approaches to diminishing the state’s carbon footprint working with other state agencies.
Existing California programs have demonstrated that major air pollution reductions can be
achieved through economic and technological advancements. For example, new electric power
plants in California now emit 90 percent less ozone and particulate forming Nitrogen Oxides
( NOx) than they did two decades ago due to technology- forcing regulations. Strict technology-forcing
standards have also resulted in California’s greenest new passenger cars emitting 99
14.62
13.82
9.88
1.47
23.4
0
5
10
15
20
25
1990 2006 2020 2050 2003 -
US
ETAAC FINAL REPORT
1- 2
percent less Volatile Organic Compounds ( VOC) and NOx than vehicles did in 1970. Policies
supporting aggressive energy efficiency upgrades, as well as higher energy prices and a
transition toward a service- oriented economy, have all helped California keep its per capita
electricity consumption flat for the past few decades. California has achieved this feat, in part,
through a balanced portfolio of policies, performance standards and market- based incentives.
These State policies addressed important market failures: pollution externalities; market barriers
to private sector Research, Development & Demonstration ( RD& D); misplaced financial
incentives; and imperfect information for energy consumers. As California turns its attention to
combating global climate change, new State policies designed to surmount these and other
market failures must expand in scope and creativity.
Electric Power
19.6%
Industrial
22.8% Ag & Forestry
8.0%
Others
8.4%
Transportation
41.2%
Figure 1- 2: Carbon Emissions by Sector
As shown above in Figure 1- 2, GHG emissions result from many activities ranging from
transportation to manufacturing to agriculture. Policies implemented under AB 32 and the
Governor’s Executive Order for 2050 must address all sectors of California’s economy so that all
significant sources of GHG emissions participate in both the challenges and opportunities
afforded by this critical piece of state legislation. This broad- scaled approach is the most likely
to create a level playing field, and address new alternative energy sources and fuels that could be
used in multiple sectors. For example, policies need to recognize that electricity and biofuels
will likely compete with more traditional transportation fuels in the future; therefore, policies
that address only the electric sector or only the petroleum refining sector are unlikely to achieve
the goals of AB 32.
The initial AB 32 target of reducing California’s GHG emissions back to 1990 levels by 2020 is
the critical first step toward reducing emissions and placing the state on a trajectory to meet long-term
GHG reduction goals. The long- term reduction goals for 2050 and beyond are equally
important and will require fundamental changes in consumer behavior, in energy use, and in the
infrastructure that supports virtually all economic activity. In some cases, the state will
encounter tradeoffs between the actions necessary to bring about the wide scale transformation
of a carbon- free economy with those that may bring about the lowest cost emission reductions in
ETAAC FINAL REPORT
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the short term. This report identifies recommendations to achieve both short- term and long- term
goals. Balanced and innovative approaches are clearly needed.
II. Major Strategies and Opportunities
AB 32 instructs CARB to create the Economic and Technology Advancement Advisory
Committee ( ETAAC) and instructs ETAAC to do the following:
“ Advise on activities that will facilitate investment in and implementation of
technological research and development opportunities including, but not limited to,
identifying new technologies, research, demonstration projects, funding opportunities,
developing state, national, and international partnerships and technology transfer
opportunities, and identifying and assessing research and advanced technology
investment and incentive opportunities that will assist in the reduction of greenhouse gas
emissions. The committee may also advise the CARB on state, regional, national, and
international economic and technological developments related to greenhouse gas
emission reductions."
ETAAC has identified five major strategies for promoting economic and technology
advancement. The Committee believes these policy approaches are key to California’s success
in tackling the climate change challenge. ETAAC has also identified five key areas of
opportunity, places where the state must focus its attention and resources to deliver the GHG
emission reductions and ancillary benefits needed for climate success. A general description of
each of these strategies and opportunities follows. A map of how each recommendation in the
report reflects these major themes is included in a chart at the end of this introductory chapter.
Strategy # 1: Accelerate GHG Emission Reductions
AB 32 establishes a fixed timeframe for California to achieve a 25 percent reduction in GHG
emissions relative to current levels. This 2020 timeframe is useful because it provides business
and policy makers specific targets for long- term planning. However, the competing interests of
many different stakeholders -- including industry, labor, environmentalists, land owners, and
others -- has led to a regulatory system for project approval that can be complex, time-consuming,
costly, and often litigious. Gridlock would not serve California as it looks to future
solutions to the climate change conundrum. ETAAC has identified areas ( for example the
deployment of advanced large scale renewable energy – section 5. III. D and methane digesters –
Chapter 6. II. A, etc.) where the project approval process could be improved without
compromising environmental integrity. To successfully complete this task, however, will require
addressing the special interests that created the existing system to begin with. Leadership and
skill to help design politically acceptable compromises will be needed.
There is an urgent need for investments in GHG emission reductions before the AB32
implementing regulations begin taking effect in 2012 because some investments in particular
technologies may preclude other choices that would lead to even greater GHG emission
reductions. In many cases, delaying these investments will also delay the total benefit of actions
that could be taken today to reduce GHG emissions.
ETAAC FINAL REPORT
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Lingering regulatory uncertainty has stymied some potential investments. These “ early actions”
by the private sector could proceed at a faster pace if the potential economic benefits of early
actions were made explicit. The actual economic value of “ credits” for early action depends on
market and regulatory decisions that may not occur immediately. If ownership and
quantification of these “ early action” credits were more clearly defined, increased investment in
GHG emission reduction projects could begin to flow, leaving California in a much better
position to cost effectively meet the AB 32 GHG emission reduction targets.
Strategy # 2: Balance a Portfolio of Economic and Technology Policies
Placing a price on carbon and other GHG emissions is a critical step towards responding to the
climate change threat as it allows private markets to incorporate the value of reducing these
emissions into their everyday business decisions. One potential option is a market based “ cap
and trade” system which establishes a cap on allowable GHG emissions that would ratchet down
over time. A declining cap can send the right price signals to shape the behavior of consumers
when purchasing products and services. It would also shape business decisions on what products
to manufacture and how to manufacture them. Establishing a price for carbon and other GHG
emissions can efficiently tilt decision- making toward cleaner alternatives. This cap and trade
approach ( complemented by technology- forcing performance standards) avoids the danger of
having government or other centralized decision- makers choose specific technologies, thereby
limiting the flexibility to allow other options to emerge on a level playing field.
If markets were perfect, such a cap and trade system would bring enough new technologies into
the market and stimulate the necessary industrial RD& D to solve the climate change challenge in
a cost effective manner. As the Market Advisory Committee notes, however, placing a price on
GHG emissions addresses only one of many market failures that impede solutions to climate
change. Additional market barriers and co- benefits would not be addressed if a cap and trade
system were the only state policy employed to implement AB 32. Complementary policies will
be needed to spur innovation, overcome traditional market barriers ( e. g., lack of information
available to energy consumers, different incentives for landlords and tenants to conserve energy,
different costs of investment financing between individuals, corporations and the state
government, etc.) and address distributional impacts from possible higher prices for goods and
services in a carbon- constrained world. Investing revenues from any allowance auctions in low
and zero carbon technology development and deployment will greatly increase the benefit of
putting a price on carbon. Performance standards ( i. e. emissions per kilowatt- hour, per mile
traveled, per units produced, etc.) also have a proven history of success and need to continue to
be part of California’s strategy. In complying with a performance standard, a regulated entity
should have the choice to use a mix of technologies that brings the entity into compliance on an
equivalent basis with a particular performance standard. In addition, California can consider
revenue- neutral fee shifting to reward the purchase of lower carbon products ( see Chapters
2. III. E and 3. IV. G).
These complementary economic and technology development strategies form the core of
ETAAC’s policy recommendations found in this report. Many of the strategies outlined in the
following pages of this report would be much more effective with appropriate price signals that
ETAAC FINAL REPORT
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flow from a declining cap on GHG emissions combined with near and long- term development of
low and zero carbon alternatives. A well conceived diverse portfolio featuring both market- based
policies and regulatory measures will be more efficient and less costly than relying exclusively
on options from either category of potential solutions on their own.
Government policy should not attempt to pick technology winners. Rather, performance- based
programs— whether market- based, command- and- control, or incentive oriented— should be the
normal course of business. ETAAC makes a number of recommendations based on the need to
help emerging technologies move through demonstration phases to achieve full commercial
viability ( see Chapters 2. II. B and 4. III. I). For instance, policies shaping development and
demonstration of innovative technologies may differ from those focused on introducing
technologies into the marketplace on a commercial scale. The best approach may be to support
new technologies to the point where they can stand- alone within a market structure characterized
by performance standards and carbon prices that become a part of everyday decision- making by
consumers and businesses. Full performance battery electric and fuel cell vehicles, for example,
are two major zero tailpipe emission technologies currently under development. While both
technologies will require significant government involvement to become fully commercialized,
ETAAC does not advise selecting one or the other as the preferred future technology. In the
shorter term, plug- in hybrids using clean electricity as part of their vehicle fuel may compete
with other vehicle technologies using lower carbon advanced vehicle fuels. Thus, standards,
policies, and incentives should be aimed towards establishing a level playing field and lowering
barriers to technologies that can then compete based on price, efficiency, emissions,
convenience, and other factors.
Flexibility in program design and implementation will be necessary to minimize the negative
economic impacts that might result from AB 32 implementation and to recognize the need to
phase- in new, low- and zero carbon technologies into the state’s economy. Preserving flexibility
for changing circumstances in the future is yet another important goal embedded in the work of
ETAAC. Electric power generation stations and other forms of capital intensive infrastructure
being planned today may become the primary energy sources for advanced vehicles of the future.
The crossover and spillover effects of today’s investment decisions will present significant
challenges and opportunities for both energy and transportation sectors.
Strategy # 3: Create Innovative Public Funding to Complement Private Investment
One result of the lack of a clear price for GHG emissions today is the inadequate level of RD& D
for new low and zero carbon technologies. Companies invest much less in RD& D than is
socially optimal because they expect a high return on their capital investments, they may not
capture all the benefits of RD& D investments, and because RD& D is an inherently risky
undertaking. Stimulating innovation in new technologies is the goal of RD& D. Broadly
speaking, there are two ways to foster innovation: by funding RD& D directly or by requiring
improved performance in the marketplace. In the energy sector, where new technologies are
often very capital intensive and integrated into complex production systems, a balanced approach
that uses both methods is clearly desirable.
