Cap and Trade Through a Public Health Lens - Marisa Rimland

8/14/2019 Cap and Trade Through a Public Health Lens - Marisa Rimland

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M E M O R A N D U M

TO:LINDARUDOLPH,DEPUTYDIRECTOROFCHRONICDISEASEPREVENTIONANDHEALTH

PROMOTIONFORTHECALIFORNIADEPARTMENTOFPUBLICHEALTH

FROM:MarisaRimland

DATE:December2008

RE:CAPANDTRADEINCALIFORNIATHROUGHAPUBLICHEALTHLENS

ExecutiveSummary

Climatechangeandthehealthoutcomesofairpollutionaretwoofthegreatest

problemsaffectingtheworldspopulationtodayandbothsharecommonorigins.The

majorityofnegativehealthoutcomessuffered,includingincreasedmortality,decreased

lungfunction,andrespiratoryrelatedhospitaladmissions,arearesultofexposureto

groundlevelozone(O3)andparticulatematter(PM)whichareemittedprimarilyduring

fossilfuelcombustionalongwithcarbondioxide(CO2),agreenhousegas(GHG).1In

2006,CaliforniapassedTheGlobalWarmingSolutionsActwhichseekstocurbemissions

ofGHGs,includingCO2.Includedinthestatutorylanguageistheintenttoconsider,

wheneverpossible,overallsocietalbenefits,includingreductionsinotherair

pollutants,diversificationofenergysourceeconomy,environment,andpublichealth.2

Aspartoftheplantomeetthestringentemissionsreductionsrequired,Californiaplans

oncreatingacapandtradeprogram.Acapandtradeprogramisaregulatory

mechanismthatcapsthetotalamountofapollutantfacilitiesunderthatcapmaylawfullyemit.InordertomaximizeGHGemissionreductions,achievepublichealth

benefitsandhelpsaveonhealthcarecosts,Californiashouldbemindfulofthe

opportunitiesavailableforachievingthesegoalsthroughstrategicdesigndecision

making.

Recommendations

1. Californiashouldmandatethatapercentageofauctionrevenuebeallocatedforpublichealthpurposes,withafocusoncommunitiesdisproportionately

impactedbycappedindustryemissions.

2. CaliforniashouldincentivizeoffsetsthathavepublichealthcobenefitswithintheStatebygivingthoseoffsetprojectsacreditmultiplier,encouraging

investmentinpublictransportationimprovementsthathavequantifiableGHG

emissionsreductions,andresultinimprovedairquality/reducednegativehealth

outcomes.

1D. Bailey, K. Knowlton -and- M. Rotkin-Ellman, Improving Air Quality and Health by Reducing GlobalWarming Pollution in California, Natural Resources Defense Council, June 2008: 42California Assembly Bill No. 32, The Global Warming Solutions Act: 8


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AirPollutionandClimateChange:CommonOrigins

Climatechangeandthehealthoutcomesofairpollutionaretwoofthegreatest

problemsaffectingtheworldspopulationtodayandbothsharecommonorigins.More

CalifornianshealthsufferspercapitaduetothefactthatCaliforniasairqualityis

disproportionatelyworsethanthemajorityoftheUnitedStates.Thebulkofthese

negativehealthoutcomesoccurasaresultofexposuretoambientairpollutantssuchasnitrogenoxides(NOx),anO3precursorandPM,inadditiontoavarietyofother

pollutantssimultaneouslyemitted.3

Thesepollutantsarearesultoffossilfuel

combustionactivityfromtransportationandlargeindustrialfacilities,suchascement

plants,oilrefineriesandpowerplants.Thereareapproximately24,000premature

deathseachyearandtensofthousandsofillnessesasaresultofairpollutionexposure.4

ThesepollutionsourcesarealsoemittersofGHGs,suchasCO2.

Arecentstudyconductedfoundthatglobalwarmingpollutionemissionsfromhuman

activitiesmaybecausing1,000airpollutionrelateddeathsand2030additionalcases

ofcancerintheUnitedStatesforeach1degreeCelsiusriseintemperaturewith200ofthesedeathsoccurringinCalifornia.5Thesehumanhealthimpactsareinadditiontothe

environmentaleffectsthatclimatechangeiscausinginCaliforniaandacrosstheglobe.

Theseenvironmentaleffectsincludeobservationsofincreasesinglobalaverageairand

oceantemperatures,widespreadmeltingofsnowandice,andrisingglobalaveragesea

level.6Therefore,policiesthatlimitfossilfuelburningemissionsbothreduceglobal

warmingpollutionandimproveoverallairquality.Thedominantpolicydesignfor

curbingtheseemissionsinCaliforniaisthecapandtrademechanism.

Thisanalysiswill:1)provideanoverviewofthecapandtrademechanism,2)discuss

twoessentialelementsofcapandtrade(auctionrevenueandoffsetuse),2)conducta

stringentanalysisoftheproposedcapandtrademechanismwithintheStateofCaliforniafocusingontheseelements,3)identifyandsummarizecurrentairpollution

regulationsofcopollutantswithinthemechanism,4)delineatethehealthoutcomes

andhealthcarecostsassociatedwithairpollutionwithintheState,and5)recommend

auctionrevenueuseandoffsetdesignwhichincorporatepublichealthgoals.

DefiningCapandTrade

Acapandtradeprogramisaregulatorymechanismthatcapsthetotalamountofa

pollutant,inthiscaseGHGemissions,whichareallowedforfacilitiestoemitunderthe

cap.TheStatesetsacapforeachcomplianceperiodoftheprogramandsetsalimiton

emissionsthatdeclinesovertime.

7

Theemissionsallowedunderthecapwillbe3

D. Bailey: 44D. Bailey: 4

5 M.Z. Jacobson, On the Causal Link Between Carbon Dioxide and Air Pollution Mortality, Geophysical

Research Letters, February 2008: 46 Intergovernmental Panel On Climate Change, Climate Change 2007: Synthesis Report:17California Air Resources Board, Climate Change Proposed Scoping Plan Appendices Volume I:

Supporting Documents and Measure Detail, October 2008: C-21


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denominatedinmetrictonsofcarbondioxideequivalent(CO2E),intheformof

allowances,whichtheStatewillissuebaseduponthetotalemissionsallowedunderthe

capduringanyspecificcomplianceperiod.Theseemissionallowancescanbetradedor

bankedforfutureuse,encouragingearlyreductionsandreducingmarketvolatility.

