(a) The Legislature hereby finds and declares all of the following:
(1) Several regions in California suffer from some of the worst air quality in the United States.
(2) While traditional command and control air quality regulatory programs are effective in cleaning up the air, other options for improvement in air quality, such as market-based incentive programs, should be explored, provided that those programs result in equivalent emission reductions while expending fewer resources and while maintaining or enhancing the state’s economy.
(3) The purpose of this section is to establish requirements under which a district board may adopt market-based incentive programs in a manner which achieves the greatest air quality improvement while strengthening the state’s economy and preserving jobs.
(b) (1) A district board may adopt a market-based incentive program as an element of the district’s plan for attainment of the state or federal ambient air quality standards.
(2) A market-based incentive program that satisfies the conditions in this section may substitute for current command and control regulations and future air quality measures that would otherwise have been adopted as part of the district’s plan for attainment, and may be implemented in lieu of some or all of the control measures adopted by the district pursuant to Chapter 10 (commencing with Section 40910) of Part 3.
(c) In adopting rules and regulations to implement a market-based incentive program, a district board shall, at the time that the rules and regulations are adopted, make express findings, and shall, at the time that the rules and regulations are submitted to the state board, submit appropriate information, to substantiate the basis for making the findings that each of the following conditions is met on an overall districtwide basis:
(1) The program will result in an equivalent or greater reduction in emissions at equivalent or less cost compared with current command and control regulations and future air quality measures that would otherwise have been adopted as part of the district’s plan for attainment.
(2) The program will provide a level of enforcement and monitoring, to ensure compliance with emission reduction requirements, comparable with command and control air quality measures that would otherwise have been adopted by the district for inclusion in the district’s plan for attainment.
(3) The program will establish a baseline methodology that provides appropriate credit so that stationary sources of air pollution which have been modified prior to implementation of the program to reduce stationary source emissions are treated equitably.
(4) The program will not result in a greater loss of jobs or more significant shifts from higher to lower skilled jobs, on an overall districtwide basis, than that which would exist under command and control air quality measures that would otherwise have been adopted as part of the district’s plan for attainment. A finding of compliance with this requirement may be made in the same manner as the analyses made by the district to meet the requirements of Section 40728.5.
(5) The program will promote the privatization of compliance and the availability of data in computer format. The district shall endeavor to provide sources with the option to keep records by way of electronic or computer data storage systems, rather than mechanical devices such as strip chart recorders.
(6) The program will not in any manner delay, postpone, or otherwise hinder district compliance with Chapter 10 (commencing with Section 40910) of Part 3.
(7) The program will not result in disproportionate impacts, measured on an aggregate basis, on those stationary sources included in the program compared to other permitted stationary sources in the district’s plan for attainment.
(d) (1) A district’s plan for attainment or plan revision submitted to the state board prior to January 1, 1993, shall be designed to achieve equivalent emission reductions and reduced cost and job impacts compared to current command and control regulations and future air quality measures that would otherwise have been adopted as part of the district’s plan for attainment. A district shall not implement a market-based incentive program unless the state board has determined that the plan or plan revision complies with this paragraph.
(2) A plan or plan revision submitted on or after January 1, 1993, shall be designed to meet the provisions of subdivision (c) and Section 40440.1 if applicable. The state board shall approve the plan or plan revision prior to program implementation, and shall make its determination not later than 90 days from the date of submittal of the plan or plan revision.
(3) Upon the adoption of rules and regulations to implement the program in accordance with subdivision (c), the district shall submit the rules and regulations to the state board. The state board shall, within 90 days from the date of submittal, determine whether the rules and regulations meet the requirements of this section and Section 40440.1, if applicable. This paragraph does not prohibit the district from implementing the program upon the approval of the plan or plan revision and prior to submittal of the rules and regulations.
(e) Within five years from the date of adoption of a market-based incentive program, the district board shall commence public hearings to reassess the program and shall, not later than seven years from the date of the district’s initial adoption of the program, ratify the findings required pursuant to paragraphs (1), (2), (5), and (6) of subdivision (c) and the district’s compliance with Section 40440.1, if applicable, with the concurrence of the state board. If the district board fails to ratify the findings within the seven-year period, the district board shall make appropriate revisions to the district’s plan for attainment.
(f) The district board shall reassess a market-based incentive program if the market price of emission trading units exceeds a predetermined level set by the district board. The district board may take action to revise the program. A predetermined market price review level shall be set in a public hearing in consideration of the costs of command and control air quality measures that would otherwise have been adopted as part of the district’s plan for attainment, costs and factors submitted by interested parties, and any other factors considered appropriate by the district board. The district board may revise the market price review level for emission trading units every three years during attainment plan updates required under Section 40925. In revising the market price review level, the district board shall consider the factors used in setting the initial market price review level as well as other economic impacts, including the overall impact of the program on job loss, rate of business formation, and rate of business closure.
(g) For sources not included in market-based incentive programs, this section does not apply to, and shall in no way limit, existing district authority to facilitate compliance with particular emission control measures by imposing or authorizing sourcewide emission caps, alternative emission control plans, stationary for mobile source emission trades, mobile for mobile source emission trades, and similar measures, whether imposed or authorized by rule or permit condition.
(h) This section does not apply to the implementation of market-based transportation control measures which do not involve emissions trading.
(Amended by Stats. 1996, Ch. 618, Sec. 1. Effective January 1, 1997.)
Last modified: October 25, 2018