The policies created to support AB 32 will galvanize significant private sector investment in
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California, but this expected investment will not be enough to reach all areas necessary to
achieve the overall GHG emission reduction goals. ETAAC reviewed areas where public
financing, possibly leveraged with private capital, can stimulate innovation and accelerate
adoption of cleaner products. ETAAC has identified the technology demonstration/ pre-commercialization
phase in a product’s life cycle as a critical stage for this type of investment. If
California decides to adopt a cap and trade system that includes the auction of emission
allowances, ETAAC proposes that a California Carbon Trust – discussed in greater detail in
Chapter 2. II. A – can direct investments in RD& D and finance technology pilot projects in
disadvantaged communities and throughout the State of California. Often, these projects offer
co- benefits such as improved air quality or employment. Investments from the California
Carbon Trust can fill RD& D funding gaps by leveraging the capabilities of universities, State
agencies, non- profits and other pioneering research leaders throughout the state.
If auction revenues from a carbon cap and trade system are large enough, they can also be used
to reduce the negative impacts of some of the more distortionary elements of California’s current
taxation system. In addition, these revenues could provide resources for GHG emission
reductions. This represents another potentially important policy option because it could improve
the economic efficiency of the overall California economy. Alternatively, these revenues could
address Environmental Justice issues by assisting communities or industries that are
disproportionately affected by climate change or by climate change mitigation programs. Any
such assistance should not eliminate the incentive created by placing a price on carbon, but
instead should help with short- term transitions to a more competitive, low- carbon economy.
California does have several hundred million dollars worth of existing incentive fund programs
underwriting RD& D and related research activities ( outlined in Appendix III). They typically
serve specific functions. At present, none of them specifically target GHG emission reductions
and they also are not currently coordinated to achieve the maximum amount of co- benefits.
ETAAC recommends that the State of California make an affirmative commitment to RD& D
programs geared toward GHG emission abatement ( see Chapter 2. II. B), and examine how to best
integrate these climate change priorities and existing State funded programs with existing
environmental and energy policy goals. The State should also consider creating a new
organization to house these and other programs. By not just supporting, but actively promoting
clean energy innovation, California has the opportunity to seed the marketplace with promising
new technologies that may provide critical tools to achieve AB 32’ s reduction targets. This
seeding effort will also bring to market solutions necessary to meet the 2050 goal of a carbon-free
economy. This will also drive new investment dollars to California and better enable our
state to attract and nurture the most promising clean energy start- up businesses.
Strategy # 4: Foster International and Domestic Partnerships
California should learn from the European Union and others in the international community that
have already moved forward on the implementation of policies designed to respond to global
climate change. California can learn from both policies that have worked and those that have
not. Success on the climate change front domestically can benefit greatly from partnerships
between the public and private sector ( see Chapter 4. III. H), between State and local
governments, between the State and Federal government, and between the State and other
ETAAC FINAL REPORT
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nations. Broad deployment of clean technology will generally drive down costs and lead to
subsequent generations of innovation. California must leverage agreements with western U. S.
states, Canadian provinces, the European Union, the United Kingdom and other countries and
coordinate with Federal programs ( such as the recently signed “ Energy Independence and
Security Act” – H. R. 6) if AB 32 is to accomplish its expressed intent. Achieving genuine
success on climate change will also require the transfer of clean technology to developing
nations, including China, India, Mexico and Latin America. Exporting both information on
public policy solutions and the benefits of a strong Cleantech industry is one example
recommended by ETAAC ( see Chapter 2. II. B); partnering with other states, the Federal
government, and other nations on low and zero tailpipe emission vehicles is another ( see Chapter
3. IV. E).
Within the state, leveraging and coordinating RD& D efforts of State and Federal labs, private
research institutes, universities and non- profit organizations is a major opportunity for California
to garner cost- effective emissions reductions and co- benefits. CARB has initiated two projects
that will offer stakeholders consolidated documents illuminating climate research efforts and
priorities in California. The California Climate Research, Development, Demonstration, and
Deployment ( RDD& D) catalog will present climate- related research and commercialization
efforts underway in California in a publicly available, searchable database. The California
Climate RDD& D Road Map will delineate each State agency’s research priorities in support of
AB 32’ s climate change response goals. The catalogue and road map were initiated in October
2007 and will be completed by April 2008. A coordinated effort would ensure that market and
policy signals reach and influence RDD& D being funded at these innovation centers ( see
Chapter 2. II. B). Such an effort may facilitate policy initiatives that reflect real technological
progress and may help individual innovations achieve the necessary scale more quickly. This
could be accomplished by a new entity charged with coordinating low and zero carbon research
efforts, or it could be accomplished by an existing private or public entity. The CPUC recently
acknowledged a similar need and opened a proceeding to consider creating a “ California Institute
for Climate Solutions” to be administered within California universities.
Strategy # 5: Leadership Across State Agencies
There must be effective leadership across all State agencies to reduce GHG emissions from their
own governmental operations and from the stakeholders they oversee and/ or regulate. Just as all
sectors of the state’s economy need to participate in the opportunities and challenges of meeting
California’s GHG emission reduction goals, all State agencies must also participate ( with
Cal/ EPA playing a key government coordination role). This sort of coordination will also be
important for planning efforts to adapt to the climate change effects that could still potentially
occur even if atmospheric GHG levels are stabilized to avoid the most severe negative impacts
( see Chapters 3. IV. H and 5. VI. K).
Many new technologies and practices to lower GHG emissions will also have co- benefits such as
less air pollution or lower water consumption. But some will also lead to higher costs and may
even exacerbate other policy challenges. It will be necessary for California to identify and
manage tradeoffs that will occur as it addresses climate change. Tradeoffs among different
public policy objectives should be integrated across all State agency decisions -- those associated
directly with AB 32 as well as other air pollution regulations, infrastructure development, and so
ETAAC FINAL REPORT
1- 8
forth. Such reciprocity is needed to avoid an unbalanced set of regulatory and project decisions
that would result in missed opportunities to help meet climate change goals and integrate these
goals into other State programs. SB 85, approved in August 2007, calls for an annual Report
Card summarizing progress from all State agencies ( section 12892). ETAAC strongly supports
this Report Card as a way of providing regular feedback. If possible, these Report Cards should
be strengthened with independent, third party verification.
Opportunity # 1: Accelerate Efficiency Measures
The most cost- effective GHG emission reduction opportunities continue to be investments in
energy efficiency. Whether it is more efficient buildings, appliances or motor vehicles, initial
up- front investment is rewarded - often very quickly - with reduced energy use and lower overall
costs. While California has led the nation in building and appliance efficiency, the State has
significant opportunities to do much more. In some cases, further technological innovation is
needed to create more efficient products. In other cases, faster adoption of existing and
emerging technology needs to be encouraged ( see Chapters 3. IV. E, 3. IV. F, 4. III. F;, 5. II. A,
5. II. B).
ETAAC believes that new types of financing will likely increase the development and adoption
of energy efficient technologies and practices. Consequently, financing policies that can be
implemented through utilities or municipalities to increase efficiency are recommended ( see
Chapter 2. III. F, G). The potential use of auction proceeds to help finance efficiency upgrades to
lower energy bills in historically disadvantaged communities is another opportunity to achieve
efficiency, while also meeting AB 32’ s Environmental Justice goals.
Energy efficiency opportunities exist in all the sectors considered in this report. ETAAC
recommends that the State, in considering these opportunities, ensure the proposed programs and
measures are coordinated to avoid overlaps, duplication, and double- counting.
Opportunity # 2: Remove Carbon from Energy Sources
California’s future sources of electricity, transportation fuels and heating fuels will need to be
zero or near- zero carbon by 2050. Renewable energy technologies such as wind, solar, and
others offer the technical potential to generate all of California’s electricity, but there are a
number of technical and implementation challenges that will not be simple to overcome.
ETAAC examined the opportunity of how to quickly scale up these sources of renewable energy,
( such as wind, solar, and geothermal steam) both on- site distributed generation and central
utility- scale power plants. ETAAC also identified barriers that must be overcome ( See Chapter
5. III. C) to achieve an increase in renewable energy or carbon- free equivalent to 33 percent.. In
addition, biomass sources, if coupled with carbon sequestration, could produce renewable energy
supplies and permanently remove carbon from the atmosphere provided that there are no net
adverse air quality effects from growing and using the biomass ( see Chapters 6. II. A, 6. II. C,
6. II. D ad 7. IV. A).
Electricity storage has the potential to enable higher penetrations of renewable energy in
California’s power supply portfolio. Technologies such as pumped hydro storage, compressed
air, thermal storage, batteries, or hydrogen can transform intermittent renewable generation into
ETAAC FINAL REPORT
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a reliable resource for energy planning ( see Chapter 5. IV. F). Electricity storage in the form of
plug- in electric vehicles has the potential to both reduce reliance on fossil fuels in the transport
sector and allow for even greater utilization of existing and future renewable electricity
generation ( see Chapter 5. IV. G).
In the AB 32 timeframe, ETAAC believes fossil fuels, including natural gas, can play an
important role for both power generation and heating. Over the long term, fossil fuels such as
natural gas are most likely to play a valuable role for traditional uses and as a feedstock for
vehicle energy supplies if carbon can be separated and permanently stored. Large scale
deployment of low carbon, zero carbon and even negative carbon biomass energy will likely
require methods to permanently sequester carbon. California should continue to partner with
other states, Federal agencies and international partners to encourage RD& D to find cost-effective
and safe methods of sequestering CO2 streams from power generation ( see Chapters
5. V. I).
Opportunity # 3: Rethink Transportation to Lower Demand and Carbon Emissions
Transportation by far accounts for the largest fraction of GHG emissions in California, roughly
40 percent of the state’s total inventory. In order to meet 2050 GHG goals, the transportation
sector will need to accomplish a dramatic transition to new low and zero carbon technologies.
ETAAC recommends that California build upon existing State programs to reduce air pollution
and " decarbonize" the state’s transportation system. These existing programs include the Pavley
– Schwarzenegger vehicle GHG emission regulations, the Low Carbon Fuel Standard, the
Low/ Zero Emission Vehicle program and the Zero- Emission Bus program. California should
also initiate a near- term program to reduce GHG emissions from Heavy- Duty Vehicles ( HDV).
The infrastructure to deploy technologies emerging from these State programs must also be
based on low or zero emission fuel supplies.
In addition to transportation technology itself, it is time to rethink current methods of mobility
for both freight and people. California’s growth in motor vehicle purchases and State
investments in road infrastructure occurred largely during a period in time when transportation
fuels were inexpensive. This is no longer the case. Decreasing Vehicle Miles Traveled ( VMT)
is critical to meeting AB 32 GHG emission reduction goals. Reducing this growth will also yield
important co- benefits such as diminishing the time lost in traffic congestion and the
corresponding improved quality of life. Putting a price on carbon is one way to help reduce
vehicle use and congestion. Yet these approaches are limited in scope. They must be
complemented by pricing for other currently unpriced transportation costs, alternative transit
options, such as electric rail, and urban and suburban designs that provide better and affordable
alternatives to the internal combustion engine ( see Chapter 3. III). Local government land use
planning decisions will need to be coordinated with state- wide priorities to encourage transit-oriented
residential and commercial development ( see Chapter 3. III. A). Without such
coordination, overall VMT will climb due to current population growth rates. This is just one of
many ways in which local governments are a key partner with the State in complying with AB
32.
