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Strengthening Energy Policy in California

Workshop Summary

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Project
The Alternative Energy Future

This spring, in Los Angeles, California, the ÇďżűĘÓƵ and UCLA Law’s Emmett Institute on Climate Change and the Environment convened the third of three regional workshops on durability and adaptability in climate and energy policy. The workshop proceeded with short presentations by academic and policy leaders in climate, energy, and environmental policy, with open discussions following those presentations. The meeting was held under Chatham House Rules, meaning that the identity of the speakers or of individual commenters is not provided here.

Climate change is a complex problem requiring long-term commitments; science, prediction, markets, and human behavior all create policy-making uncertainty. Therefore, instilling institutional, statutory, and regulatory durability and adaptability is critical to the success of any lasting climate and energy policy. California’s frequent role at the vanguard of new energy policies, its history of responding to political will to enact environmental policy, and its unique governance capacity—partially due to its size—make it well-suited as a laboratory for encouraging development of robust climate and energy policies.

The Clean Air Act’s (“CAA”) National Ambient Air Quality Standards (“NAAQS”) program1 is an example of a durable and adaptable climate and energy policy that—through the conditions of history, structure, and decision processes—has enabled effective regulation of pollutants that endanger public health and welfare. And at the state level, California not only also has a long history of leadership in air quality regulation, but also has consistently pushed for ambitious climate and energy policies with the groundbreaking Global Warming Solutions Act of 2006 (“AB 32”) and related legislation.2 Through these laws, the state has set progressively more aggressive targets for greenhouse gas emissions reduction. Currently, state legislation tasks the California Air Resources Board (“CARB”) to ensure that the state’s annual CO2 emissions are 40% below 1990 levels by 2030.3

Endnotes

  • 142 U.S.C. § 7409 et seq.
  • 2See California Global Warming Solutions Act, AB 32 (2006); see also Cal. Health & Safety Code § 38566.
  • 3Cal. Health & Safety Code § 38566.

What Can We Learn from the National Ambient Air Quality Standards?

NAAQS provides an example of policy design that has largely been successful due to its durability and adaptability. The policy’s historical context, along with the policy structures and administrative processes it demands, have all contributed to this success and can illustrate future approaches to fostering durable and adaptable policies. EPA has regulated certain pollutants that “cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare” through the NAAQS program since the adoption of the CAA in 1970.4 Over time, there has been a 71% decrease in aggregate national emissions across the six pollutants for which standards have been set. The program is a successful example of cooperative, iterative federalism in environmental law;5 the collaborative interaction of state and national regulation and the ability to revisit decisions has enabled the law to continue to be effective. Under the CAA, EPA sets federal standards that specify the maximum allowable pollution concentration in the ambient air, and then states develop and implement their own programs, with federal oversight and by incorporating federal emissions control programs, to comply with the federal standards. The EPA Administrator is required to revise the federal standards periodically as appropriate, creating a regular mechanism through which the agency can ratchet down ambient air pollution.6

One presenter explained how the historical underpinnings of the CAA, along with the policy structure and administrative processes it fosters, have enabled its durability and adaptability. Unlike many more recently-enacted environmental laws, the NAAQS program emerged onto an almost blank regulatory slate during a period of relative bipartisan agreement and has benefitted from decades of review by—and interaction with —Congress, EPA, and federal courts. Under the statute, the NAAQS are subject to periodic review and revision by EPA, and outside, independent research informs standard-setting decisions. Structurally, states build their implementation plans with the goal of attaining compliance with the standards, allowing them to spread compliance obligations to fit their individual contexts. Citizen suits provide both a court-assisted check on EPA and provide the agency with guidance on what is permissible in future planning. As a whole, the CAA administrative procedures have allowed for the NAAQS review process—amended to include a more consultative Integrated Science Assessment in 20097— along with formal and informal scientific review, multiple opportunities for public input and participation, and a procedural generosity through which EPA allows signaling and vetting of proposed changes well before it makes any final rule.

From these fundamental characteristics of the NAAQS program, one can draw general lessons with which to approach durable and adaptable policy. Complex programs are more than the sum of their parts; policymakers need to understand how programs evolve over time, and how different administrative or political contexts may dictate different design choices at the outset. Structurally, effective design contributes to policy success; policy instruments are not reducible widgets. The NAAQS process illustrates the role that robust administrative processes can play, but also that effective processes need time to develop and mature by allowing for revision of standards and external review.

Current energy policies, informed by an awareness of greenhouse gases and their impacts, are the progeny of a different historical moment marked by reduced bipartisanship. Additionally, federal and state governments both support a complicated landscape of preexisting regulatory efforts, including electricity regulatory structures and, in some states, preexisting greenhouse gas reduction policies. Finally, the current regulatory environment supports a broader preference for market-based approaches. Therefore, while we cannot draw too many firm lines, we can think about previous air quality policy, such as NAAQS, as not a strict analog, but as an illustrative example for designing successful future climate and energy policies for both California and the nation.