Onecentraldesignfeatureofthecapandtrademechanisminvolvesthemethodofallowanceallocation.Allocationistheprocessofperiodicdistributionofemissions

allowancesunderanemissionscapandtradesystem.8Allowancescanbeallocated

eitherbyauction,giveaway,oracombinationofboth.Eachindividualallowance

constitutesatemporarypermitfortheallowanceholdertoemitoneunitofGHG

emissionswithinthecomplianceperiod.9Attheendofeachcomplianceperiod,all

regulatedsourceswithinacapandtradeprogrammustsurrenderallowancesequalto

theirtotalemissionsduringthatcomplianceperiod.Enablingallowancestobebought

andsoldlikeatraditionalcommoditycreatesamarketthatsetstheallowancepriceto

reflectthemarginalcostofreducingemissions.Theabilitytotradeincentivizes

regulatedsourcestopursuelowcostemissionreductionstrategiesattheirfacilities.Theabilitytotradealsoallowsfacilitiestoadjusttochangingconditionsandtakeadvantage

ofreductionopportunitieswhenthoseopportunitiesarelessexpensivethanbuying

additionalemissionsallowances.10

Itisessentialthataneffectivecapandtradesystembewelldesigned,andinclude

strongmonitoring,reportingandenforcementrules,aswellasstrictpenaltiesfornon

compliance.Awelldesignedcapandtradesystemensuresthattheemissionslimitwill

bemetwhilesimultaneouslycreatingapriceforGHGemissionsthataccuratelyreflects

thecostofthereductionsnecessarytomeettheenvironmentalgoal.Thispricesignal

determinesthedecisionsmadebyproducersandconsumersabouttheenergyand

servicesthattheyprovideoruse.11Underacapandtradesystem,facilitieshaveacontinuousincentivetoreduceemissionsinordertoreducetheircompliancecosts.The

marketcreatesanopportunityforfacilitiesthatcanreduceemissionsatlowercostto

doso.OneexampleofacapandtradeprogramistheU.S.EPAsacidraintrading

program,anationalprogramtodecreaseacidrainbyreducingemissionsofsulfur

dioxide(SO2).

TheUseofOffsetsinaCapandTradeSystem

Previouscapandtrademechanismshaveutilizedtheoffsetusagetoprovideadditional

lowcostemissionsreductions.Offsetsaremeasurablereductions,avoidances,or

sequestrationsofGHGemissionsfromasourcethatisnotpartofanemissionreduction

8Climate Change Proposed Scoping Plan Appendices Volume I: C-19

9Climate Change Proposed Scoping Plan Appendices Volume I: C-12

10California Air Resources Board, Climate Change Proposed Scoping Plan: A Framework For Change,October 2008: 3011

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program.12

Theyaretypicallyprojectbased.Theseprojectsownershipcanbe

transferredtoothersandaredevelopedtoachievethedesiredemissionreductionfrom

activitiesthatarenotregulated,coveredunderanemissionscap,oraproductof

governmentincentivesbutultimatelyresultinanemissionsreductionthatcanbe

quantifiedandverified.Ifacapandtradeprogramincludesoffsets,regulatedsources

havetheopportunitytopurchasethemtohelpmeetcomplianceobligations.13

Theprimarybenefitforallowingoffsetsisimprovedcosteffectiveness.Theabilityto

generateoffsets,whichcouldbesoldasemissioncredits,wouldincentivizenon

regulatedsourcestoreduce,avoid,orsequesteremissionsthatmaynothavebeen

doneotherwise.Additionally,includingoffsetsinacapandtrademechanismcould

potentiallyexpandemissionmitigationopportunitiesandresultinreducedcompliance

costsforregulatedsources.Manyoffsetprojectshavethepotentialtooffer

environmentalbenefitsalso.14

Themainconcernwithoffsetsiswhetherornottheyrepresentrealemissionreductions.Foranoffsettobecredible,atonofCO2Eemissionsfromanoffsetproject

shouldequatetoatonreducedfromacoveredemissionsource,suchasasmokestack

orexhaustpipe.Thisqualificationisproblematicbecausemanyoffsetsaredifficultto

measure.Ifillegitimateoffsetcreditsarepermittedtoenterintoanemissionstrading

program,theprogramwillfailtoreduceGHGemissionsandnotachieveitsgoals.

Anotherconcerniswhetherincludingoffsetswouldsendtheappropriatepricesignalto

encouragethedevelopmentoflongtermmitigationtechnologies.15

Abroaderconcern

withoffsetsisthattheymaydiscouragebringingtheunregulatedregionunderitsown

cap.16

Somemaintainthatifdevelopednationsuseallofthelowcostoffsetsin

developingnations,thesedevelopingnationswillfacehighercompliancecostsasa

resultifandwhentheyestablishGHGemissionreductionrequirements.Therefore,internationaloffsetsmayserveasadisincentivefordevelopingnationstoenactlawsor

regulationslimitingGHGemissionsbecausetheywouldlosefundingfromtheoffset

market.17

California:GlobalWarmingSolutionsActof2006(AB32)

TheStateofCaliforniahasbegunaddressingglobalwarmingthroughaseriesof

regulations.Californiahastraditionallybrokennewgroundineffortstoreduceair

pollution,datingbackto1963whentheCaliforniaNewMotorVehiclePollutionControl

12

Jonathan L. Ramseur, The Role of Offsets in a Greenhouse Gas Emissions Cap-and-Trade Program:Potential Benefits and Concerns, Congressional Research Service: CRS-113

Climate Change Proposed Scoping Plan: 3614

Jonathan L. Ramseur: CRS-1215Jonathan L. Ramseur: CRS-1216

Personal Communication With Lee Friedman, December 14, 2008.17

Jonathan L. Ramseur: CRS-25


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Boardadoptedthenationsfirstmotorvehicleemissionstandards.18