ETAAC FINAL REPORT
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California’s freight systems will need a similarly dramatic overhaul. California’s coastal ports
and Central Valley freeways have become increasingly congested. Alternative modes of goods
movement have become both a necessity and an opportunity to reduce GHG emissions and other
criteria air pollutants.
Opportunity # 4: Reduce GHG Emissions from Industry, Agriculture, Forestry and Water
Forest, agricultural and industrial practices also emit GHG emissions due to energy consumption
and other activities. Significant opportunities exist to reduce these GHG emissions through
established best practices such as the expanded and judicious use of combined heat and power in
industry ( see Chapter 4. II. C). In addition, both the agriculture and forestry sectors hold the long
term potential to sequester carbon in biomass and soil ( see Chapter 6. II. E, 6. II. F and Chapter
7. IV. B).
Water use in California is extremely energy intensive. Today, more than 19 percent of
electricity, 30 percent of natural gas not used for electricity generation, and 88 million gallons of
diesel fuel per year are used to treat, deliver and heat water in California each year. Policies and
technologies that increase the efficiency of the state’s water delivery systems and reduce end- use
will produce multiple benefits. Less demand for water resources translates into reduced
emissions of CO2 and other air pollutants since less energy is used to pump, treat and move
water. Other economic and environmental benefits also flow from water efficiency ( see Chapter
8. II. A and 8. II. B). There is also an opportunity to capitalize on carbon- sequestering benefits of
soil and biomass and reduce end- use water demand by providing incentives for sustainable
practices, including the application of compost ( see Chapter 4. IV. L and 4. IV. N).
Opportunity # 5: Capture Cleantech Employment, Economic, Health, and Environmental
Justice Co- Benefits
Many policies designed to combat climate change can also bring about substantial economic,
health and environmental co- benefits for the State of California. For example, climate policies
can stimulate the Cleantech industry in California providing both economic growth and jobs.
The Cleantech industry encompasses everything from alternative energy generation to
wastewater treatment to more resource- efficient industrial processes. Although each of these
industries is unique, they all share a common thread: they rely upon new and innovative
technology to create products and services that compete favorably on price and performance
while reducing our collective environmental footprint. Given its legacy of entrepreneurism and
clean energy innovation, California is well positioned to attract venture capital investments in
Cleantech companies. In 2007, California led the nation in Cleantech venture capital with $ 1.78
billion, representing 48 percent of total U. S. Cleantech investments of $ 3.67 billion. This
represents a 50 percent growth over 2006 in venture investments in California companies.
Cleantech represents a new export opportunity, too. Cleantech products will increasingly be
needed worldwide to address climate change and other challenges associated with the decreasing
availability of water and other natural resources. Furthermore, Cleantech is spurring new
employment opportunities in such fields as solar energy and energy efficiency device
ETAAC FINAL REPORT
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installation. ETAAC proposes State supported training programs to encourage the development
of these kinds of green- collar jobs ( Chapter 2. III. D).
At present, the State of California is doing little to encourage the manufacturing of Cleantech
products within state borders. In fact, it is quite possible that many Cleantech companies will
locate their manufacturing operations out- of- state, while keeping their corporate headquarters
and RD& D facilities in California. ( This trend is already underway.) The State should consider
a variety of policy recommendations to make it more economically attractive to both invent and
manufacture solutions to climate change in California. Such incentives would allow California
to more fully reap the economic benefits of the rapidly expanding Cleantech industry ( Chapter
2. III. C).
Some policies designed to combat climate change can reduce pollutants affecting local public
health. Ground level ozone and black carbon ( a type of fine particulate mostly from diesel
combustion) contribute to both climate change1 and major public health problems that exist in
California. 2 Assessing existing regulations for public health pollutants such as ozone and fine
particulate regulations were outside the scope of the ETAAC report. Nevertheless, ETAAC
acknowledges the importance of existing programs to achieve public health standards and
welcomes innovations that would further these goals while also meeting AB 32’ s GHG emission
reduction targets. In addition, ETAAC has identified a number of opportunities to reduce CO2
and other GHG emissions along with reducing ozone and fine particulates.
In evaluating potential policy and technological fixes to comply with the challenges of AB 32,
ETAAC recognized the need to develop solutions that avoid imposing undue compliance or
increased pollution burdens on disadvantaged communities suffering from historic pollution
levels. Instead, ETAAC has explored how AB 32 could create new economic opportunity for
these same communities. Many recommendations were designed in part to specifically reduce
pollution burden in Environmental Justice areas ( see Chapter 2. II. A). In all cases, further
evaluation such as cumulative impacts assessment need to occur when specific implementation
measures are developed by CARB or other agencies or organizations to ensure Environmental
Justice benefits and avoid disadvantages.
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III. Summary Message
California has a prime opportunity as it seeks to meet the challenges embodied in AB 32. By
acting sooner rather than later, California can lower the costs of transitioning to an economy less
dependent upon carbon and other GHG emitting energy sources. 3 At the same time, it can reap
the rewards of a more sustainable, efficient and competitive economic system. The opportunities
linked to AB 32 cut across all sectors examined in this ETAAC report: transportation;
industrial/ commercial/ residential energy use; electricity/ natural gas; agriculture; forestry; and
water. Renewable energy, alternative fuels, and energy efficiency could create environmental
benefits and jobs in all stages of economic development, ranging from RD& D to manufacturing
and the rest of product and equipment lifecycles.
Policy makers, industry and consumers must bear in mind that the long- term effects of decisions
made today will still be with us in 2020, and in many cases, in 2050 and beyond. Land- use
decisions and choices about new electric power generation infrastructure will either help or
hinder California’s efforts to meet both the 2020 and 2050 GHG emission reduction targets.
Development of new kinds of clean vehicles and other transportation technologies over the next
decade may dictate whether the state is on a trajectory toward meeting the AB 32 mandates or
falling behind the curve on achieving these critical long- range goals.
Californians are ready to respond to the climate change challenge. To meet the timeframe
outlined in AB 32, however, California must do the following:
· Continue the state’s long- standing commitment to environmental policy and build on the
success of existing programs and regulations in order to develop low and zero carbon
solutions;
· Establish a clear market price on carbon to provide the incentives for businesses and
consumers to reduce their carbon emissions efficiently and California should invest the
value of any resulting auction or fee revenues to achieve additional reductions;
· Attract and leverage private capital for productive investments;
· Develop and retain new green collar jobs;
· Adopt polices and measures that facilitate the kind of business and technology
innovations that have made California world renowned;
· Develop and maintain a capability to assess and adjust policies and measures over time as
new conditions emerge and new technologies are developed. Other parts of the U. S. and
the world are also investing in Cleantech and California needs to maintain its leadership
position to comply with AB 32;
· Continue partnerships at the State, national, and international level with leaders on
climate change mitigation strategies.
In addition to mitigating the dire impacts of climate change, effective action on AB 32 can also
yield the co- benefits of cleaner air, new industries and jobs here in California. The knowledge
ETAAC FINAL REPORT
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and products created in response to AB 32 will strengthen both the California economy and the
state’s international leadership on environmental issues.
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IV. The Role of ETAAC
ETAAC was created to facilitate the development of new policies and technologies as
quickly and economically as possible, including initiatives that reach outside of direct GHG
emission regulations. CARB provided several specific areas of focus for ETAAC and
requested that the Committee look broadly at issues that relate to CARB, other State agencies
and the State Legislature:
· Review and prioritize incentive proposals for industry compliance with AB 32,
identifying potential funding sources to underwrite these fiscal incentives;
· Identify the areas where public sector investment is critical to overcoming barriers to
achieving the California’s climate protection objectives by 2020 and 2050 and discuss
whether those investments should be at the local, State or Federal level, or some
combination thereof;
· Identify advanced technologies with the greatest GHG emission reduction potential, their
commercial status, and the steps necessary to accomplish significant market
penetration;
· Identify export opportunities for California businesses that specialize in carbon reduction
technologies and services;
· Recommend key demonstration projects for early success and assist CARB in
formulating proposals for public/ private partnerships and the potential involvement of
national and international organizations;
· Review and comment on the findings and recommendations of the Cal/ EPA Market
Advisory Committee, to the extent that report affects deliberations of ETAAC.
To meet these objectives, CARB appointed members to the ETAAC in January 2007. Members
were selected based on their knowledge and expertise in fields of business, technology research
and development, climate change and economics. ( Brief biographies of members are listed in
Appendix I.) The Committee is chaired by former CARB chairman and former Cal/ EPA
Secretary Alan Lloyd, Ph D. The Committee vice- Chair is Bob Epstein, Ph D., noted engineer
and entrepreneur, and co- founder of Environmental Entrepreneurs.
ETAAC has endeavored to adhere to the following ten general principles while carrying
adhering to its mission and tasks:
1. Address near, medium and long- term goals
2. Encourage early action
3. Foster collaboration at all levels of government
4. Encourage public and private research, demonstration and development
5. Leverage California’s centers of innovation
6. Establish a level playing field and do not pick winners and losers
7. Maximize public health and socio- economic benefits
ETAAC FINAL REPORT
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8. Address Environmental Justice concerns
9. Participation across all sectors
10. Flexible approaches
This final ETAAC report reflects consensus views when consensus was reached, and reflects a
range of differing points- of- views when there was general support that fell short of a consensus.
Each recommendation may not necessarily reflect the views of every ETAAC member.
ETAAC met nine times throughout California ( see Appendix II) and received presentations by
members of California’s technology community. Meetings were subject to the Bagley- Keene
Open Meeting Act and webcast to allow significant opportunities for public comments and input.
ETAAC also received numerous suggestions from the general public for ways to reduce climate
change emissions ( a summary table of the suggestions received prior to the final drafting of this
report is presented in Appendix IV and V). ETAAC has also agreed to develop an Internet
website at www. etaac. org to provide access to details of the technologies ETAAC is reviewing
as mechanisms to comply with AB 32.
The work of ETAAC is designed to complement ongoing efforts to reduce GHG emissions in
California. The recommendations contained in this report do not replace or supersede existing
State regulatory programs, or any adopted future policies authorized under AB 32. However, the
ETAAC report may facilitate the development of technologies that help meet, or even exceed,
the GHG emission reduction goals outlined in AB 32. Comments received by ETAAC regarding
the development of specific rules have been collated outside of this report for consideration
during the appropriate regulatory development process.