Endnotes

  • 442 U.S.C. § 7408(a)(1)(A).
  • 5See Ann E. Carlson, Iterative Federalism and Climate Change, 103 Nw. U. L. Rev. 1097 (2009).
  • 642 U.S.C. §7401 et seq. (1970).
  • 7See EPA Administrator Lisa P. Jackson, Memorandum: Processing for Reviewing National Ambient Air Quality Standards (May 21, 2009).

Durability and Adaptability in the Broader California Climate and Energy Context

Conference participants noted that the CAA is one of several statutes operating within California’s broad portfolio of environmental and energy policies. For example, the state has a complex electricity policy structure, which fosters procurement programs that incentivize development and deployment of technologies, which can promote efficiency and storage to meet renewable portfolio standards (RPS).8 Such examples provide a richer basis of understanding from which to examine adaptability and durability. As tools that force technological development to aid in CAA compliance, procurement policies address their own issues of adaptability and durability.

One participant noted that procurement policies need to be adaptable to encourage a full suite of technology options to reduce pollutions, but if they are too flexible those options that do develop might not effectively scale to meet long-term goals. Additionally, as California has moved towards integrated resource planning processes to set the stage for meeting long-term energy goals, it has added mechanisms for periodically revisiting modeling and analysis to incorporate new science and technology information.9 To accomplish integrated resource planning, agencies must have the capability to absorb and adapt to new information as it develops, which means that in addition to the processes for evaluating science and technology, structural design must create institutions with the capacity to allow regulatory bodies to alter their course to respond to new data.

According to several participants, for technology development in the long-term to result from procurement policies, those polices must be durable. For example, in the California Public Utilities Commission’s (“CPUC”) work on the RPS, one key to success has been establishing evaluation frameworks at the front end of policy implementation. For example, least-cost, best-fit methodology ranks requested utility offers by value; this process is pervasive across multiple RPS statutes and provides a stable means for evaluating solicitations from utilities.10 This allows both utilities and regulators to have a consistent basis for understanding the regulations over time.

Like the CAA, California’s RPS statutes encourage agency discretion. Commenters suggested that the CAA’s use of cooperative federalism allows states discretion in implementing their pollution control programs. The structure of the state’s RPS highlights the role of discretion in the energy procurement processes. There may be less need for agency discretion on the final target—the goal set by the state—but it is important for the CPUC to have the capacity to devise strategies for meeting goals, with some checks and balances in place to ensure there is no abuse or mission drift.

A full consideration of adaptability and durability requires careful consideration of the regulatory and governance context, taking into account multiple statutes, regulations, agencies, and programs. Just as energy procurement decisions can result in durability or adaptability consequences for CAA or other pollution control programs, other policies might also require successful interplay between programs. A robust biodiversity policy might involve understanding complex relationships between the Endangered Species Act, federal public lands law, state law, and all of the agencies active in the field. An overlapping web of law and policy might lead to more durability, because retrenchment or repeal might require action on several avenues. But the existence of too many regulatory statutes and administrative bodies can also impede adaptability, because of coordination hurdles when working across multiple systems.

Examination of energy procurement policy highlights the complexities for policymaking in different sectors. What makes a policy adaptable and durable (in terms of goals or metrics) may differ across sectors. And the strategies for achieving adaptability and durability also differ.

In energy procurement, policy makers might benefit from having more capacity to recruit segments of the industry to work towards regulatory goals. Top-down pollution control regulation might not. Having such capacity can improve both durability and flexibility, by: (1) encouraging long-term industry buy-in for a chosen policy path; and (2) allowing policy makers to harness industry efforts that make progress towards low emissions goals.

Other sectors, including transportation, face different barriers. The Governor of California has set an ambitious transportation goal: 5 million electric vehicles (“EV”) by 2030.11 Although increased EV production and access to charging will help the state reach this goal, there must also be consumer demand for the vehicles. To reach this goal, one-third of California households will need to afford EVs. Therefore, in addition to the EV technology barrier there is a demand-side barrier. Agencies and industries will need to develop policies that enhance market penetration down the income scale while making EVs cost-effective over their lifetime. Pricing issues also exist in accessing electricity; consumers still bear the cost of new developments.  Development of durable, adaptable polices for transportation might face wrinkles that do not exist for either CPUC regulation of utilities or top-down regulation of polluters.