Californiahas,in

effect,servedasanincubatorforinnovativestandardsandtechnologies,whichin

subsequentyearsbecamethenationalnorm.19In2006,CaliforniapassedAB32,the

GlobalWarmingSolutionsActof2006.ThisActrequiresCaliforniatoreduceitstotal

greenhousegasemissionsto1990levelsby2020,areductionofapproximately25%

percentfromcurrentlevels.GovernorSchwarzeneggeralsosignedExecutiveOrderS305in2005,whichrequiresadditionalreductionsto80%below1990levelsby2050.20

Withinthebill,Californiastatesthat,Inadoptingregulationspursuanttothissection

andPart5(commencingwithSection38570),totheextentfeasibleandinfurtherance

ofachievingthestatewidegreenhousegasemissionslimit,thestateboardshall

consideroverallsocietalbenefits,includingreductionsinotherairpollutants,

diversificationofenergysourceeconomy,environment,andpublichealth.21Anintegral

partofCaliforniasplantoachievetheseambitiousgoalsandtoreduceglobalwarming

isacapandtraderegulatorymechanismthatwilllimitemissionsofCO2E.This

mechanismiscurrentlyunderdesign.

CapandTradeinCalifornia:ImplementedIn2Phases

TheCaliforniaAirResourcesBoard(ARB)planstoimplementCaliforniascapandtrade

measureintwophases.PhaseI,thefirstcomplianceperiodthatbeginsin2012,will

include:1)allelectricitygeneration,includinganywhichisimportedintotheState,and

2)anylargeindustrialsourceswhichemitabove25,000metrictonsofCO2E,including

anyhighglobalwarmingpotentialgasesthatarepartoftheindustrialprocess.Phase

II,thesecondcomplianceperiodthatbeginsin2015,willinclude:1)upstream

treatmentofindustrialfuelcombustionatfacilitieswithemissionsatorbelow25,000

metrictonsofCO2E,andallfuelcombustion,bothcommercialandresidential,and2)

upstreamtreatmentoftransportationfuels.22Foranalyticalpurposes,thispaperwill

focusonthesecondelementofPhaseI(largeindustrialsourcesemittinghighamountsofCO2E)duetoitsuniquerelevancetothepublichealthissuesunderdiscussion.

CapandTradeinCalifornia:LinkingToWesternClimateInitiativePartners

CaliforniahasdecidedtocollaboratewithsixotherstatesandfourCanadianprovinces

intheWesternClimateInitiative(WCI)inordertodesignaregionalgreenhousegas

emissionsreductionprogramthatincludesacapandtrademechanism.Byparticipating

inWCI,Californiacreatesanopportunitytohopefullyprovidesubstantiallygreater

reductionsingreenhousegasemissionsthroughouttheregionthanCaliforniacould

accomplishonitsown.Thereareadditionalbenefitsaswell.Thelargerscopeofthe

programwillexpandthemarketforcleantechnologiesandhelptoavoidleakagethe18

Staff of California Air Resources Board, Staff Proposal Regarding the Maximum Feasible and Cost-

Effective Reduction of Greenhouse Gas Emissions From Motor Vehicles, June 14, 200419 Declaration of Michael Walsh, Central Valley Chrysler-Jeep, Inc. vs. Catherine Witherspoon, et al., May

200620 Office of The Attorney General of California, http://ag.ca.gov/globalwarming/index.php21

California Assembly Bill No. 32, The Global Warming Solutions Act: 822

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emissionssourcerelocationfromwithinCaliforniatoothersourcesoutsidethestate.23

Despitethiseventuallinkagetoaregionaltradingprogram,Californiascapand

apportionmentwillcontinuetobeconsistentwiththeCaliforniaspecific(AB32)

economywideemissionsgoal.Afirmregionalcapwithstrongreportingand

enforcementruleswillprovideahighdegreeofconfidencethatemissionswillnotexceedtargetedlevels.ARBhascommittedtoensuringthesystemasawholehas

integritybeforeCaliforniaparticipatesintheWCImarketsystem.24

Withoutensuring

systemintegrity,CaliforniacannotbecertainofitsabilitytomaintainAB32sgoalsifit

participatesontheregionallevel.

CapandTradeinCalifornia:AllowanceAllocation

ThedecisionsmadesurroundinghowallowanceswillbeallocatedwithinCalifornias

capandtradedesignwillbeextremelyinfluentialonhowthesystemfunctionsasa

wholeandareasignificantaspectoftherulemakingprocess.Theallowanceallocation

methodwilllargelydeterminetheeconomicimpactthatacapandtradesystemhasamongregulatedentities,consumersandotherpartiesandhowthatimpactis

distributedamongstthoseinvolved.25TheCaliforniaPublicUtilitiesCommissionandthe

CaliforniaEnergyCommissionexploredtheissuessurroundingthiscrucialdecision

betweenfreeallocationandauctionofallowancesandultimatelyrecommendedthat

ARBtransitionto100percentauctionfortheelectricitysectorby2016.Additionally,

ARBsMarketAdvisoryCommittee(MAC)havealsorecommendedtransitioningtofull

auctionwithinthecapandtradeprogram,notingthatasysteminwhichCalifornia

ultimatelyauctionsallofitsemissionallowancesisconsistentwithfundamental

objectivesofcosteffectiveness,fairnessandsimplicity.26

IthasnotyetbeendeterminedwithcertaintyhowARBwillultimatelydecidetoallocateallowancesbuttheywilldefinitelykeepitsdistributiondesignwithinthegeneral

guidelinesestablishedintheWCIprogramdesignframework.Thisguaranteesa

minimumof10percentofallowancesbeauctionedwithinthefirstthreeyear

complianceperiodandincreasingto25percentin2020.27Thisminimumisasimple

floor,however,andARBisfreetoauctionoffagreaterpercentageiftheychoosetodo

so.Theprimarydecisionssurroundingallowanceauctionsarehowtheauctionprocess

willbeconductedand,onceauctioned,howtheauctionrevenuewillbespent.WCI

Partnerjurisdictions,includingCalifornia,willbedevelopingacoordinatedregional

auctionprocessthatwillallowCaliforniaandtheotherWCIPartnerjurisdictionsto

auctionallowancesthroughouttheWCIregionandreceivetheirindividualauction

23

Climate Change Proposed Scoping Plan: ES-824

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proceeds.28

Giventhesefairlylowinitialpercentagesofallowancesbeingauctioned,ARBiscurrently

consideringthemethodofallocationoftheremainingallowances,withafocusongive

awaymethodology.Foranyallowancesthataredistributedforfree,ARBhassaidthat

theywill,inconcertwithotherWCIPartnerjurisdictions,establishcriteriathatwilldeterminewhoshouldbereceivingallowancesforfree.Freedistributioncanbe

