California Climate Action Registry Holds Working Group Meeting

Nadia M. P. Wetzler

On July 19, 2001, approximately 40 representatives of government, NGOs, and industry met to discuss the status of the California Climate Action Registry (Registry). As reported in the last edition of this Newsletter [Vol. 4, No. 3, July 2001], in fall 2000, the California Legislature enacted SB 1771, the "California Climate Action Registry," which the governor approved on September 30, 2000. The goal of the act is to explore non-regulatory methods by which businesses could be encouraged to voluntarily monitor and reduce greenhouse gas emissions. It provides for the establishment of a nonprofit public benefit corporation, the Registry, which allows California entities to record and register voluntary greenhouse gas emission reductions made after 1990. The State of California commits to use its best efforts to ensure the emissions results registered in the California Registry (according to Registry-approved procedures) will receive "appropriate consideration" under any future state or national regulatory regime. Cal. Health & Safety Code § 42801(e).

California Climate Action Registry: Background
Molly Tirpak, California Climate Action Registry Working Group, kicked off the meeting by explaining the goals of the Registry, which include: providing an opportunity for participants to gain experience in developing their own emissions inventory before they become subject to regulatory action, and assisting businesses in compiling their inventories by providing a protocol and list of criteria that has been vetted through a public review process.

Diane Wittenberg, California Climate Action Registry, said the Registry is based on the notion that, upon the adoption of a future regulatory scheme, participants in the Registry will have high credit-worthy emissions that have been quantified in a transparent, certifiable and verifiable manner, with a high potential value for future credit trading. She said that, in effect, the Registry functions as an honest broker that stores high quality information.

The Registry Office will be located in Los Angeles. The Registry has secured funding for its first two years ($1 million from the state and $250,000 from the Energy Foundation). Jim Boyd, California Resources Agency, said the Registry will be up and running by the end of summer 2001. Once formed, the Board will adopt procedures and guidelines and hire staff to set up protocols on how to quantify and register emission reductions.

Attendees Express Interest and Concern
Attendees expressed interest in the Climate Action Registry, as well as concern over some of the elements of the program. Bud Beebe of the Sacramento Municipal Utility District (SMUD) said he supported the program and its goal of developing a protocol that quantifies entity-wide greenhouse gas emissions in a manner that is verifiable and imposes little cost on participants. Dave Olsen of the CEO Coalition, and former CEO of Patagonia, noted the potential side-benefits of participating in the registry. He said that in preparing its inventory, Patagonia had discovered inefficiencies in its operations, which when corrected provided considerable economic savings.

A representative of British Petroleum (BP) noted that the company had already invested considerable time in putting together an inventory of emissions from its operations. However, she noted that BP is not prepared to register its nation-wide emissions. Similarly, Cindy Tuck, California Council for Environmental and Economic Balance (CCEEB), stated that while many of her clients support the Registry, a number are hesitant to participate in the program because of the requirement to report nation-wide emissions of greenhouse gases. Kyle Davis, Edison Mission Energy, and Howard Gollay, Southern California Edison, both noted that the requirement to obtain third-party verification, and eventually to track indirect emissions, made quantification and tracking of greenhouse gas emissions more time-consuming and expensive for participants. Mr. Gollay said that giving participants flexibility in the quantification process and simplifying reporting requirements was essential. In response, Ms. Wittenberg described potential alternatives to third-party verification. She said that small emitters may be allowed to submit data using certified software that is easily spot-checked and thus bypass the need to pay for independent verification.

Other attendees said it was important that the Registry track nation-wide emissions, especially since greenhouse gases do not remain within borders. Attendees also said they wanted to promote consistency and avoid a series of registries with conflicting requirements. Michael Murray, Sempra Energy, noted that having consistent programs is essential for allowing future credit trading. Julia Levin, Union of Concerned Scientists, said that if companies want to promote consistency, they should commit to nation-wide reporting, since it was unlikely that any other state would adopt a program more stringent than California's. According to Ms. Levin, the California Climate Action Registry is likely to become the national model.

Dale Bryk, Natural Resources Defense Council (NRDC), reported on NRDC's efforts to develop a consensus on how the Registry should work. In June 2001, NRDC sponsored a meeting in San Francisco of representatives of government and NGOs that are working on climate change, so to avoid duplication, encourage consistency, and reach agreement on the Registry's goals. The group identified one goal as encouraging companies to look at registries as a cost-effective opportunity for improving efficiency and reducing emissions. Six working groups were established to determine which emissions should be reported, how to report the emissions, and how to transition from project-level reporting (along the lines of the federal 1605(b) program - see below) to participating in the Registry. Ms. Bryk said that the collaboration of states and NGOs needs to broaden to include industry partners. She also said that the federal 1605(b) program had little credibility with the environmental community and did not appear useful for businesses.

Quantification Process
Several attendees asked questions regarding the quantification process. Wendy James, California Climate Action Registry Working Group, indicated that the baseline year for calculating emissions reductions is 1990. Companies may select an earlier baseline if they have data showing actions the companies took to reduce greenhouse gas emissions. The California Energy Commission is developing a verification protocol. Julia Levin, Union of Concerned Scientists, said the unit of reporting is expected to be tons of greenhouse gas emissions, although industry-specific metrics may eventually be developed. She noted it was important to retain a basic unit of reporting given the possibility of future national and international regulation of greenhouse gas emissions.

According to Pierre DuVair, California Energy Commission (CEC), the Registry has benefited from a number of methodological advances, including the World Resources Institute's protocol (quantification procedures for carbon trading). Lawrence Berkeley National Lab is looking at industry specific metrics, with three pilot studies in particular. The American Petroleum Institute is putting together greenhouse gas emission estimation methodologies for the oil and gas industry. The U.S. Department of Energy has been working on methodologies for reporting greenhouse gas emissions for over six years under the Energy Policy Act section 1605(b) program (a program under which businesses and individuals nation-wide can register emissions reductions at a project or entity level). EPA is developing the Climate Leaders Program, which is expected to be similar to the California program. Mr. DuVair also said that California expects participants to play an active role in developing the protocol and related guidance.

Local Efforts in California to Quantify and Reduce Greenhouse Gas Emissions
Gary Gero, Los Angeles Environmental Affairs Department, described the Los Angeles City Council's climate action plan. The City committed to reduce emissions in Los Angeles by 2010 to 30% below 1990 levels. In addition, the City committed to increase its purchase of green power. As of July 1, 2001, 10% of the City's power came from green sources. The City's goal is to purchase 25% of its power from green sources. L.A. expects to benefit economically from its plan due to eventual regulation of greenhouse gases. By reducing its emissions now and recording its emission reductions in a registry, the City hopes to generate emission reduction credits that it can eventually sell at a large discount or give away to new businesses as an incentive to locate in L.A.

The City of Santa Monica expects to adopt a registry program for its entire community, according to Ms. Wittenberg.

Creation of Registries in Other States
According to Ms. Bryk, registries are currently being developed by four states: California, New Hampshire, New Jersey, and Wisconsin. Approximately 8-12 other states are considering developing registry programs, but not all want their own registry. In addition, Ms. Bryk said the northeastern states are exploring the development of a regional registry.

Nadia M.P. Wetzler is an associate of McCutchen, Doyle, Brown & Enersen, L.L.P., and a member of the Section's Committee on Climate Change and Sustainable Development.