ETAAC FINAL REPORT
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V. Organization of ETAAC report
Broad participation by all sectors of California’s economy will be necessary to achieve the AB
32’ s reduction targets. This ETAAC report contains a chapter offering economic/ financial
strategies for climate change solutions that stretch across sectors, followed by one chapter for
each of the six specific sectors analyzed from a stand- point of policy and technology strategies
and opportunities ( transportation, industry/ commercial/ residential, electricity/ natural gas,
agriculture, forestry sector, and water). ETAAC’s comments on the Market Advisory
Committee report also comprise a chapter in this report. Finally, detailed information on energy
and transportation technology advances is included in the Appendix IV and V, respectively.
Developing solutions of the scale required by the climate change challenge will be a complex
endeavor. It is therefore important to recognize that each of the proposed policies included in
this ETAAC report will inevitably interact with one another. Each recommendation put forward
by each ETAAC sector subgroup contains critical information on expected GHG emission
reductions and an expected timeframe for achieving these reductions when each policy is
considered as a stand- alone option. The “ timeframe” sections of each policy recommendation
are designed to indicate which of these policies can be in place in the near term ( in time for the
2012 deadline of AB 32), medium term ( in time for the 2020 deadline of AB 32), or long- term
( in time for the 2050 deadline under the Governor’s Executive Order). ETAAC did not prepare a
full scale implementation analysis for these recommendations individually, or as an integrated
program ( which would depend on the menu of choices selected). ETAAC did, nonetheless,
identify major co- benefits and mitigation requirements when such information was known and
available. ETAAC believes that the benefits, costs, risks, trade– offs and uncertainties associated
with climate change response policies must be made transparent as California moves forward
with the implementation of AB 32. In the final analysis, it is vitally important to understand and
fully communicate the rich diversity of information included in this ETAAC assessment so that
California policy makers and the general public can identify solutions to AB 32 that are fair,
balanced, and effective.
ETAAC FINAL REPORT
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VI. Mapping from Recommendation to Categories, Timeframes and
Responsible Parties
Recommendation
Relevant Strategies and
Opportunities
Time-frame
Responsible
parties
2- FINANCE
A. Create a California Carbon Trust
Accelerate GHG Emission Reductions;
Balance a Portfolio of Economic and
Technology Policies;
Innovative public finance;
Accelerate efficiency;
International and Domestic Partnerships
By 2012
CARB
Legislature
Other
B. Promote Clean Energy Innovation
and Commercialization
Balance a Portfolio of Economic and
Technology;
Innovative public finance;
Capture Economic, Health, and
Environmental Justice Co- benefits
International and Domestic Partnerships
By 2012
CARB
CEC
CPUC
C. Leveraging AB 32 to Spur California
Job Creation and Manufacturing
Capture Economic, Health, and
Environmental Justice Co- benefits
By 2012
Legislature
CPUC
Other
D. Clean Technology Workforce
Training Program
Capture Economic, Health, and
Environmental Justice Co- benefits
By 2012 Other
E. Fee and Tax Shifting ( Feebates)
Balance a Portfolio of Economic and
Technology;
Accelerate efficiency
By 2012
Legislature
Other
F. Municipal Assessment Districts
Innovative public finance;
Accelerate efficiency
By 2012 Other
G. On- Bill Financing for Small Business
Energy Efficiency Projects
Accelerate efficiency By 2012
CPUC
Other
3. TRANSPORTATION
A. Planning: Smart Growth and Transit
Villages
Accelerate efficiency;
Rethink Transportation to Lower Demand
and Carbon;
Capture Economic, Health, and
Environmental Justice Co- benefits
By 2012
CEC
Other
Cal Trans
B. Pay- As- You- Drive Insurance
Rethink Transportation to Lower Demand
and Carbon
By 2012
CARB
Legislature
Other
Cal Trans
ETAAC FINAL REPORT
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C. Congestion Charges
Balance a Portfolio of Economic and
Technology
Rethink Transportation to Lower Demand
and Carbon
By 2012
Legislature
Other
Cal Trans
D. Employer- Based Commute Trip
Reductions
Rethink Transportation to Lower Demand
and Carbon
By 2012
CARB
Other
E. New Vehicle Technology
Improvements
Accelerate efficiency;
Rethink Transportation to Lower Demand
and Carbon;
Reduce GHG - Industry, Ag, Forestry,
Water
By 2020
CARB
Other
F. Low GHG Fleet Standards and
Procurement Policies
Balance a Portfolio of Economic and
Technology;
Accelerate efficiency;
Rethink Transportation to Lower Demand
and Carbon
By 2012
By 2020
CARB
Other
G. GHG- based Vehicle Feebates and
Registration Fees and Indexed Fuel
Taxes
Balance a Portfolio of Economic and
Technology;
Accelerate efficiency;
Rethink Transportation to Lower Demand
and Carbon
By 2012
Legislature
Other
H. Air Quality Incentives Programs and
Standards
Balance a Portfolio of Economic and
Technology
Capture Economic, Health, and
Environmental Justice Co- benefits
By 2012
CARB
Legislature
Other
I. Create Markets for Green Fuels
Balance a Portfolio of Economic and
Technology;
Remove Carbon from Energy Sources;
Rethink Transportation to Lower Demand
and Carbon;
Reduce GHG: Industry, ag, forestry, water
By 2012
CARB
Other
4 – Industrial, Commercial & Residential Energy Use
A. Cleantech Tax Incentives
Innovative public finance;
Accelerate efficiency
By 2012
Legislature
Other
B. Rebates for Load Reduction
Accelerate efficiency;
Reduce GHG: Industry, ag, forestry, water
By 2012 Other
C. Improve Policies for Combined Heat
and Power Plants
Accelerate efficiency;
Reduce GHG Industry, ag, forestry, water
By 2012
CEC
CPUC
Other
D. Distributed Renewable Energy
Generation: Solar PV
Remove Carbon from Energy Sources By 2020 Legislature
CPUC
ETAAC FINAL REPORT
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Other
E. Customer Choice of Electric Service
Provider
Remove Carbon from Energy Sources By 2012
Legislature
CPUC
F. Building Efficiency Programs and
Incentives
Accelerate efficiency By 2020
CEC
Other
G. Combustion Devices: Energy
Efficiency
Accelerate efficiency;
International and Domestic Partnerships
By 2012
CARB
CEC
Other
H. Industry - Government Partnerships
to Reduce Industrial Energy Intensity
International and Domestic Partnerships;
Coordinate Across State Agencies
By 2012
CEC
Other
CalEPA
I. A Revolving Fund for Technology
Demonstration Projects
Innovative public finance;
Accelerate efficiency;
Reduce GHG Industry, ag, forestry, water
By 2020 No answer
J. Develop Suite of Emission Reduction
Protocols for Recycling
Reduce GHG Industry, ag, forestry, water By 2012
CARB
CIWMB
K. Increase Commercial- Sector
Recycling
Reduce GHG Industry, ag, forestry, water By 2012
CARB
CIWMB
L. Remove Barriers to Composting Reduce GHG Industry, ag, forestry, water By 2012
CARB
CIWMB
Cal Trans
M. Phase Out Diversion Credit for
Greenwaste Alternative Daily Credit
Reduce GHG Industry, ag, forestry, water By 2012
CARB
CIWMB
N. Reduce Agricultural Emissions
Through Composting
Reduce GHG Industry, ag, forestry, water
By 2020
CARB
CDFA
CIWMB
O. Evaluate and Improve Policies for
Qualified Waste Conversion
Technologies
Reduce GHG Industry, ag, forestry, water By 2012 Other
5. ELECTRICITY AND NATURAL GAS
A. Energy Efficiency Program
Coordination
Accelerate efficiency By 2012
CARB
CPUC
B. Aggressive LED Energy Efficiency
Programs
Accelerate efficiency By 2012
CARB
CEC
CPUC
C. Take Steps Necessary to Achieve an
Increase in Renewable Energy to 33
Balance a Portfolio of Economic and
Technology
By 2020
CARB
CEC
ETAAC FINAL REPORT
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Percent by 2020 to Reduce GHG
Emissions
Remove Carbon from Energy Sources CPUC
Other
D. Competitive Renewable Energy
Zones
Accelerate GHG Emission Reductions;
Remove Carbon from Energy Sources
By 2012
CEC
CPUC
Other
E. Renewable Energy Technology
Assessments
Remove Carbon from Energy Sources By 2012
CEC
CPUC
Other
F. Electricity Storage as an Enabling
Technology for Renewable Energy
Remove Carbon from Energy Sources;
Coordinate Across State Agencies
By 2012
CEC
CPUC
Other
G. Plug- in Electric Drive Vehicles as
Storage Devices
Remove Carbon from Energy Sources;
Rethink Transportation to Lower Demand
and Carbon
By 2020 CARB
H. Smart Grid as Enabling Technology
for Renewables and Clean Vehicles
Accelerate efficiency;
Remove Carbon from Energy Sources
By 2012
Legislature
CPUC
I. Carbon Capture and Sequestration in
Geological Formations
Remove Carbon from Energy Sources By 2020 Other
J. Low and Zero Carbon Electricity
Generation Plan
Balance a Portfolio of Economic and
Technology;
Remove Carbon from Energy Sources
By 2012
CARB
CEC
CPUC
Other
K. Unifying Standards for Climate-
Related Programs
Balance a Portfolio of Economic and
Technology;
Coordinate Across State Agencies;
By 2020
CARB
CEC
CPUC
6. AGRICULTURE
A - Manure to Energy Facilities
Remove Carbon from Energy Sources;
Reduce GHG Industry, ag, forestry, water
By 2012
By 2020
CARB
CEC
CPUC
Other
CDFA
CalEPA
B - Enteric Fermentation Reduce GHG Industry, ag, forestry, water
By 2020
By 2050
Other
CDFA
C - Agricultural Biomass Utilization
Remove Carbon from Energy Sources;
Reduce GHG Industry, ag, forestry, water
By 2020
By 2050
CARB
CEC
CPUC
CDFA
CalEPA
SWRCB
D - Dedicated Bio- Fuels Crops Remove Carbon from Energy Sources
By 2012
By 2020
CARB
CEC
CDFA
ETAAC FINAL REPORT
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CalEPA
SWRCB
E - Soil Carbon and Sequestration Reduce GHG Industry, ag, forestry, water
By 2012
By 2020
By 2050
CEC
CDFA
SWRCB
USDA/ NRCS
F - Riparian Restoration and Farmscape
Sequestration
Reduce GHG Industry, ag, forestry, water
By 2012
By 2020
By 2050
CDFA
USDA/ NRCS
G - Fertilizer Use and Water
Management Efficiency
Accelerate efficiency;
Reduce GHG Industry, ag, forestry, water
By 2012
By 2020
By 2050
CEC
CDFA
SWRCB
USDA/ NRCS
7. FORESTRY
A - Link Forest Fuels Management and
Biomass Utilization
Remove Carbon from Energy Sources;
Reduce GHG Industry, ag, forestry, water
By 2012
CARB
Other
CDF
B. Reforestation and Forest Management
for Enhanced Carbon Storage
Reduce GHG Industry, ag, forestry, water By 2012
CARB
Other
CalEPA
CDF
C - Urban Forests for Climate Benefits
Remove Carbon from Energy Sources;
Reduce GHG Industry, ag, forestry, water
By 2012
Other
CDF
Cal Trans
D. Endorse " California Climate
Solutions" Program
Capture Economic, Health, and
Environmental Justice Co- benefits
By 2012
CARB
Other
8. WATER POLICY
A. Establish a Loading Order for Water
Accelerate efficiency
Reduce GHG Industry, ag, forestry, water
Coordinate Across State Agencies
By 2012
Legislature
CPUC
Other
SWRCB
DWR
B. Establish a Public Goods Charge for
Funding Water Improvements
Accelerate efficiency
Reduce GHG Industry, ag, forest, water
By 2012
Legislature
CPUC
SWRCB
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1 IPCC, Fourth Assessment Report ( AR4), Working Group 1 Report The Physical Science Basis, Summary for
Policymakers, 2007.
