California Climate Action Registry

Nadia M. P. Wetzler
Christopher Berka

Anticipating the possibility that greenhouse gas emissions may ultimately be regulated at the national and international levels, the California Legislature has decided to explore non-regulatory methods by which businesses could be encouraged voluntarily to monitor and reduce greenhouse gas emissions. In furtherance of this goal, in fall 2000, the Legislature enacted SB 1771, the "California Climate Action Registry," sponsored by Senator Byron D. Sher (D-Stanford), which the Governor approved on September 30, 2000. The legislation is in part a response to recommendations made by business witnesses at a hearing held in the fall 1999 by the Senate Environmental Quality Committee on the subject of climate change.

The statute requires the California Resources Agency to establish a nonprofit public benefit corporation, to be known as the California Climate Action Registry (Registry). Cal. Health & Safety Code § 42800 et seq. The Registry allows California entities to record and register voluntary greenhouse gas emission reductions made after 1990.

Businesses are given various incentives to participate in the program. First, through the "California Climate Action Registry," the state commits to use its best efforts to ensure that entities participating in the program receive appropriate consideration under any future international, federal, or state regulatory scheme relating to greenhouse gas emissions. Cal. Health & Safety Code § 42801(e). Second, the Registry will recognize, publicize, and promote registrants making voluntary reductions. Cal. Health & Safety Code §§ 42810(e), 42823(I).

Participation in the registry is voluntary, and the Legislature endeavored to keep bureaucratic requirements at a minimum. At the same time, the Registry is intended to be a comprehensive approach for tracking and reducing greenhouse gas emissions. Initially, participants are to report direct and indirect emissions of carbon dioxide. Cal. Health & Safety Code § 42840(c). Indirect emissions include emissions from electricity consumption and those resulting from offsite steam generation. Emissions from participants' transportation-based activities may also eventually be included in indirect emissions. Cal. Health & Safety Code § 42840(b). Within three years after joining the registry, participants must also monitor and report emissions of hydrofluorocarbons, methane, nitrogen oxides, perfluorocarbons, and sulfur hexafluoride. Cal. Health & Safety Code § 42840(c).

Participants agree to establish emissions baselines on an entity-wide basis, including emissions generated outside the state, to monitor their emissions and set reduction targets, and to report the quantity of their annual emissions progress. Cal. Health & Safety Code §§ 42823(i), 42824. Participants initially must report and monitor emissions from all sources they own in the state. Within three years of registering, they must report and monitor emissions from all of their sources based in the United States. In addition, the Registry is to encourage corporations with international operations to register their total worldwide emissions baselines and annual emissions results. Cal. Health & Safety Code § 42840(d).

Typically, participants are to report their baseline emissions during their first year of participation in the Registry and then report emission results in each subsequent year to record changes in emission levels with respect to the baseline year. However, participants may report their annual emission results without establishing a baseline. Participants are required to have their emission levels (and baselines) verified by a third party.

Baselines are to be set according to the actual emissions for the most recent year for which the applicant has complete energy use and fuel consumption data available, beginning after January 1, 1990. Cal. Health & Safety Code § 42840(a)(1). Emission reduction goals are to be established based on international best practices for specific industries and economic sectors. In addition, the Registry may adopt guidelines encouraging participants to report emissions in relation to the annual average business-as-usual rate of improvement in the energy efficiency of the state economy. Other than these guidelines, the rule does not appear to require a specific reduction rate. The Registry is intended to serve as a means for participants to track their progress in reducing their actual emissions of greenhouse gases. See Cal. Health & Safety Code § 42823. The legislation does not appear to contemplate that participants could report emission reductions achieved by financing mitigation projects at sources (or sinks) owned by others.

Led by a seven-member board of directors, which includes the Secretary of the Resources Agency and the Secretary for Environmental Protection, as well as five public members representing business, local government, and public interest organizations, the Registry performs a number of functions, including (1) providing referrals to approved providers for advice on designing programs to establish emissions baselines and monitor and track emissions, establishing emissions reduction goals based on international best practices, and designing and implementing organization-specific energy efficiency or renewable energy plans; (2) adopting a list of organizations recognized by the state to provide technical advice and assist participants in identifying providers with appropriate expertise; (3) adopting standards for verifying emissions and reductions; (4) qualifying independent firms (whose services participants in the Registry are responsible for funding) to verify and audit emission reductions; and (5) maintaining a record of all emissions baselines and reductions. Cal. Health & Safety Code § 42823. The Registry is to make the record of emissions baselines and reductions available to the public. Cal. Health & Safety Code § 42823(g).

In addition to working with participants and administering the program, the Registry plays an important role in helping the state respond to global climate change concerns. The Registry is to track greenhouse gas emissions in the state, inform the public about climate change matters, and guide the state in developing policies consistent with reducing global greenhouse gas emissions. To this end, the Registry will maintain an inventory of emissions from all sources located in the state, which the Registry is to update, by January 1, 2002, with additional updates to follow every five years. Further, the inventory is to include information comparing emissions from similar inventories prepared for the United States and other states or countries, and information on relevant energy and air quality policies and activities. Cal. Health & Safety Code § 25730(a). The Registry is to play a proactive role in reducing the state's emissions, in part by acquiring and developing data global climate change and providing state, regional, and local agencies, utilities, business, and industry with information on the costs, technical feasibility, and demonstrated effectiveness of methods for reducing or mitigating the production of greenhouse gases. Cal. Health & Safety Code § 25730(b).

On March 26, 2001, the Secretary of the Resources Agency filed with the Secretary of State the Articles of Incorporation for the Registry. Currently, the Resources Agency is in the process of developing recommendations to the Governor for candidates to serve on the Registry's Board of Directors, as well as developing the Registry's bylaws.

Complete text of the California Climate Action Registry legislation is available at http://info.sen.ca.gov/pub/99-00/bill/sen/sb_1751-1800/sb_1771_bill_20000930_chaptered.html.

Nadia M. P. Wetzler is an associate and Christopher Berka is a partner in the San Francisco and Palo Alto offices of McCutchen, Doyle, Brown & Enersen, L.L.P. Both are members of the Section's Committee on Climate Change and Sustainable Development.