determinedbyconsideringperformancestandards(benchmarks),historicalemissions

(grandfathering),orsomeotherrelevantmetric.TheMAChasrecommendedthatARB

baseanyfreeallocationofallowancesonenvironmentalperformancebenchmarks,and

thattheydesigntheauctionprocesstoencouragevoluntaryearlyreductionsbyfirms,

municipalities,andindividualconsumers.29

Californiamaytaketheopportunitytoincentivizecertainactionsandactivitiesthrough

theallocationprocess.Allowancesetasidesareonemethodforcreatingthese

incentives.Anallowancesetasideisapoolofallowancesdistributedbasedonalternativecriterianotbeingconsideredintheprimarymethodofallocationthatcanbe

usedwithanyallocationmethodology.Allowancesetasidescandirectacertainportion

ofallowancesfromwithinthecaptorecognizeactionspreviouslytakenorfurther

incentivizefutureactionswhichbenefitthepolicygoal.However,creatingsuch

allowancesetasideswillhaveafinancialimpactonthesystem,ifsuchallowancesare

givenaway.30Therefore,itiscrucialthatthedecisionsregardingtheseallowanceset

asidesbemadewithstringentconsiderationofachievingmaximumbenefittoCalifornia.

Considerations/GuidingPrinciplesForAllowanceAllocationDecisions

ARBhasdevelopedguidingprinciplesthattheyplantofollowwhiledevelopingits

recommendationsontheseissues.Theirrecommendationswill:Minimizetheeconomicburdenoftheprogramonconsumers(especiallylow

incomeconsumers),workers,localgovernments,andbusinesses

Ensurefairtreatmentamongstandwithinincludedsectorsincludingnewmarketentrants

MinimizecostvolatilityforcoveredsectorsMaximizemarketliquidityandminimizeopportunitiesformarketmanipulationAvoidGHGleakageandoverallemploymentlossRecognizeandrewardearlyactionfromcoveredsectorsAvoidwindfallprofitsandotherunnecessarywealthtransfer

EncourageenergyefficiencyandthedevelopmentoflowGHGemittingtechnologies

Avoidcriteriaandtoxicairpollutantemissionsincreases,especiallyin28Climate Change Proposed Scoping Plan Appendices Volume I : C-2029




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communitiesalreadydisproportionatelyimpactedbythosepollutants31

Theprinciplethatismostrelevanttothisanalysisisthefinalone,whichdirectly

addressesthepublichealtheffectsofcopollutants.Thisanalysiswillfocusonthatgoal.

CapandTradeinCalifornia:UseofOffsets

CaliforniaplanstoworkwiththeWCIPartnerjurisdictionstoensurethatthewesternregionalmarketincludesclearandconsistentrulesforuseofoffsets.TheWCIPartner

jurisdictionsareconsideringallowingindividualregulatedentitiestousealimited

amountoftradableunits(offsetsandallowances)fromothergovernmentregulated

GHGemissiontradingsystemsforcompliancepurposes.Additionally,Californiaisalso

consideringlimitingtheamountofoffsetsandnonWCItradableunitsthatcouldbe

usedbyindividualregulatedentitiesforcompliance.32Inthatendeavor,ARBwill

establishaquantitativelimitonoffsetssothatitiscertainthatthebulkofemission

reductionscomefromwithinthecappedsectors.ARBwillseta49percentoffset

reductionsceiling,applythisceilingstoeachcomplianceperiodandwillencourageWCI

Partnerjurisdictionstodothesameinordertoensurerealreductionsfromcappedsectorswithinthefirstcomplianceperiod.33

WhileitsclearthatoffsetswillbeallowedwithinCaliforniacapandtrademechanism,

whatisntclearishowtheseoffsetswillbedesignedinordertomaximizeemissions

reductionsandmeetAB32sothergoals,(improvingoverallairqualityandpublichealth)

inadditiontothecapandtradespecificprincipleofnotincreasingemissionofco

pollutantsforcommunitieswhoarealreadydisproportionatelyimpacted.Additionally,

therearekeyissuesunderdiscussioncurrentlythatwouldhaveanimpactonthese

statedgoals.Locationofoffsetsisoneoftheseissues.Thereareseveraloptionsfor

locationofoffsets.Theycanbe:1)keptwithinCalifornia,2)restrictedtotheWCIregion,

3)allowedanywherewithintheUnitedStates,or4)beunlimitedgeographically.WhilethereisnoclearstatedpreferenceintheScopingPlanonoffsetallocation,itappears

thatARBisleaningtowardsallowingoutofstateoffsetsandcertainlyconsidering

internationalusageincountrieslikeMexico.Onlypositivesarementionedforbothof

thesepossibilities.ARBstatesitsbeliefthatoutofstateoffsetsencourageenergy

efficientinnovationsoutsideoftheStateandthattheylowercompliancecostsfor

regulatedentitiesaswell.TheyalsoindicateinterestinprojectsintheMexicanborder

region,statingthattheyprovidetheopportunitytorealizeconsiderablecobenefitsin

bothcountries.34

LanguageInAB32BillItself:PublicHealthSpecificallyMentionedAB32makesseveralassertionsregardingthedangersofclimatechange.Primary

amongsttheseassertionsisthat,Globalwarmingposesaseriousthreattothe

31

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economicwellbeing,publichealth,naturalresources,andtheenvironmentof

California.Thepotentialadverseimpactsofglobalwarmingincludetheexacerbationof

airqualityproblems,areductioninthequalityandsupplyofwatertothestatefromthe

Sierraandanincreaseintheincidencesofinfectiousdiseases,asthma,andother

humanhealthrelatedproblems.35And,aspreviouslymentioned,thelanguagewithin

thebillclearlystatesthatitwillalsoconsidergreatersocietalbenefits,includingreducingairpollutionandimprovingpublichealth.36Duetothesegoals,publichealth

shouldbeinvolvedanddulyconsideredinthecapandtradedesignprocessinorderto

mitigatethenegativehealthoutcomeswhichoccurasaresultofcriteriapollutant

exposureandclimatechange,aswellasclimatechangemitigationitself.Thiscanbe

achievedbytargetingauctionrevenueforpublichealthprojectswhichsimultaneously

improvepublichealthandcontributetotheachievementofadditionalGHGreductions.

