Mary D. Nichols, chairman of the California Air Resources Board, spoke with Bloomberg BNA correspondent Carolyn Whetzel in Los Angeles Dec. 16 about the agency's air quality and climate policies. In this exclusive interview, Nichols discusses what's ahead in the ongoing implementation of the state's landmark Global Warming Solutions Act (A.B. 32) and for the nation's first economywide greenhouse gas emissions cap-and-trade program—now linked with Quebec's carbon market. This interview has been edited for clarity.
Bloomberg BNA: What impacts do you see from the Republicans takeover of Congress on California's air quality and climate programs?
Nichols: I think the California delegation will remain solidly supportive of the state's interests. The state as a whole has a very strong delegation, starting with our two senators. There's a real question that with the Republicans taking over various key committees, that EPA is going to be facing more hearings, more oversight, more questions, more threats to their budget than they had in the past. On the other hand, the [Obama] administration has been steadfast in its support through EPA and the president's Climate Action Plan. So, I don't think there's a threat to California's interests.
Bloomberg BNA: What are some of the big challenges CARB will face in 2015?
Nichols: This year we're going to have to finish up with whatever happens with the [Section] 111(d) rule [EPA's Clean Power Plan]. We're going to have start a new A.B. 32 scoping plan while we're setting a new midterm [greenhouse gas emissions] target.
Bloomberg BNA: California's greenhouse gas emissions trading is economywide. Would this pose any challenges in complying with the EPA proposed Clean Power Plan, which focuses on the electricity sector?
Nichols: We don't think so. We believe ours fits within the framework very easily.
Bloomberg BNA: Washington Gov. Jay Inslee (D) has plans to introduce legislation to create a carbon market, which if passed may open to door to linkage with the California-Quebec market. Oregon is expected to consider legislation establishing a carbon tax. Are you aware of any other states in the region considering programs that set a price on carbon or even a cap-and-trade program that could be linked with California's?
Nichols: I don't think anybody is as far as long as the Pacific Coast Collaborative states, at this point. In our conversations with other states around the proposed EPA 111(d) rulemaking, which is occurring at the agency levels and with some governors' office staff people, there has been some discussions around the fact that when this rule goes final, there will be some incentives for ways to join a market. But I don't think anyone is doing anything very concrete at the moment.
Bloomberg BNA: On Jan. 1, CARB's greenhouse gas emissions cap-and-trade program will be expanded to include distributors of transportation fuels and natural gas. What measures are in place to monitor the impacts of bringing these entities into the market on consumers, industry and the market itself?
Nichols: With respect to the cap-and-trade program, we created the allowance reserve to be able to intervene in the market, if needed, if it turns out there is a shortage of allowances or the price goes up to quickly. We haven't yet had to use that and hope we never will. I think people who watch gasoline markets are now convinced that this a program that can be managed in a steadfast way that will not interfere with the normal operations of our fuel supply system and that it can be done for a very reasonable cost.
Bloomberg BNA: In California, we're less than a month into the new legislative session and already three bills have been introduced to establish a 2030 greenhouse gas emissions reduction target, to continue emissions beyond the 2020 goal set in A.B. 32 and on the state's long-term goal to cut emissions 80 percent by 2050. On Dec. 15, the governor and Democratic leadership also called for a midterm goal. Will CARB be setting that goal or will the legislature?
Nichols: I have advocated that rather than the legislature set the goal, they should direct us to set the goal. They can give us some general guidance and parameters if they want to, but the technical job of actually defining what the goal is, is better done by the administrative agency because there are options in the way you phrase it in terms of percentage off of the baseline, the cumulative number of tons reduced and the exact trajectory that we [CARB] should really do. We're looking at the 2030 goal now. We're just not ready to go the legislature and say adopt this.
Bloomberg BNA: What is CARB's plan for implementing S.B. 605, the recently enacted legislation requiring a comprehensive plan to reduce emissions of short-lived climate pollutants such as black carbon, fluorinated gases and methane?
Nichols: We filed a report a year or so ago about what's already been done on black carbon and methane under the existing rules, which is intensive. But the legislature asked us for an update and to come up with a plan on the things that we're working on right now. Ryan McCarthy, who is my science and technology adviser, is coordinating that effort that's due out at the end of 2015.
Bloomberg BNA: The EPA has proposed revising the national ambient air quality standard for ground-level zone to between 65 parts per billion and 70 ppb to protect public health. What challenges would a stricter standard pose for the California?
Nichols: Well, you know we have been long-time advocates for EPA using the best science to set air standards and we have followed this proceeding and followed the science that went into it. The proposal was hanging out for a long time. It may seem to be moving the goal post, but the fact is we've worked for decades now on standards that people said were impossible to reach, and we keep on making steady good progress towards them. So, we're not afraid of having a tougher standard to have as our health goal. Obviously, it will require some additional planning and work and we know it's not easy. But we also know that we have a very good track record of working with industry in California to come up with new technologies and new solutions, and we'll expect to do that again.
Bloomberg BNA: Meeting the state's 2050 greenhouse gas emissions goal and bringing some areas of the state into compliance with federal air quality standards will require a massive transformation of the state's transportation sector: cars, trucks, equipment and much more. CARB's zero-emission vehicle mandate is key to both these efforts. The ZEV rule dates back to the early 1990s and has had lots of starts and stops. Are we going to the ZEV movement stall again?
Nichols: I think the ZEV rule is now really coming to fruition with an array of plug-in vehicles, advanced hybrids, battery-electrics and now a number of fuel cells coming into the market. I think we're really now on track to do this and go beyond, in terms of the direct mandate.
Bloomberg BNA: At the EPA, there always seems to be a backlog of state implementation plans awaiting final action. What's the potential for seeing more of a bottleneck under the proposed Clean Power Plan, which will require a new wave of state plans?
Nichols: I think there's going to have to be a discussion on how to get faster approvals. And it is coming up in the context of the 111(d) proposal, where EPA, at the request of CARB and others, is looking at actually coming out with early guidance that would facilitate the submittal and approval of plans. So, that even though every state gets to do its own plan and they get to do them differently, the bottom line is that if there is a checklist, and if you check all the boxes, then you can get your plan approved. I think they're going to have to do that and it's going to be in its own small way revolutionary, as it could open the door to the expedited processing of SIPS.
Bloomberg BNA: It seems that over the years, the CARB has become more sophisticated in its legal vetting of draft regulations. Is this true?
Nichols: Yes, I think so. A couple of things have happened. First of all, unfortunately, it took losing a case or two on CEQA [the California Environmental Quality Act] to educate us about the fact that, yes, we are subject to this law and we have to follow the procedures precisely, even when what we are doing is adopting rules that are beneficial to the environment. If anyone has a beef with any aspect of the rule, they can find some issue where you might possibly cause, even though it's unlikely, an adverse impact in some area. You've got to dispose it, you've got to say how you're planning to deal with it. And we had not always been doing that prior to the board actually adopting the rule. So what we've come up with is, in effect, a two-step process. Now the rule is going to come to the board once and then go back to the staff for more work and then come back to the board again for final adoption. We're not going to try to get caught up in an endless loop where people wait until the last second to raise issues and string out the process. But we do have to be more careful and precise in following procedural requirements.
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