2 The California Almanac of Emissions and Air Quality, 2007 Edition.
3 Stern Review, Cabinet Office - HM Treasury ( 2006).
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2. FINANCIAL SECTOR
I. Introduction
The ETAAC financial sector subgroup investigated several different strategies and methods to
encourage financial sector innovation in the deployment and development of greenhouse gas
( GHG) emission reduction technologies. The general public contributed a variety of written
suggestions on financial tools to accelerate these clean technologies, which will be documented
at the ETAAC web site ( www. etaac. org). This financial sector chapter sums up suggestions
brought forward during public meetings as well as a set of informal meetings with
representatives from Cleantech companies, Cleantech investors, companies which operate in
existing carbon markets and members of the greater U. S. financial community.
With billions of dollars now being invested in Cleantech companies, California has a unique
opportunity to create new jobs and entire new industries right here in our own backyard. Smart
economic development policies that take advantage of new financial tools and programs are
needed to ensure that California realizes its full potential as a climate change pioneer and
captures the job creation benefits of its environmental leadership. Many startup companies want
to grow in California. They want to maintain a strong nexus between manufacturing, research,
development and deployment ( RD& D), and proximity to major markets. Yet barriers to this
potential and highly beneficial synergy remain. These barriers can result in relocation of
Cleantech companies to other states and regions.
Several overriding themes emerged from the finance sector subgroup’s inquiry:
· Existing state financial incentives and grants are unlikely to be sufficient to spur the
needed innovation in GHG emission reduction technologies to comply with AB 32.
CARB staff produced a document ( see Appendix III) listing the various state grants
available under existing programs. While some of these programs may be beneficial, they
are not yet coordinated to achieve maximum impact for AB 32’ s GHG emission
reduction targets ( see recommendation C below.) AB 32 sets the stage for a timely
opportunity to rationally link the State’s numerous but disparate RD& D programs to
make sure they are coordinated and focused on encouraging GHG emission reductions.
· California would benefit from a cogent financial incentive program to stimulate the
deployment of GHG reduction technologies both inside and outside of capped economy
sectors. Judging from the experience of existing cap and trade systems in the United
States1 it is unclear if such systems encourage or discourage innovation. Though the
ETAAC financial sector subgroup does not presume that an emissions trading system will
be created under AB 32, it does believe that the State needs a significant incentive system
to help assure that compliance is achieved at lowest possible cost. This incentive system
should also encourage investments in California’s disadvantaged communities to address
broader Environmental Justice and economic development goals.
· Revenue neutral shifting of fees and taxes can encourage the distribution and purchase of
cleaner products and fuels.
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· California is well positioned to attract venture capital investments in Cleantech
companies. California led the nation in Cleantech venture investments in 2007 with $ 1.78
billion, representing 48 percent of total Cleantech investments in the U. S. However, the
amount of invested capital is not the same thing as productive investment. The State
should encourage private investment that is informed by policy trends and technology
advancements in order to generate both robust economic and environmental returns. 2
· International Partnerships can help create export opportunities for California Cleantech
companies. As California continues to transform into a greener economy, the State will
need to provide a pathway for clean technology manufactured in the state to be
showcased in other nations. If California is going to be a leader in developing the
technologies of tomorrow, it will be important that these technologies gain traction
throughout the world. There is ample opportunity for California to create this market
since economies large and small are looking for cleaner practices to cut their carbon
emissions. A key aspect to developing these international linkages and partnerships is to
ensure that California has an active presence in these nations. It is the State’s duty to
foster linkages between Cleantech businesses in California and businesses throughout the
world. These linkages will not only encourage other nations to use California’s home
grown technologies, but provide a venue to learn about how best practices give
businesses incentive to keep innovating. Existing California trade offices in other
countries should showcase the State’s accomplishments and offer information on
California’s clean technologies and corresponding business opportunities.
· At present, the State is doing little to encourage the manufacturing of products in
California. In fact, it is expected many Cleantech companies may be moving their
manufacturing out- of- state while keeping their headquarters and RD& D facilities in
California. The ETAAC finance sector subgroup did not look at the comprehensive set of
issues related to attracting and keeping manufacturing in California, but rather focused on
issues pertaining to AB 32 or to the manufacturing of products in California directly
impacted or created by AB 32.
From these overriding themes, the ETAAC finance sector subgroup issued two central
recommendations and a set of additional policies designed to support activities in all of the
subsequent ETAAC subgroup reports: transportation; industry/ commercial/ residential;
electricity/ natural gas; agriculture; forestry; and water. An ETAAC analysis of the Market
Advisory Committee’s report in chapter 9 examines how market structures will also impact early
actions, innovations and price signals in each of these economic sectors of California.
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II. Central Recommendations: Carbon Trust & Cleantech Commercialization
A. Create a California Carbon Trust
A new public or a public- private entity creates an incentive fund using allowance revenues to
encourage carbon reductions in sectors inside and outside the cap, while also supporting
environmental justice goals, actively managing the carbon market, and encouraging RD& D
efforts. Activities could start prior to 2012, helping to set an early price signal for carbon and
other GHG emissions.
· Timeframe: In place by 2012.
· GHG Reduction Potential: The potential for GHG emission reductions would depend on
the Carbon Trust’s funding source ( initially from early auction proceeds or some other
source) and the cost of acquiring carbon rights. The Trust is likely to secure reductions at a
cost equal to or slightly less than allowance auction prices. In other words, for every
million dollars of CO2 allowance auction revenue provided to the Trust, roughly one
million tons of CO2 would be reduced.
· Ease of Implementation: Moderately difficult. Barriers include the following:
o Assumes some auction revenue.
o Requires the creation of a new market maker. It may make sense to house the Trust
within an existing entity or create a new entity designed specifically to encourage the
development and execution of GHG emission reduction projects outside the cap. This
entity could be a public entity or a public/ private entity.
· Co- benefits / Mitigation Requirements: Many co- benefits, no mitigation requirements:
o Provides funding for carbon reductions.
o Encourages carbon reduction projects prior to 2012.
o Can direct funding towards technology demonstration and research in areas where
private investment is lacking.
o Supports Environmental Justice goals of empowering communities and reducing
criteria and toxic pollutants.
· Responsible Parties: To be determined. Could be an existing agency ( a combination of
California Air Resources Board ( CARB) and regional air boards, the California Treasurer’s
office, etc.) or could be a new entity.
Problem: California would benefit from a financial mechanism that stimulates investment in
GHG emission reduction projects and technologies in both capped and uncapped sectors of the
state’s economy. This financial mechanism can address the following problems:
· Barriers and early failures in emerging markets for GHG emission reductions.
· Lack of financial support for projects in disadvantaged communities or with other
significant co- benefits.
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· Price spikes and instability in the carbon market.
· Gaps in private sector funding for RD& D projects.
Possible Solution: A California Carbon Trust could serve four important roles as the manager of
an incentive fund for carbon and other GHG emission reductions in California. Its primary
purpose would be to achieve GHG emission reductions beyond those coming from the AB 32
caped sectors, helping California to reach its ambitious reduction targets. The second purpose,
closely linked to the first, would be to further the Environmental Justice goal of empowering
communities to take part in achieving emission reductions of both carbon and other criteria toxic
pollutants. A third role for the Trust would be to serve as a market maker and price stabilizer
during the early years of the carbon market. And the fourth role would be to fund University
research and “ first project” demonstration financing in areas where private sector funding is
lacking. The Trust’s activities could start prior to 2012, jump- starting GHG emission reductions
in California, helping to establish an early price signal for carbon and other GHG emissions.
1) Achieve Additional GHG Reductions and Address Carbon Market Failures
This Trust would achieve its primary goal of reducing GHG emissions outside the cap of a cap
and trade system -- reductions that cannot be claimed by regulated entities -- by offering to
purchase the carbon benefits from projects that meet strict requirements of being additional, real
and verifiable. Qualified projects would compete based on a project- proposed price of carbon.
This process would operate in parallel with private offset investments, but would have greater
flexibility to fund reductions that would achieve AB 32 goals but may not receive private sector
funding. For instance, private sector investments may need to achieve rapid payback times to
attract private capital, with the benefits of reductions in the future greatly discounted. By taking
a long view of meeting GHG emission reductions in 2020 and 2050, the Trust could invest in
projects that may have a greater overall reduction per dollar of investment, but a longer lead
time. The Trust could also address other gaps and failures in the carbon market, encouraging a
variety of projects that are having trouble finding access to capital from the private sector. The
Trust would not fully fund the project, but would offer enough of a financial incentive to allow
the project to become financially feasible.
To ensure the integrity of the carbon reductions, the Trust should generally limit funding to
projects for which clear measurement and verification standards exist. For example, project types
could include those for which the California Climate Action Registry has accounting protocols or
those projects that can produce measurable and verifiable energy efficiency gains or low carbon
energy generation. In some cases, it may be appropriate for the Trust to encourage projects for
which no protocols currently exist, or projects with great potential but some uncertainty. In such
situations, the price paid for carbon reductions would be reduced to account for the risk. The
Trust could consider keeping some percentage of carbon reductions in reserve so that
environmental integrity can be maintained in case of project failures.
The Trust’s standard project selection process would be based on the relative cost- effectiveness
of emissions reductions, similar to the State’s successful Carl Moyer program. The Trust could
issue requests for proposals periodically ( quarterly or annually, for example), and applicants
could include municipalities, hospitals, schools, community organizations, nonprofits, or any
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other project sponsor outside of the cap. An application to the Trust for funding would detail the
project’s plans, including the quantity of emissions to be reduced and a proposed price at which
the project will sell the emission reductions to the Trust. A “ Dutch auction” or descending price
auction could be used to find the lowest cost projects and determine the price at which the Trust
decides to purchase carbon reductions. Because the Trust does not fund entire projects, all
projects would have to be financially viable through a combination of their own balance sheet
and the additional value of selling the carbon reduction credits to the Trust.