Agency design can influence the ability of the agency to both be more adaptable and durable. One participant noted that differences between EPA, the Consumer Product Safety Commission (“CPSC”), and the Occupational Safety and Health Administration (“OSHA”) highlight this. The latter two institutions faced less discretion in determining which rules they made and how tightly they enforced them, resulting in subsequent Congressional efforts to hamstring them after some of their enforcement actions became politically unpalatable. Conversely, EPA was delegated expansive authority, and the discretion to use that authority. When it was not politically advisable for the agency to enforce a regulation, EPA had capacity to be more cautious in its enforcement of rules and therefore to partially buffer itself from negative political attention, increasing its capacity to regulate in the future.

Endnotes

  • 8See, e.g. SB 350, Clean Energy and Pollution Reduction Act of 2015 (De LeĂłn).
  • 9See, e.g. Cal. Energy Comm’n, Publicly Owned Utility Integrated Resource Plan Submission and Review Guidelines (17-IEPR-07, Sept. 5, 2017).
  • 10At the beginning of each RPS solicitation cycle, each IOU submits its RPS procurement plan and solicitation protocol to the CPUC for approval. Filed with the RPS procurement plan and solicitation protocol is a detailed description of the IOU's least-cost best-fit methodology. The RPS statute requires utilities to select renewable resources that are least-cost and best-fit. Costs include the cost of the renewable energy generation as well as any indirect costs due integration of the resource and needed transmission investment. In addition, IOUs consider the benefits of the energy and capacity value. “Best fit” criteria address their system needs and RPS portfolio needs.” CPUC, Utility Scale Request for Offers: Least-Cost Best-Fit (2018), http://cpuc.ca.gov/Utility_Scale_RFO/.
  • 11Cal. Exec. Order No. B-48-18 (Jan. 26, 2018).

Successes and Failures of California Policy

Attendees considered where California policy differs from policies in other states or national law. They also addressed where California policy has failed to be durable or adaptable. Statutes that enable discretion have allowed some agencies, like CARB, to be more adaptable than federal analogs. However, that trend has not been consistent across all sectors, with participants noting oil extraction and transportation as notable failures. However, there are many examples of California’s government being more nimble than the federal government, with consistent political will fostering successes. At the same time, other factors, including economics, regulatory funding structures, and agency autonomy have contributed to California’s policy successes.

In a discussion of failures and successes, one attendee (?) noted that CARB has succeeded in implementing the State’s climate policies because AB 32 grants CARB wide latitude to strategize to meet regulatory goals. AB 32 promotes agency adaptability by enabling discretion. There is a marked contrast between the very sparse level of detail provided by California climate laws when compared to federal bills like the failed Waxman-Markey bill. Waxman-Markey provided a high level of detail on the means of implementation which, if enacted, probably have constrained future agency adaptability in applying its provisions.

A participant noted that California has failed to design effective policies for curtailing oil extraction. However, this may be more evidence of lack of political will than a failure in policy design itself. Lack of political will might also explain California’s failures in transportation policy, where car culture and the predominance of automotive transportation result in older cars on the road and a resistance to inspection and maintenance programs. Although more recent policy action made progress towards regulating emissions from the transportation sector, it has lagged behind electric production.

One of the primary differences between California and federal law has been that, on many energy and climate issues, California’s government is more nimble and responsive. The legislature has consistently been able to revise legislation and state agencies have succeeded in altering regulations, when needed. This may reflect Californians’ support for environmental protection, but the effect has been similar to the EPA’s multi-decadal ability, imposed by the CAA, to revise NAAQS standards and keep the NAAQS program a useful tool for promoting air quality. Some of this nimbleness and ability might be issue- or agency-dependent. One might look to the perceived rigidity in the California Coastal Commission when compared to the relatively nimble NOAA fisheries, to see examples where California agencies have not been adaptive.

Participants asked how portable California’s successes are. Often, this comes down to political will. On any emerging issue, Congress will be unlikely to grant EPA the level of discretion that it gave the agency in the 1970 CAA, but studying the CAA is essential because it provides an example in which the statute’s momentum persists because of the original political will and not ongoing political preference.

However, one attendee noted that political consistency is not the only factor leading to durable, adaptable regulations in California. California benefits from a highly diversified economy that has shown itself capable of reinventing itself several times, increasing resiliency in the face of regulatory burdens. Structurally, CARB is also insulated in that a portion of its funding is fairly consistent due to a proliferation of fees that fund many activities. This allows for some agency independence in California. In contrast, EPA faces the constant threat of defunding, meaning that there are areas where it may formally have the discretion to act, but cannot do so without repercussions, harming the durability of the agency itself.

Conclusion

The mechanisms for achieving durability and adaptability have differed between the California and federal systems. Providing agencies such as CARB and the CPUC with enough discretion to pursue goals over time, but also with sufficient accountability to the public and to legislative bodies, can lead to effective systems where state agencies are able to alter course over time to meet targets. Either at inception of a policy or throughout policy development, both state and federal governments can utilize that will to enable agencies with the discretion to institute effective policies, the authority to enforce those policies, and the resources to enforce change over time.