Additionally,publichealthcanbeimprovedbyincentivizingoffsetswhichhavepublic

healthimplicationsinadditiontomeetingthestringentcriteriaofquantifying,

monitoringtherequiredGHGemissionreductions.

CapandTradeMechanism:DoesNotDirectlyAccountforCoPollutants

WhileAB32sgoalsarecommendableandwillcertainlyimproveoverallairqualityin

CaliforniainadditiontoloweringGHGemissions,therearecriteriapollutantsemitted

alongwithCO2Ethatarenotpartofthecapandtrademechanismandhavenegative

publichealtheffects.ThecopollutantsthatthispaperfocusesonareNOxPMandO3.

NOx,anO3precursor,andPMandareprimarilyemittedbyfossilfuelcombustionfrom

transportation,powerplantsandotherindustrieswhichfallundertheproposedcap.37

PMairpollutionisanairsuspendedmixtureofsolidandliquidparticlesthatvaryin

number,size,shapeandsurfacewithPM2.5(thesmallestparticle)beingthemost

dangeroustohumanhealth.Theeffectsfromthesepollutantscanbeameliorated

throughinnovativedesignefforts.ThesecopollutantscanandshouldbeaccountedforwithinthedesigninordertoensurethatCaliforniamaximizestheopportunitiesthatAB

32presentsinachievingitsstatedgoalofrealreductionsinotherpollutantsaswellas

improvingpublichealthforallCalifornians.Inaddition,AB32includesspecificcriteria

thatARBmustconsiderbeforeadoptingregulationsformarketbasedmeasures,and

directstheBoardtotheextentfeasibletodesignanymarketbasedcompliance

mechanismstopreventanyincreaseintheemissionsoftoxicaircontaminantsor

criteriaairpollutants.

RegulationsofCopollutantsOutsideofAB32:ParticulateMatter

In2006,ARBadoptedanemissionreductionplanforportsandgoodsmovementactivitiescalledtheEmissionReductionPlanforPortsandGoodsMovementwhichis

partofthelargerGoodsMovementPlan.ARBhasalsoadoptedregulationstoreduce

pollutionfromcommercialharborcraft,shipauxiliaryengines,cargohandling

35California Assembly Bill No. 32: 236

California Assembly Bill No. 32: 837

D. Bailey: 4


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equipment,porttrucksandshorepowerforatberthoceangoingvessels.Emissions

fromlocomotivesandrailyardoperationsarebeingnegotiatedwiththerailindustry.

ARBalsorecentlyadoptedregulationsforalreadyinuseoffroadequipmentincluding

constructionandminingequipment,andagriculturalpumps.Laterthisyear,separate

regulationswilladdressheavydutydieseltrucks.Stateambientairqualitystandardsare

alsoperiodicallyreviewedtoassesstheiradequacyinprotectingpublichealth,andthisnewinformationwillbeconsideredwhenthePMstandardsarenextreviewed.

ReductionsinPM2.5fromCaliforniasexistingprogramsand2007SIPmeasuresare

estimatedtoresultin3,700avoidedprematuredeathsstatewideinthesametimeframe

asAB32.38

However,ARBhasstatedthattheseregulationsarenotenoughduetothe

newinformationregardingthehealthdangersofexposure.Theyindicatethatthereisa

needtocontinuereducingpublicexposurestoPM2.5.39Therefore,Californiawouldbe

bestservedbyincorporatingdesignelementsthataidinthisfurtherreduction.

RegulationsofCopollutantsOutsideofAB32:NOxandOzone

O3isregulatedinCaliforniaasacriteriaairpollutant.InAprilof2005,ARBapprovedanO3standardwithspecialconsiderationtowardchildrenshealth.An8houraverage

standardforO3wasestablishedas0.070partspermillion(ppm),anda1houraverage

O3standardwassetat0.09ppm.40Thesestandardsrelyonlocalairpollutioncontrolor

airqualitymanagementdistrictsfortheadoptionofrulesandregulationstocontrol

emissionsfromstationarysourcestoassurethatthesestandardsareachievedand

maintained.TheARBisresponsibleforadoptionofemissionstandardsformobile

sourcesandconsumerproducts.Anumberofdifferentimplementationmeasuresare

possible,andeachcouldhaveitsownenvironmentaloreconomicimpact.41

Theonly

regulationscurrentlyinplaceontheStatelevelforNOx,involveregulationofdiesel

vehiclesandothertransportationrelatedreductionsaspartoftheState

ImplementationPlan(SIP).Emissionsfromothersources,likelargeindustrialfacilities,arenotpartofthoseregulations.However,therearesomeregionalregulationsinplace

forstationarysources.InSouthernCalifornia,TheSouthCoastAirQualityManagement

District(SCAQMD)hascreatedafacilityspecificcapandtrademechanismtoreducethe

presenceofNOxandSulfurOxides(SOx)intheLosAngelesbasin.42

38

Scoping Plan: 8839

California Air Resources Board, Facts About Particulate Matter Mortality:New data revealing greaterdangers from PM2.5, May 30,2008:240

California Air Resources Board, Ozone and Ambient Air Quality Standards,41

California Air Resources Board, Review of the California Ambient Air Quality StandardFor Nitrogen Dioxide:Staff Report Initial Statement of Reasons for Proposed Rulemaking, January 5,2007: 842

Craig Burnside and Martin Eichenbaum, A Mixed Bag: Assessment of MarketPerformance and Firm Trading Behavior in the Nox Reclaim Program,Federal Reserve Bank of Chicago,

August 1996: 5


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WhatAB32WillDotoImproveAirQuality

WhilethecapandtradedesignonlyfocusesonreducingemissionsofCO2E,itistrue

thatAB32willresultinimprovedairqualityandreducedemissionsoftheambientair

pollutantsatconcernhere.ARBpredictsthattheprimarydirectpublichealthbenefits

willbereductionsinsmogformingemissionsandtoxicdieselparticulatematter.NOx

willbesignificantlyreduced,aswillparticulatepollutionanddirectlyemittedPM2.5.43

TheseadditionalbenefitsoftheProposedScopingPlanin2020aresignificantand

shouldincreasewithfurtherreductionsinfossilfuelcombustion,theprimarybasisfor

theestimatedpublichealthbenefits.