The Trust could choose to do one of two things with the carbon it has “ purchased” from emission
reduction projects. Both of these choices have the added benefit of ensuring that carbon
reductions occur within California and that investments stay within the state.
· The Trust can retire the carbon credits for public benefit. Credits earmarked for
retirement might have no real market value or might pose double- counting concerns.
For example, the Trust would retire the credits generated by an energy efficiency
program that allows the associated Load Serving Entity to claim credit by reducing its
own emissions. All carbon reduction projects that also value co- benefits such as
abatement of air pollution would have to be retired.
· Credits from Trust projects that value only carbon might be eligible for sale in the
voluntary markets. The revenue generated by these sales could be put back into the
Trust and used to invest in further reductions. Possible buyers might include state
agencies, corporations, or individuals ( through an offset program) that want to offset
their emissions.
Note that the Trust could potentially be designed so that some of the carbon credits it purchases
could be used by capped entities as a flexible compliance mechanism in the regulated market.
These credits would come from certain approved project types for which protocols exist.
2) Dedicate Resources to Fund Projects to Achieve AB 32’ s Environmental Justice Goals
By setting aside a fixed portion of its funds to be distributed to projects based on cumulative
impacts, geographic location, demographics, and/ or associated co- benefits, this Trust could also
help to reach important environmental justice goals. Distributing funds based on geography or
demography would ensure that disadvantaged communities receive a pre- determined amount of
funding for projects that not only reduce carbon emissions, but also foster community
development and protect low income consumers from rising energy prices.
In addition to distributing funds based on geography or demographics, the Trust could choose to
favor projects with ancillary benefits, such as green collar job creation, technology
demonstration, or criteria and toxic pollution clean- ups. In these cases, the Trust would pay not
only for carbon reductions, but would also consider co- benefits such as local air quality benefits.
For example, a project that reduced NOx in addition to CO2 could be financially rewarded not
only for the decreased carbon, but also for the NOx reduced by the project. By attaching either a
time value or a monetary value to co- benefits, the Trust would create incentives for projects that
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not only help California reach its GHG emission reduction targets, but also achieve
Environmental Justice goals such as job creation and pollution abatement.
For example, a project applicant might want to retrofit the Heating, Ventilation, and Air
Conditioning ( HVAC) system at a multi- family residential building. A market barrier exists
because of the discrepancy between who makes the capital investment and who ultimately reaps
the benefit of that investment. In this case, the building owner must front the capital while the
tenants benefit from lower utility bills. The Trust creates an incentive to help overcome the
market barrier by offering to purchase the project’s carbon benefit from the building owner. The
building owner benefits because he or she is reimbursed for the retrofit up to the value of the
carbon reduced, while tenants benefit from lowered utility bills, not to mention more efficient
and better quality air conditioning and heating in their homes. The State of California benefits
from the reduction in carbon, and capped entities such as members of the business sector benefit
because California is closer to its emission reduction target at no expense to them. In this
example -- as in all instances where the Trust would make this type of project investments -- it is
important to note that the State would have to address any overlaps with programs eligible within
the scope of a GHG cap, to avoid double counting and clarify crediting issues.
The selection process for projects with co- benefits would be similar to that for projects that
involve only climate change benefits. Projects would be judged on relative cost- effectiveness,
compared with other projects in the same category ( based on geographic location, specific co-benefits,
etc). Projects would also need to be financially viable through a combination of their
own economics and the additional value of the carbon reductions, plus whatever values the Trust
assigns to the co- benefits. Again, the GHG emission reduction credits could be retired for public
benefit or possibly sold into voluntary markets.
3) Actively Manage the Early Carbon Market and Mitigate Price Volatility
The third role of the Trust could be as an enabler of the early carbon market in California. The
Trust could purchase emission reductions that have been certified as tradable credits and sell or
retire them as needed in order to help stabilize the California carbon market. The Trust could be
particularly valuable in seeding the market and stabilizing it in the early years. In later years, as
the California carbon market grows and matures, the role of the Trust as “ market maker” would
diminish.
The Trust could also be designed so that some of the carbon credits it purchases from projects
outside the cap could be used as a flexible compliance hedge in the regulated market. These
credits would come from certain approved project types for which protocols exist, and would
only be sold into the compliance market as needed to alleviate price spikes. The Trust would thus
act as a “ shock absorber,” buying credits from capped entities when demand for carbon is weak -
- in order to support higher prices needed for investment and innovation -- and selling credits
when demand is high and supply is low.
By stabilizing the price of carbon ( when necessary) and providing a sense of certainty over time,
the Trust would be managing carbon the way that the Federal Reserve Bank manages interest
rates. This active management should decrease the likelihood of the regulatory process
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overreacting or reacting too slowly to volatile carbon prices. As a dynamic manager of the price
of carbon with a long- range view, the Trust would perform the role of a market oriented safety
valve and obviate the need for static regulations such as price floors or ceilings.
Specific rules for intervention in the market would have to be developed in advance. The market
regulating role of the Trust would be carried out by an independent body of experts. This would
be a preeminent group, comparable to the Federal Reserve board or the California Independent
System Operator, which currently manages the majority of transmission resources for the state’s
electricity grid.
Considerable public comments were received both in favor and against the role of the California
Carbon Trust as an active market maker. The potential effectiveness of this role will depend on
the overall design of both the regulations and the structure of the California Carbon Trust.
4) Encourage Research, Development, and Demonstration
A fourth role for the Trust would be to fund University R& D, as well as demonstration projects
and first production facilities. These areas lack adequate private funding, but can produce
valuable technology advancement, accelerating GHG emission reductions and supporting
economic growth. The Trust could set aside some percentage of the allowance revenues to be
spent in these areas, with funds to be distributed based on judgments of the relative promise,
reliability, and cost- effectiveness of projects in various categories. This really encompasses two
related, but separate, uses of Carbon Trust funds:
· University Research and Development: The Trust would provide funds for RD& D of the
technologies needed for a low carbon future. The role of the Trust in funding University
RD& D should be considered alongside the proposed California Institute for Climate
Solutions currently under consideration by the CPUC so as to prevent overlap and
duplication of efforts. The Trust could possibly serve as a source of funds for the
Institute.
· Demonstration and First Production Facilities: By supporting demonstration and first
production facilities, the Trust could bridge an important gap in the financing of new
technologies. Public sector managers generally treat demonstration, first project
financing, and commercialization as the responsibility of the private sector, while most
private sector financiers are unwilling to invest at these early stages due to the high level
of risk. This dilemma creates a financing gap that requires a novel solution. The Trust
could provide the financing and capital necessary to address this problem and encourage
the commercialization of clean energy technologies. This could be done in many
different ways. ( See “ Support Demonstration Finance” - Finance Sector Section II. C,
below.)
Funding Sources for the Carbon Trust
Revenues for the Trust could come from the auction of allowances, from penalties or fees for
non- compliance post- 2012, or from another source such as the general fund or borrowing
guaranteed through repayment from auction revenues. Based on historical experience, revenue
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from penalty fees is expected to be minimal. California Environmental Quality Act mitigation
fees are another possible revenue source to consider. 3 If the Trust is set up as a public- private
partnership, private sector businesses would be another potential source of funding. If the Trust
is designed to be a market maker and has the authority to purchase and sell carbon credits, an
additional source of funding would be the sale of certified, tradable carbon credits. Finally,
another source of funding could be the sale of carbon reduction credits into the voluntary market.
The State might consider offering one or more early auctions of a small percentage of the 2012
allocations. This early auction proposal presupposes that the state has decided not to grandfather
all allocations based on historic emissions and has established a minimum percentage of
allowances to be auctioned in 2012. One or more early auctions would help to set an early price
signal and would remove some of the uncertainty about rule- making, jump- starting the market
for carbon in advance of 2012. A price discovery period would probably reveal a price lower
than expected; this is what has happened historically in other similar schemes. Early auctions
would allow the state to “ learn by doing,” essentially serving as a trial period. The State would
have the opportunity to learn and make adjustments before 2012. If the State decides against an
early auction, the Trust could be funded initially through the State’s general fund or through a
loan, or through other sources.
Any auction revenues are legally a fee and thus must meet the legal standard established by the
Sinclair Paint court decision. A “ Sinclair Test” requirement means that the fee must be
reasonable and there must be a nexus between the purpose of the fee and the use of its revenues.
The Trust passes the Sinclair test because both the fee and the Trust’s expenditures are intended
to cut carbon emissions in California.
Consideration should be given to designing the Trust as a public/ private partnership in order to
leverage private capital in addition to the public money used to purchase credits. Involving
private capital could provide access to resources that should help improve the economics of the
Trust, particularly in the earlier years of operation before 2012. Another possible benefit of
involving the private sector would be a contract guarantee that Trust revenues would be
restricted to the purpose of diminishing GHG emissions.
Models for the California Carbon Trust
The Carbon Trust ( UK) is an independent government- funded company created in 2001. Its
mission is to accelerate the country’s move towards a low- carbon economy by developing
commercial low- carbon technologies and working with business and the public sector to cut
emissions. The Carbon Trust carries out five different functions: ( 1) information and education;
( 2) practical solutions, knowledge, and resources for businesses and public sector entities that
wish to reduce energy use and emissions; ( 3) funding, advice, and demonstration for low carbon
technologies; ( 4) developing new, low carbon businesses; and ( 5) investing in clean energy
technologies with commercial potential.
The Climate Trust is a non- profit formed in 1997 in response to an Oregon law that requires
new fossil fueled power plants to offset a portion of their CO2 emissions. The Climate Trust
provides high- quality offset projects for power plants, regulators, businesses, and individuals.
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The Climate Trust is one of the largest buyers of offsets in the United States, with a portfolio of
sixteen projects that are anticipated to offset 2.6 million metric tons of CO2 over project
lifetimes.
The Carbon Market Efficiency Board is a market- regulating body proposed in the Warner-
Lieberman " America's Climate Security Act" ( S. 2191). This Board would be authorized to
trigger relief remedies to protect the economy in case of volatile prices or unpredictable market
events. Operating under the oversight of the US Department of Treasury, the Board would be
authorized to allow increased borrowing of allowances or to temporarily expand the National
Emission Allowance Account, so long as the cap in future years is tightened enough that
cumulative emissions reductions remain unchanged.
The Climate Change Credit Corporation is a nonprofit corporation proposed in the Warner-
Lieberman Bill. The Corporation would receive and auction allowances and distribute the
proceeds. Auction revenues would be distributed among seven clearly delineated categories.
