BILL NUMBER: AB 376AMENDED BILL TEXT AMENDED IN ASSEMBLY MAY 6, 2009 AMENDED IN ASSEMBLY APRIL 13, 2009 INTRODUCED BY Assembly Member Nava FEBRUARY 23, 2009 An act to add Division 25.8 (commencing with Section 38900) to the Health and Safety Code, relating to greenhouse gas emission offsets. LEGISLATIVE COUNSEL'S DIGEST AB 376, as amended, Nava. Voluntary greenhouse gas emission offsets. Existing law creates a statewide greenhouse gas emission limit equivalent to what the statewide greenhouse gas emissions level was in 1990, to be achieved by 2020. The State Air Resources Board is the state agency charged with monitoring and regulating sources of greenhouse gases in order to reduce emissions of greenhouse gases. This bill would require a person selling a voluntary offset, as defined, in the state to clearly and conspicuously disclose specific information in any marketing materials for the voluntary offset. The bill, beginning January 1, 2011, would require an entity that sells a voluntary offset in the state to ensure that each voluntary offset sold has a unique serial number and is registered with and tracked by a registry, as defined. The bill would require a registry to meet certain documentation and tracking requirements. The bill, except as specified, would prohibit a person from registering a voluntary offset with more than one registry concurrently. The bill would prohibit a person from selling, allocating, awarding, transferring, or claiming a voluntary offset for retirement more than once. The bill would authorize a person to resell a voluntary offset that has been previously sold if all rights and benefits associated with the voluntary offset are sold each time the offset is sold. The bill would subject any person who violates those provisions to a civil penalty of not more than $10,000 for each violation. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) Global warming poses a serious challenge to public health, the environment, and the economy. (2) With increasing concern regarding global warming, there has been an increase in the advertising, sale, and transfer of greenhouse gas emission reduction credits, offsets, and similar products designed to allow individuals or entities, or both, to purchase emission reduction credits in lieu of actually making those reductions themselves. (3) The market for the trading of voluntary greenhouse gas emissions offsets exceeds three hundred fifty million dollars ($350,000,000) and represents a reduction of over 70,000,000 metric tons of carbon dioxide equivalents annually. (4) A significant amount of retail voluntary greenhouse gas emissions offsets are purchased by California residents, businesses, and government agencies. (5) Some voluntary offsets sold to retail customers are certified as being real, measurable, and verifiable. However, there are numerous public and private entities that create and certify offset projects, and these entities may apply different standards to projects with inconsistent results, generating confusion at the customer level. (6) In addition, concerns have been raised about instances of potential fraud or misrepresentation in the voluntary offset market, which is difficult to address in the absence of clear standards for retail offsets. (7) The purchase and sale of voluntary offsets at the retail level represents an important opportunity for all Californians to take part in projects that immediately reduce California's greenhouse gas emissions and bring important additional local benefits to California communities. (8) Consumers and other members of the public have few protections or standardized methods by which to ensure that they are purchasing or obtaining emission reduction credits that actually reduce greenhouse gases, reduce global warming, and improve the environment. (9) The voluntary offset market will continue to grow along with the compliance market for a variety of reasons, including all of the following: (A) Voluntary project protocols take less time to adopt than compliance protocols and could serve as a testing ground for compliance grade offsets. (B) Voluntary credits have a lower cost than compliance offsets and offer consumers an alternative to compliance grade project prices. (C) Voluntary credits offer opportunities abroad and provide access to a larger range of reductions and emission reduction projects. (b) It is the intent of the Legislature to create through this act a process for ensuring that voluntary offsets sold at the retail level in California meet clear and consistent disclosure and registration standards. (c) It is the further intent of the Legislature that the State Air Resources Board develop another process, independent from that created pursuant to this act, to regulate any market-based compliance mechanisms adopted pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code). SEC. 2. Division 25.8 (commencing with Section 38900) is added to the Health and Safety Code, to read: DIVISION 25.8. Greenhouse Gas Emission Offset Sales CHAPTER 1. GENERAL PROVISIONS 38900. As used in this division: (a) "Certification body" means any organization that does all of the following: (1) Develops or adopts protocols for determining the eligibility of projects to generate greenhouse gas emission reductions. (2) Develops or adopts methodologies for the quantification of the emission reductions created by offset projects. (3) Sets up the verification procedures for the projects certified by the verifying organization. (b) "Greenhouse gas" includes carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, and any other gases designated by the state board or Legislature that contribute to climate change. (c) "Marketing materials" means promotional and informational materials that include descriptions of the voluntary offsets and can reasonably be determined to be intended to inform the consumer about available products or influence a consumer's decision to purchase specific products, that could include, but are not limited to, promotional materials on the Internet, in brochures, and advertisements. (d) "Project" refers to a greenhouse gas reduction project that reduces emissions of greenhouse gases or increases sequestration of greenhouse gases in a manner that is real, permanent, additional, measurable, and verifiable, and thereby creates a voluntary offset that may be sold. Projects may include, but are not limited to, forestry-based projects, methane capture and destruction projects, fuel switching projects, and stationary combustion emission reduction projects. (e) "Registry" means an organization that does all of the following: (1) Registers projects that generate voluntary offsets and records the type of voluntary actions generating the offset. (2) Issues a unique serial number for each registered voluntary offset. (3) Tracks ownership, verifies authentic origination, and records retirement of voluntary offsets. (f) "Retirement" of a voluntary offset means to eliminate an offset from a registry so that no one can use, claim, or report that offset as an emission reduction. (g) "State board" means the State Air Resources Board. (h) "Voluntary offset" means any product sold in the state that claims to be a "greenhouse gas emission offset," a "voluntary emission reduction," a "retail offset," or any like term, which connotes that the product represents or corresponds to a reduction, not required by any law or regulation, in the amount of greenhouse gases present in the atmosphere or that prevents the emission of greenhouse gases into the atmosphere that would have otherwise been emitted. Voluntary offsets for the purposes of this subdivision do not include any greenhouse gas reduction measures, including voluntary greenhouse gas emission reduction measures or market-based compliance mechanisms, used to comply with greenhouse gas emission limits established by any law or regulation, including, but not limited to, limits established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)), the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code), or federal law or regulation. 38901. Beginning January 1, 2010, a person selling a voluntary offset in the state shall clearly and conspicuously disclose in any marketing materials for the voluntary offset all of the following: (a) The geographic location of the project used to create the voluntary offset, including, but not limited to, the country of origin. If the project is located in the United States, the state or states where the emission reduction or reductions took place shall be disclosed. (b) The date or range of dates that the emission reduction represented by the voluntary offset occurred or will occur. (c) A brief description of the project used to create the voluntary offset.(d) Limitations on the permanence of the emission reductions that correspond to the voluntary offset, including the potential for unexpected reversal of an emission reduction, and the basis of claims of permanence.(e)(d) The name of the certification body or governmental entity protocol under which the voluntary offset was verified.If the voluntary offset is not verified using protocols stipulated by a certification body or governmental entity, the seller shall clearly and conspicuously disclose in the marketing materials that the voluntary offset or voluntary offsets being sold are not verified under protocols accepted by a governmental agency or certification body.(f)(e) The name of the protocol under which the project's emissions reductions were quantified.If the project's emission reductions that produced the voluntary offset are not quantified using protocols stipulated by a certification body or governmental entity, the seller shall clearly and conspicuously disclose in the marketing materials that the voluntary offset or voluntary offsets being sold are not quantified under protocols accepted by a governmental agency or certification body.(g)(f) The name of the registry where the voluntary offset is registered.(h)(g) Information on any significant environmental or public health impacts associated with the creation and maintenance of the voluntary offset project, including, but not limited to, impacts on species, habitat, ecosystems, land use, air quality, and water supply and quality. 38902. (a) Beginning January 1, 2011, no protocol, certification body, or registry may be used to support a voluntary offset marketing claim unless it has first been validated by the state board, except as provided in subdivision (b). (b) At the election of the state board, a protocol, certification body, or registry may be validated by the California Climate Action Registry established pursuant to former Chapter 6 (commencing with Section 42800) of Part 4 of Division 26, as effective on December 31, 2007.38902.38903. (a) Beginning January 1, 2011, a person who sells a voluntary offset in the state shall ensure that each voluntary offset sold has a unique serial number and is registered with and tracked by a registry. (b) Every registry shall maintain documentation of the serial number assigned to each of the voluntary offsets it registers. (c) Every sale of a voluntary offset for the purposes of retirement shall be reported to the registry tracking that offset's serial number, and recorded to ensure that the offset has been retired and cannot be sold again or be claimed to reduce the same emissions more than once.38903.38904. (a) A person shall not register a voluntary offset with more than one registry concurrently unless the registrations are linked in a fashion that prevents simultaneous purchases and retirements of that offset. A registry may however transfer an offset to another registry. (b) A person shall not sell, allocate, award, transfer, or claim a voluntary offset for retirement more than once. (c) A person may resell a voluntary offset that has been previously sold if all rights and benefits associated with the voluntary offset are sold each time the offset is sold.38904.38905. (a) A person shall not sell, offer for sale, advertise, or label any product in violation of this division. (b) A person shall not willfully make a false statement or representation, or knowingly fail to disclose a fact required to be disclosed, or falsify or alter any document or form to misinform or mislead the public.38905.38906. Nothing in this division is intended to prevent consumers from using the Consumers Legal Remedies Act (Title 1.5 (commencing with Section 1750) of Part 4 of Division 3 of the Civil Code) or any other law to take action against producers or marketers of offsets, or from recovering associated court costs and attorney's fees pursuant to Section 1021.5 of the Code of Civil Procedure or any other law.38906.38907. Nothing in this division is intended to alter the implementation of the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)) by the state board. CHAPTER 2. ENFORCEMENT 38920. (a) Any person who violates any provision of this division is liable for a civil penalty of not more than ten thousand dollars ($10,000) for each violation. (b) The Attorney General, a district attorney, a city attorney, or any other state or local enforcement agency may bring a civil action to recover civil penalties authorized by subdivision (a).