ARBsproposalinitsscopingplanforreducingsmogformingpollutantswouldreduce

approximately61tonsperdayofNOxand15tonsperdayofPM2.5in2020inCalifornia.

Thisequatestoanestimatedairqualityrelatedpublichealthbenefitof400avoided

prematuredeathsstatewide.44Whilethesepublichealthbenefitsarecommendable,

utilizingtheopportunitytosaveadditionallivesandreducenegativehealthoutcomes

wouldonlybenefitCaliforniaanditscitizensandshouldbeseized.

HealthOutcomesofNitrogenOxide,OzoneandParticulateMatter

Airpollutionkills50,000100,000eachyearintheUnitedStates.Themaincausesofair

pollutionrelateddeathareasthma,bronchitis,emphysema,lungdisease,heartdisease,

andrespiratoryallergies.About40%offatalitiesareduetopowerplantemissionsand

50%,toonandoffroadvehicleemissions.45BothNOxandPMaretheprimarycausesof

thesenegativehealthoutcomes.GroundlevelozoneandPMhavebeenlinkedto

hospitaladmissionsandemergencyroomvisitsforrespiratoryproblems,decreasedlung

function,andincreasedmortalityrelatedtocardiovascularandrespiratoryillness.46

Studieshavedemonstratedassociationsbetweenambientfineparticulateairpollution

andelevatedrisksofbothcardiopulmonaryandlungcancermortality.47ArecentARBreviewofscientificliteraturerevealedthattheeffectsofPM2.5,thesmallestclassified

sizeofPM,aremuchmoreseverethanpreviouslythought.AccordingtoARB,every

increaseof10microgramspercubicmeterofPM2.5exposurecreatesatenpercent

increaseinriskofprematuredeath.Thereare14,000to24,000deathswhichmaybe

associatedwithexposurestoPM2.5inCaliforniaannually.Amajorityofthesedeaths

occurindenselypopulatedareassuchastheSouthCoast,SanJoaquinValleyandSan

FranciscoBayairbasins.PM2.5oftenconcentratesinareasnearroadwaysandpower

43Scoping Plan: 8844

Scoping Plan: 8845

Mark Z. Jacobson, Addressing Global Warming, Air Pollution Health Damage,and Long-Term Energy Needs Simultaneously, Stanford University, June 6, 2006: 346

D. Bailey: 447C. Arden Pope III, Richard T. Burnett, Michael J. Thun, Eugenia E. Calle, Daniel Krewski, Kazuhiko

Ito, George D. Thurston, Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to FineParticulate Air Pollution,Journal of the American Medical Association, March 2002: 1137


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plants.48

ExposuretoNOxisassociatedwithrespiratorysymptoms,episodesof

respiratoryillnessandimpairedlungfunctioning.Ozone,apowerfuloxidantthatcan

damagetherespiratorytractandcauseinflammationandirritationhasbeenindividually

associatedwithseveralnegativehealthoutcomesincludingcardiopulmonarymortality

andonsetofasthma.

LevelsofairpollutantssuchasO3aretypicallyhigheronwarmerdaysandcontributeto

negativehealthoutcomessuchasrespiratoryconditionsanddiminishedlungfunction.49

NumerousstudiesthathavebeenconductedrevealthathigherO3concentrations

aggravateexistingasthmaconditions.50

DeathsrelatedtoO3exposuremayincreaseby

4.5percentduetoclimatechangealoneby2050.Whenotherregionalcharacteristics

areincluded,suchasprojectedpopulationgrowthandanthropogenicO3precursor

emissionsincreases,relatedmortalitywouldincreaseby59.9percentinthe2050s

comparetothe1990s.Theseincreasesinmortalitywouldbelargelycontainedwithin

atriskpopulations.51

CommunitiesWithLowSocioeconomicStatusAreMostAffected

WhileallCalifornianssufferwhenairqualityislow,thecommunitieswhoaremost

drasticallyaffectedbybothozoneandPMarecharacterizedbytheirlowsocioeconomic

status(SES).Thefossilfuelinfrastructureisdisproportionatelylocatedinlowincome

communities.Additionally,thereisevidencethatnegativehealthoutcomesfrom

ambientairpollutionarealsoassociatedwithracialsegregation.Asthmaprevalence,

hospitalizationandmortalityarethreetimesgreateramongminoritiesthanamong

whites.52

Unevenindustrialdevelopment,realestatespeculation,discriminationin

governmentandprivatefinancing,workplacediscriminationandexclusionaryzoning

haveledtosystemicracialsegregationindiverseurbanareaswithimportant

implicationsforcommunityhealthandindividualwellbeing.53Estimatedcancerrisksassociatedwithambientairtoxicswerefoundtobehighestinmetropolitanareasthat

werehighlysegregated.Disparitiesbetweenracial/ethnicgroupswerealsowiderin

moresegregatedmetropolitanareas.54

Thesedifferenceswillonlybecomemoremarkedasclimatechangeimpactstheamount

48

Facts About Particulate Matter Mortality: 149

K. Knowlton, J.E. Rosenthal and C. Hogrefe. Assessing ozone-related health impacts under a changingclimate,Environmental Health PerspectivesNovember 2004: 155750 Lawrence D. Frank and Peter Engelke. Multiple Impacts of the Built Environment on Public Health:Walkable Places and the Exposure to Air Pollution,International Regional Science Review:20551

K. Knowlton: 155752

Maxine Burkett, Just Solutions to Climate Change: A Climate Justice Propoosal for a Domestic CleanDevelopment Mechanism,Buffalo Law Review: 953Rachel Morello-Frosch and Bill M. Jesdale, Separate and Unequal: Residential Segregation andEstimated Cancer Risks Associated with Ambient Air Toxics in US Metropolitan Area,Environmental

Health Perspectives, March 2006: 38654

Rachel Morello-Frosch: 386


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13

ofambientairpollutionlikeozone,whicharemademarkedlyworsebysunandheat.