Examples include 20 percent for a public- private partnership to commercialize low and zero-emissions
transportation sector technologies and reducing vehicle miles traveled, 10 percent for
air quality improvements, and 10 percent for mitigating impacts in disadvantaged areas.
B. Promote Clean Energy Innovation and Commercialization
Support California RD& D and commercialization efforts today to ensure that critical innovations
are available to contribute to GHG reductions in future years. Optimize current programs toward
the climate change goal and consider new programs to accomplish objective. Consider creating
a new entity to coordinate these efforts.
· Timeframe: Programs in place by 2012.
· GHG Reduction Potential: Cannot quantify.
· Ease of Implementation: Moderate. Barriers include:
o Recalibrating current subsidy programs that are not structured to measure GHG
emission reductions could be politically challenging.
o Some current subsidy programs calculate avoided costs differently so it may be
difficult to compare or measure real program value or comparative potential for
GHG emission reductions.
o The State currently has no scale- relevant program in place to support
demonstration projects for emerging technologies. A new financial vehicle may
need to be created to fill this gap by sharing risk between public and private
sectors.
o Complicated State programs make it difficult for the private companies to identify
opportunities for them to participate.
· Co- Benefits / Mitigation Requirements: Many benefits, no mitigation requirements:
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o Would fill the “ innovation pipeline” with promising new technologies that could
substantially cut carbon and GHG emissions.
o Would orient disparate clean energy programs toward the unifying goal of
decreasing GHG emissions without decreasing the importance of other public
policy goals.
o Would better ensure that public and private RD& D efforts are informed by public
policy objectives.
o Would close a critical gap in the clean energy investment ecosystem by
supporting demonstration projects.
o Would ensure greater linkage and enable more effective comparison across
current programs by creating consistent calculation of avoided costs.
o Would support California’s culture of entrepreneurship and support economic
development objectives.
· Responsible Parties: California Energy Commission ( CEC); California Public Utilities
Commission ( CPUC); CARB. Could involve the creation of the new organization
referenced below.
Problem: The technologies needed to support GHG reductions beyond 2020 do not yet exist.
While the State of California currently funds a variety of RD& D programs, these programs are
not necessarily geared strictly toward measuring GHG reductions. Moreover, the State’s
individual subsidy programs are in most cases not optimally coordinated in pursuit of the
principal current objective of AB 32 -- GHG emissions reduction -- causing inefficiencies and
missed opportunities for improved performance. On top of that, other states are implementing
programs and incentives to attract Cleantech companies as part of their economic development
strategies.
Possible Solution: The State of California should make an affirmative commitment to RD& D
programs geared toward GHG abatement. By not just supporting but actively promoting clean
energy innovation, the State has the opportunity to seed the California marketplace with
promising new technologies that may aid in achieving GHG abatement goals -- particularly for
the beyond 2020 goals,. This will also drive new investment dollars to California and better
enable our state to attract and nurture the most promising clean energy start- up businesses. The
State should also consider creating a new organization to house these and other programs.
What is “ Cleantech”?
The Cleantech industry encompasses a broad range of products and services, including
everything from from alternative energy generation to wastewater treatment to more resource-efficient
industrial processes. Although some of these industries are unique, all share a common
thread: they rely upon new and innovative technology to create products and services that
compete favorably on price and performance while reducing our collective environmental
footprint.
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According to categories established by the Cleantech Capital Group, total U. S. venture
investment in Cleantech was $ 3.67 billion in 2007. California received $ 1.78 billion or 48
percent of the total. To be included in the Cleantech category, products and services must do the
following: optimize use of natural resources; offer a cleaner or less wasteful alternative to
traditional products and services; have their genesis in an innovative or novel technology or
application; add economic value compared to traditional alternatives.
The eleven Cleantech categories measured are:
Energy Generation & Fuels
Energy Storage
Energy Infrastructure
Energy Efficiency
Transportation
Water & Wastewater
Air & Environment
Materials
Manufacturing/ Industrial
Agriculture
Recycling & Waste
Companies in these categories may not always market themselves specifically as “ Cleantech”
and investors likewise may not necessarily consider themselves to be “ Cleantech” investors.
The ETAAC financial sector subgroup offers these suggestions to foster clean energy innovation:
Support Demonstration Finance: Create a single or a series of financial vehicles to support
demonstration finance for projects that have particularly high climate change abatement
potential. This may include, but is not limited to, clean generation technologies, energy
efficiency industrial applications and vehicle demonstrations of new low and zero tailpipe
transportation options. The absence of funding for project demonstrations is a significant
impediment to the maturation of new technologies and is consistently identified by thought
leaders as a major gap in the financial architecture of clean energy. Public sector managers view
demonstration as the responsibility of the private sector, while private sector investors view it as
too risky. The demonstration finance fund could be structured to leverage a combination of
public funds already nominally dedicated to such efforts and private funding, and/ or it could be
funded by royalties, shared savings or shared carbon credits banked for future use. The proposed
California Carbon Trust ( Finance Sector Section II, B) is one option to consider for this role.
Organizing principles for a demonstration finance effort could include:
· Establish Public Sector Tenants. Where possible, use the State of California, county and
city and/ or other large scale public sector customers as “ anchor tenants” for
demonstration projects.
· Support Specific Projects with the Highest Likelihood of Return. A process should be
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established whereby projects having the highest likelihood of making a major
contribution to climate change mitigation, but are too speculative for the private markets,
are given first priority.
· Enable Market/ Consumer Choice. In addition to technology specific demonstration
projects, support a broader set of investments in infrastructure for demonstration projects
of technologies that can showcase their merits against one another ( i. e. biofuels
infrastructure versus renewable energy transmission infrastructure.
· Encourage Broader Participation in Procurement Processes. Consider using a
demonstration fund to allow emerging technologies to participate in electricity and fuels
procurement by funding their above- market cost component.
· Partner Where Possible. Because demonstration projects come in all shapes and sizes, it
would be optimal to allow the private sector to participate. Debt and high risk equity
from the private sector at market rates could be coupled with contributions from the
public sector in the form of serving as a backstop to mitigate against above- market costs
and risks.
· Link Current Demonstration Efforts. The Public Interest Energy Research Program
( PIER) and the Emerging Technologies Coordinating Council ( ETCC), both funded by
investor- owned utility ( IOU) ratepayers, have funds available and actively pursue
demonstration projects. In addition, the CPUC is considering a proposal by Pacific Gas
& Electric and Sempra Energy to create an analogue to the ETCC specifically for
renewable resource demonstration projects. These efforts, while very important, are all
immature, not coordinated, and not geared to address the new mandates of AB 32. At
some point it may be useful to link all demonstration project funds and to consider a
broader funding source than just IOU ratepayers.
Specific technology areas that merit attention from a demonstration finance program include:
· Clean Generation. Support initial megawatt ( MW) scale installations that prove
technical feasibility and enable project financing for emerging technologies.
· Energy Efficiency Technologies. Support demonstration projects for industrial equipment
to accelerate the adoption of emerging, yet technically proven, energy efficiency
technologies. 4
· Clean Transportation. Support vehicle demonstrations of low and zero emission
transportation options including light, medium and heavy duty plug- in hybrids, dedicated
electric vehicles, and hydrogen or other advanced fuels. 5
Target RD& D Funding for Carbon Reductions: Promote the use of public funds to support
research specifically for technologies offering potentially high climate change abatement value.
Consider linking the current individual subsidy programs into a unifying framework with a
common set of reduction objectives, possibly including a consistent approach to State- calculated
avoided costs. Accurate and consistent calculation of avoided costs would help identify the most
cost- effective technology options and better ensure that RD& D funding is efficient and attuned
to commercialization.
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Leverage California’s Centers of Innovation: Leverage and provide coordination among the
existing RD& D efforts of State and Federal labs, private research institutes and universities.
Currently there is no single source of information about what the referenced centers of
innovation are working on or how their research priorities are established. A coordinated effort
would ensure that market and policy signals reach and influence innovation centers. Such an
effort may enable policy initiatives that reflect real technological progress and may help
individual innovations achieve scale more quickly. This could be accomplished by a new entity
charged with coordinating low carbon research efforts, or it could be accomplished by an
existing private or public entity. The CPUC recently acknowledged a similar need and opened a
proceeding to consider creating a “ Climate Solutions Institute” to be housed within California
universities.
Engage the Private Sector: Create visible onramps for private sector support for early stage
clean energy innovation. Create a roadmap of the State’s technology priorities citing public
funding of certain sectors where applicable ( i. e. where funding starts and where it stops). Where
it makes sense, create financial vehicles that leverage both the public and private sectors.
Develop a program including an outreach campaign that enables our state to more effectively
attract and nurture the most attractive low carbon start up entrepreneurs. Create industry specific
public private partnerships in support of low carbon objectives to ensure private sector
knowledge, engagement and support.
Consider Creating a New Entity to Coordinate These Efforts: A single focused entity may
be well positioned to act as a coordinator of policy- motivated technology innovation, for
example by administering targeted State grant funds for specific technology challenges – i. e. the
“ golden carrot” approach to goal- setting and reward. Such an entity could also enable the
multiple public and private centers of clean energy innovation in California to communicate,
share research, seek private funding, and move mature technologies through the procurement
processes of the major state energy providers. The organization could also act as the principal
agent for external market development and technology transfer to demand centers outside of
California. Finally, such an entity could play a valuable “ connective tissue” role in helping to
coordinate State incentive programs toward the AB 32 reduction goals, and in providing the
private sector with insight into the structure and availability of incentive funding.
The organizational form and supporting revenue structure of a new entity would be dependent on
the objective. A variety of organizational models could be considered including:
· Create a new State program authority within an existing State agency;
· Create a private nonprofit entity via statute similar to the creation of the California
Climate Registry;
· Create a private vehicle that manages public fees and funds to accomplish public
objectives similar to the Carbon Trust;
· Create a private nonprofit organization that does not manage public fees.
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In response to public comment on this issue, ETAAC recognizes the potential value of initiating
this coordinated process via the creation of a statewide “ Action Plan” that would “ enable
California’s agencies and institutions to avoid duplication, maximize coordination, leverage
resources, ensure cost- effective results, and identify gaps in necessary efforts.” 6
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III. Additional Organizational and Policy Recommendations
C. Leveraging AB 32 to Spur California Job Creation and Manufacturing
A five- year “ Buy California” incentive program could boost in- state Cleantech manufacturing
and take advantage of the lower embedded carbon content of California- manufactured products.
Amending current disincentives in the California’s income tax and sales tax codes would help
ensure that California is competitive with other states in attracting Cleantech capital investment.
A Cleantech manufacturing attraction initiative could help the state proactively attract and grow
companies here.
· Timeframe: In place by 2012.