LevelsofairpollutantssuchasO3aretypicallyhigheronwarmerdaysandcontributeto

negativehealthoutcomessuchasrespiratoryconditionsanddiminishedlungfunction.55

NumerousstudiesthathavebeenconductedrevealthathigherO3concentrations

aggravateexistingasthmaconditions.56Povertyisoftenpositivelycorrelatedwith

increasingsusceptibilitytoclimatesensitivehealthoutcomes.Increasedvulnerabilitywillmakeadaptingtochangingweatherconditionsmuchmoredifficult.Withoutproper

adaptation,thoseinthelowestsocioeconomicstratuswillbeunabletoprotect

themselvesfromthesehealthoutcomesandtheirhealthwillsufferasaresult.57

Capandtrademechanismscanalsoconcentratepollutionincommunitieswhere

factoriespurchaseemissionsreductioncreditsratherthanreduceactualemissions.

Theselocalizedhealthrisksfrompollutionsourcesareoftenoverlookedduetoafocus

onregionalairqualityconcerns.Theresultisadisproportionateburdenthruston

communitiessurroundingmajorpollutionemitters,whichcreatesincreasedrisksof

toxicexposureandnegativehealthoutcomes.Theselocalizedtoxichotspotsareoverwhelminglylowincomeandpopulatedbypeopleofcolor.58Theissuessurrounding

hotspotsisfurthercomplicatedbytheemissionofcopollutantsandprecursors(like

theonesdiscussedhere),whichmayincreaseexposuretocertaintypesofchemicalsin

downwindcommunitieswherepollutionisconcentrated.Theseissuesareevenmore

pronouncedwhenthecapandtrademechanismitselfdoesnotaccountfortheseco

pollutants.

HealthcareCosts

OneinfiveCalifornianslackhealthinsurance.Thevastmajorityofthoseuninsured

(75%)areworkingadultsandtheirfamilies.Estimatespredictthatthenumberof

Californianswithouthealthinsurancewillgrowby20percentoverthenextfiveyears.59ThepercentageofCalifornianswholackhealthinsuranceiscorrelatedwithfamily

income.(SeeFigure1)andasignificantpercentageareLatino(59%).Thelowestincome

individualsqualifyforMediCal,astatebasedhealthinsuranceprogrampaidforwith

publicfunds.ThetotalStatecostsinthefiscalyearof20072008forhospitalizationand

professionalcarecostsunderMediCalis$4,657,648,450.60

Thisnumberisincredibly

largeinmagnitude.However,ARBdoesestimatethatthepredictedreductionsinNOx

55K. Knowlton: 155756 Lawrence D. Frank: 20557 Kristi L. Ebi, David M. Mills, Joel B. Smith and Anne Grambsch, Climate Change and Human Health

Impacts in the United States: An Update on the Results of the U.S. National Assessment,Environmental

Health Perspectives September 2006: 1319.58

Richard Toshiyuki Drury, Michael E. Belliveau, J. Scott Kuhn , and Shipra Bansal, Pollution, Tradingand Environmental Injustice: Los Angeles Failed Experiment in Air Quality Policy, 9 Duke Envtl. L. -

and- Pol'y F. 23159California Healthcare Foundation, Snapshot Californias Uninsured, 2007: 260

California Department of Health Care Services, Medi-Cal Expenditures By Service CategoryFiscal Year 2007-08, May 2008 Medi-Cal Estimate: CY Page 5


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andPM2.5willcreateeconomicsavingsinthemagnitudeof$2.2billion.61

Thisfigureis

notpurelyStatemoneybutacombinationofprivateandpublicexpenditures.However,

duetothesignificantsizeofthefigure,itstandstoreasonthatiffurtherreductionsof

thesecriteriapollutantsweretobeachieved,thesavingswouldbeevengreater,freeing

upresourcesfortheState.

Figure1.SourceEmployeeBenefitResearchInstituteestimatesoftheCurrentPopulationSurvey,March

2001and2007Supplements

AuctionRevenue:MandatePercentageBeUsedforPublicHealth

CaliforniawouldmaximizethebenefitsoftheCO2Ecapandtrademechanismifit

auctionedoffatleastaportionofitsallowancesandeventuallyreached100%auction.

Thereisalotofdiscussionandcontroversysurroundinghow/whethertotransitionto

fullauctionandthispaperwillnotweighinonthisdecision.However,itisclearthatat

leastaportionofanyrevenuesreceivedbytheStateshouldbedirectedtowardspublic

healthrelatedprojectswhichhavecobenefitsofreducingCaliforniasimpacton

climatechange.

TherationalebehindPublicHealthagencieshavingtherighttomoniesfromauctionrevenuerefersbacktotheoriginalintentofAB32itself.AB32clearlystatesthat

Californiashould,ifpossible,considersocietalbenefitsoutsideofsimplyGHGreduction

includingreducingotherairpollutantsandimprovingpublichealth.62Thesellingof

61California Air Resources Board, Climate Change Proposed Scoping Plan Appendices Volume II:Analysis and Documentation, October 2008: H-9462

California Assembly Bill No. 32: 8


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15

emissionallowanceswillresultinarevenueboonfortheStateofCalifornia.That

revenuecanbeputtogooduseinimprovingthepublichealthofcommunitieswhich

aredisproportionatelyimpactedbyairpollutionandwhoaremostvulnerableto

climatechangedrelatedhealthimpacts.Byinvestinginreducingairpollution,notonly

willpublichealthbeimprovedbutfurtherreductionsinGHGcanalsobeachieved.

Additionally,fundsareneededtoaidlowincomeandvulnerablepopulationsinadapting.Fundscouldalsobedirectedtowardsachievingthosegoalsduetothe

increasingpublichealthdangersthatclimatechangeposes.

Itisworthmentioningthat,astheFederalgovernmentbeginstomoveonclimate

change,thataFederalcapandtradesystemmayreplacetheStateandRegional

mechanismsinplaceandauctionrevenuewillthereforebecomeabsorbedbythe

Federalgovernmentaswell.Whilethisisapossibility,itisnotaneventuality.Therefore,

Californiashouldmoveforwardwithitsplansanddesignitsplanforthelongterm.

IncentivizingOffsetsWithPublicHealthCobenefitsThroughaCreditMultiplier

ItisclearthatoffsetswillbepermissiblewithinCaliforniascapandtrademechanism.

However,thenatureofthoseoffsetsisstillundetermined.Theuseofoffsetsgives

Californiaagreatopportunityto,notonlyachieveitsemissionsreductionsgoals,butto

simultaneouslyrealizepublichealthbenefitsaswell.Whiletherearemanyprojects

withinCaliforniathatcouldimprovepublichealth,itisalsocrucialthatanyproposed

offsetbeverifiableandquantifiableintermsofitsGHGreduction.Ideally,California

shouldincentivizepublichealthrelatedoffsetsthatmeetthesecriteria.Thequestionis

how.

CaliforniashouldgiveacreditmultipliertooffsetprojectsthatarelocatedinCalifornia

andhavepublichealthcobenefits.ThiscreditmultiplierwouldgivecappedindustriesmorecredittowardsmeetingtheirGHGemissionsreductionrequirementsifthey

investedinpublichealthrelateoffsets.Byutilizingthismethodofoffsetcrediting,

CaliforniawouldachievesocietalbenefitsandachieveitsstatedAB32goals.

Offsets:ImprovingPublicTransportationInfrastructure

Therearealimitednumberofoffsetsthathavebothpublichealthbenefitsandachieve

quantifiableandverifiableemissionsreductions.Oneoffsetwhichbothimprovesair

qualityandresultsinverifiablylowerGHGemissionsreductionisinvestmentinpublic

transportation.StudiesshowthathouseholdVehicleMilesTravelled(VMT)are

correlatedwithresidentialdensityandaccesstopublictransit.

63

AsignificantportionofCaliforniasGHGemissions(39%)comesfromtransportation.(SeeFigure2)Whilethere

arenostudiesavailablethatstudyhowincreaseduseofpublictransportationcould

63

Robert Puentes- Fellow and Director, Metropolitan Infrastructure Initiative Brookings Institution,"Strengthening the Ability of Public Transportation to Reduce Our Dependence on Foreign Oil,

Testimony before Committee on Banking, Housing and Urban Affairs- United States Senate September 9,

2008


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16

lowerthispercentageofGHGemissionswithintheStateofCalifornia,therehasbeena

studydonewhichquantifiesthisfortheentireUnitedStates.Astudydoneforthe

AmericanPublicTransportationAssociationfoundthatthecarbonemissionsfrompublic

transportationwere12.3millionmetrictonnes,or4.0millionmetrictonneslessthan

wouldhavebeenusedbypersonalvehicles.Additionally,usingpublictransportation

resultedinreducedcongestionlevelsequivalenttohavinganadditional340milliongallonsofgasoline,whichequatedtoanother3.0millionmetrictonnesofCO2

reduction.ThissumstoanetCO2emissionreductionof6.9millionmetrictonneswhen

includingtheavoidedcongestionfuelconsumptiondue.Theresalsoanadditional

400,000metrictonnesofadditionalGHGssaved,includingsulfurhexafluoride,HFCs,

perfluorocarbons,andchlorofluorocarbons.64Extrapolatingfromthesefigures,itis

logicaltoconcludethatincreasedrelianceonpublictransportationwithinCalifornia

wouldalsoachieveconsiderableemissionsreductions.Thereareequitybenefitsto

improvingpublictransportationsystemsaswell.

OverathirdofCaliforniasresidentsdonothavedriverslicensesandmustrelyonotherformsoftransportationforaccesstojobs,education,healthcareandothervitaldaily

needs.Despitethis,about80%ofsurfacetransportationfundsarespentonhighways,

withlessthan20%goingtotransitservices.Lowincomeresidentsandpersonsofcolor

aredisproportionatelyrepresentedamongthetransitdependent.65Locatingsuchpublic

transportationprojectsincommunitiesthatsurroundhighemissionsindustrieswould

bedesirable,giventhedisproportionateburdentheyalreadybearbasedontheir

proximitytotheseemitters.Sincethereisalocalaswellasglobalreductionin

pollutantsfromtheincreaseduseofpublictransportation,thiswouldhelpimprovelocal

airquality

64

Todd Davis and Monica Hale, Public Transportations Contribution to U.S. Greenhouse GasReduction, Science Applications International Corporation for the American Public Transportation

Association, May 2007: 1265Amanda Eaken of theNational Resources Defense Council, Improving Transportation System Equity,Comments to California Air Resources Board: 2


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17

Figure2.Source:CaliforniaAirResourcesBoard

Therefore,incentivinginvestmentinpublictransportationprojectsbybothallowing

suchinvestmentsbecountedasanoffsetaswellasgivingsuchanoffsetanadditionalmultiplierwouldresultingreatlyimprovedoverallairqualityonbothalocaland

regionallevelaswellasachievingtherequiredGHGemissionsreduction.

Conclusion

CaliforniahascommendablyincludedspecificlanguagewithinTheGlobalWarming

SolutionsAct(AB32),whichbehoovestheStatetoconsiderpublichealthaspartofthat

billsimplementation.Beingmindfulofthatspecificlanguagecontainedwithinthe

statutorylanguage,itbecomesclearthatCaliforniamustincorporatepublichealth

outcomesintoitscapandtradedesign.Therearetwoopportunitiesforthemtodoso

withinthisdesign.First,Californiashouldmandatethatapercentageofauctionrevenue

receivedbytheStatethroughemissionallowancesalesbedesignatedforpublichealth

relatedpurposeswhichalsohaveclimatechangemitigationcobenefits.Second,

Californiashouldincentivizeoffsetcreationthathaspublichealthcobenefitsincluding,

butnotlimitedto,investmentsinpublictransportationimprovementswithafocuson

communitieslocatedaroundcappedfacilities.Byincorporatingtheserecommendations

intothecapandtradedesign,Californiawillimproveairqualityandreducenegative

healthoutcomes.Thesehealthbenefitswillresultineconomicsavingsforboththe


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18

Stateanditscitizens.

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