· GHG Reduction Potential: Significant, but difficult to quantify. Potential reductions
depend upon the type of manufacturing established in California and the proximity of
manufacturing locations to where goods are sold and used. The manufacture and
transportation of products manufactured in California for use within state borders is likely
to generate fewer GHG emissions than those products manufactured elsewhere.
· Ease of implementation: Moderate.
· Co- benefits / Mitigation Requirements: Many benefits, no mitigation requirements:
o Reduced GHG emissions due to California’s lower carbon energy supply ( relative
to other states and countries with Cleantech manufacturing);
o “ Multiplier effect:” additional jobs and economic activity generated through the
close proximity of suppliers, installers and other ancillary businesses;
o To the extent that this encourages the adoption of clean energy technologies,
California residents can expect improvements in air quality.
· Responsible parties: CPUC; State Legislature; California Business Transportation and
Housing Agency.
Problem: California currently faces stiff barriers to developing a strong Cleantech manufacturing
sector. Nearly 340,000 state manufacturing jobs were lost in a recent five year period.
Cleantech manufacturing could help create new jobs to replace these employment losses and
create a substantial multiplier effect with suppliers and the transportation and financial sectors,
while also reducing GHG emissions.
Companies contemplating moving products from the laboratory to full- scale manufacturing are
under strong economic pressures to locate out of state. While many states provide incentives to
attract Cleantech investment, California’s corporate income tax apportionment formula imposes
a higher tax burden on those hiring and investing within the state’s borders. Imposition of a sales
tax on manufacturing equipment installed for in- state use makes capital- intensive expansion in
California significantly more expensive than in almost any other state. Out- of- state
manufacturing results in increased emissions of carbon being released into the atmosphere due to
less efficient and higher carbon content energy supplies. Encouraging in- state manufacturing
would therefore result in both lower GHG emissions and significant in- state economic benefits.
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Possible Solutions: California can benefit from a time- limited incentive program that promotes
the growth of in- state Cleantech manufacturing. The goal of a “ Buy California” campaign
should be to get a new market started, rather than to create corporate dependence on another
entitlement program. California cannot match the incentives offered by every other state. But
California could act to remove the current disincentives in the State’s income tax code that
reduce a company’s tax bill when it decides to grow outside of California. State policy makers
should also take action to ensure that available capital resources in California are competitive
with other states.
California should examine state policies from Massachusetts, Washington, Oregon, and New
York, which are moving aggressively to promote Cleantech manufacturing. These states offer a
combination of grants, tax incentives and credits, loans and guarantees, and seed capital to
promote local jobs and the adoption of technologies developed and/ or manufactured in those
states. These efforts often dramatically lower the capital costs for companies that locate in those
states. If California takes its leadership for granted, we will lose high quality jobs, significant tax
revenues, and other benefits of having a thriving Cleantech sector.
Here are a few examples of what these other states are doing. Oregon -- which does not have a
state sales tax -- approved House Bill 3201 recently to provide a 50 percent income tax credit up
to $ 20 million ( up to ten percent of the annual cost of the facility over five years if renewable
energy systems and components are manufactured in state). California provides no comparable
investment credit and subjects new manufacturing equipment to a sales tax that generally
exceeds eight percent. As a result, a company contemplating a $ 40 million capital investment
could face a final net projected cost of approximately $ 23 million in Oregon for that facility, but
close to $ 43 million for an identical facility in California.
An example of what California might emulate is the Massachusetts’s Technology Collaborative
( MTC), which offers Renewable Initiative Rebates similar to California’s Self Generation
Incentive Program ( SGIP). The difference is that Massachusetts offers an additional incentive
( an extra $ 0.25/ watt for solar and an extra $ 2.00/ watt for fuel cells) if components are
manufactured in Massachusetts. Similarly, Washington enacted Senate Bill 5101 in May 2005,
establishing production incentives for individuals, businesses, or local governments that generate
electricity from solar power, wind power or anaerobic digesters. The incentives range from
$ 0.12/ kilowatt hour ( kWh) - $ 0.54/ kWh, depending on technology type and where the equipment
is manufactured.
One example of how to address California’s competitive disadvantage is found in SB 1012
( Kehoe), which extends California’s self generation incentive program to combined heat and
power projects and requires the CPUC to “ provide an additional incentive of $ 0.50/ kWh from
existing program funds for the installation of qualifying technologies that are manufactured in
California by companies that maintain their principal place of business in California.”
Because fuel cell systems and solar panels are large durable goods, it makes sense from an
environmental standpoint for them to be manufactured domestically. These technologies offer
direct carbon reductions by generating clean electricity. Locally produced clean energy
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technologies offset GHG emissions associated with importing large heavy equipment from
across the country or the world. Early actions to reduce the California’s CO2 levels should not
only consider end- use applications, but lifecycle product transportation impacts on the climate
and the environment.
Along with GHG emission reductions, fuel cells, solar and wind technologies generate virtually
no NOx, SOx, or other harmful particulates. Accelerating the adoption of these technologies in
California will also improve overall air quality and state living standards. On top of the
environmental benefits, AB 32 could also work wonders for the state economy. There will be an
estimated $ 14 to $ 19 billion of additional U. S. Cleantech investment between 2007 and 2010,
resulting in 40,000 to 50,000 new jobs. 7 State Cleantech retention and attraction policies will
help ensure that California benefits from the job creation and economic development spurred on
by its environmental leadership and the passage of AB 32.
In addition to the direct “ green collar” job creation that can come from promoting in- state
manufacturing of clean energy technologies, a beneficial “ multiplier effect” can occur. The
multiplier effect of a successful manufacturing facility will generate additional jobs and
economic activity through the close proximity of suppliers, installers and other ancillary
businesses.
A five- year “ Buy California” incentive program could boost Cleantech manufacturing through
year 2013. Building high production volumes should help drive down production costs, enabling
the industry to contribute significantly to achievement of the 2020 targets contained in AB 32
with progressively fewer incentives going forward.
As part of this effort, California should also develop an aggressive Cleantech manufacturing
attraction program that proactively identifies key incentives and reaches out to Cleantech
manufacturers interested in siting, remaining, or expanding in California. Through this program,
the California Business Transportation and Housing Agency would:
· Coordinate with relevant public and private sector parties including the California Labor
Federation, the California Manufacturers and Technology Association and TechNet.
· Identify additional barriers to in- state manufacturing and in- state business attraction and
retention with strategies for removing them.
· Develop additional recommendations that may include tax incentives for up- front capital
costs and State tax credits for businesses that use clean energy equipment produced in
state.
· Analyze effectiveness of other State policies to increase in- state manufacturing.
· Develop a comprehensive list of California’s existing incentives and educate Cleantech
companies and investors about their availability.
· Highlight benefits of green manufacturing clusters including: the ability to share
resources; strategies for obtaining land use permits; access publicly- funded training;
economic trend information; energy efficiency strategies; financial services
information; greater supplier access.
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· Identify existing manufacturing in California that has the potential to take companies to
the next level of success and offer the necessary support mechanisms.
D. Cleantech Workforce Training Program
At present, California lacks a program to address workforce needs across industries that are
developing and deploying advanced clean technologies in California. Creating a new program in
this area could address demands for the skilled workforce necessary to serve the Cleantech
industry’s needs.
· Timeframe: In place before 2012.
· GHG Reduction Potential: Difficult to estimate.
· Ease of Implementation: Straightforward. Models for successful workforce training
programs exist.
· Co- benefits / Mitigation Requirements: Many benefits, no mitigation requirements:
o Increased competitiveness for companies due to lower training costs incurred by
businesses; Cleantech business growth and retention; higher profits.
o Skilled and available labor pools to attract new businesses to California; lower
turnover rates with skilled workforce.
o Apprenticeship opportunities and new curriculum for academic institutions that
cater to clean energy sectors.
o Increased coordination between community- based workforce training programs,
apprenticeship programs and community college programs.
o Labor- management training partnerships in Cleantech sectors.
o Expansion of high- quality, career oriented employment opportunities.
o Increased tax base for California.
· Responsible Parties: The California Labor and Workforce Development Agency would
administer. The Employment Development Department ( EDD) would develop and
manage the RFP process and track performance. In coordination with the State
Workforce Investment Board ( WIB), a panel of experts would develop priorities,
principles and criteria, and require accountability. Panel makeup would include
employers, labor representatives, and training program providers ( including community
college district representatives and workforce and economic development agencies.)
Problem: California’s initiatives to address global climate change are boosting demand for a
skilled and trained workforce. Already, workforce shortages are being reported in areas such as
heating, ventilation and air conditioning. A technically educated workforce is vital for
California’s emerging energy sectors to be competitive and for the state to attract service and
supply- side businesses to the area.
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Possible Solutions: Establish a “ Cleantech Workforce Training Program” that could effectively
equip workers with skills in advanced energy technologies at a cost of $ 3,000-$ 6,000 per trainee
annually. The Cleantech Workforce Training Program would leverage this funding through
additional public and private funds. The goal would be to double its funding base. To the greatest
degree possible, this program would utilize existing program infrastructure, including the
California State Advanced Transportation Technology and Energy program within the
community college system and building trades apprenticeship training programs.
This program would support, create and coordinate sector- by- sector training efforts tailored to
the needs of new and existing Cleantech businesses. Training programs must be employer-driven
and reflect true workplace needs.
A properly designed and executed Cleantech Workforce Training Program would lead to
business- government- labor partnerships that support ongoing skill development and quality
employment opportunities. It would also keep California’s economy more competitive.
Curriculum development in related fields could prepare students and the state’s labor force to
serve the growing markets in emerging energy sectors, steering them to meaningful, career
oriented jobs. This highly skilled labor pool could then also attract new businesses.
The Cleantech Workforce Training Program would coordinate appropriate State agencies and
departments, the private sector and non- profit entities to do the following:
· Assess anticipated technological changes and workforce and training needs in advanced
energy- related fields at all skill levels;
· Coordinate with relevant workforce agencies to prioritize public and private training
funding in high- growth sectors;
· Identify gaps for training in emerging Cleantech sectors and existing training funding that
could support Cleantech workforce development;
· Promote skilled trades in construction, manufacturing and utilities to serve the specific
needs of the New Energy economy;
· Encourage resource- sharing and best practice models.
E. Fee and Tax Shifting ( Feebates)
Adjust specific State fees and taxes in a revenue neutral manner to encourage the distribution of
low carbon products.
· Timeframe: In place by 2012.
· GHG Reduction Potential: The reduction potential depends on the specific tax or fee.
( See below for specific examples.) The principal benefit is to encourage innovation and
to encourage consumers to purchase products with greater GHG emission reductions by
reflecting the cost of carbon in prices that consumers pay.
· Ease of implementation: Relatively straightforward; requires legislative action.
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· Co- benefits / Mitigation Requirements: None expected.
· Responsible parties: Chang