California's Global Warming Solutions Act ("AB 32") sets forth an ambitious program to combat global warming. The law requires the California Air Resources Board ("CARB") to adopt regulations to return the state's greenhouse gas emissions to 1990 levels by the year 2020. In addition, CARB must recommend initiatives to continue reducing the state's greenhouse gas emissions beyond 2020.

CARB has developed, and must implement by January 1, 2010, several early action measures, including a low-carbon fuel standard, restrictions on use of high global-warming potential refrigerants, requirements for capturing landfill methane, reduced use of certain greenhouse gases with high global-warming potential in consumer products, truck efficiency requirements, a tire inflation program, and a green port program.

In addition, CARB has established greenhouse gas emission reporting requirements for a group of industries that, according to CARB, account for 94 percent of California's greenhouse gas emissions from industrial and commercial stationary sources. Covered industries, which include petroleum refineries, hydrogen plants, power plants and cogeneration facilities, utilities, and cement plants, must report by June 1, 2009.

CARB has determined that California's 1990 greenhouse gas emissions, its target for 2020, totaled 427 million tons. CARB estimates that achieving that limit (which would represent 10 percent lower emissions than today) will require a 30 percent reduction in projected 2020 emissions under a "business as usual" scenario. To achieve such an ambitious mark, California must reduce its carbon emissions by four tons per person per year.

In December 2008, CARB adopted its Scoping Plan to meet the 2020 emissions limit. Key elements of the Scoping Plan include:

  • A "cap and trade" program (enforceable beginning in 2012) that links to programs of partner states within the Western Climate Initiative to create a regional emission credit market for electricity sources, industrial sources, transportation fuels, and commercial and residential sources.
  • Carbon fees estimated at $10 to $50 per ton of carbon dioxide equivalent to influence investment decisions and fuel choices made by large suppliers of goods and services. Revenue would support further reductions in greenhouse gases.
  • State leadership through a green government building initiative, use of cleaner fuels in state motor vehicles, insistence on green practices by government suppliers, and commuter alternatives for state employees.
  • Increased transportation efficiency, including greater use of hybrid vehicles, more aerodynamic trucks, and a high-speed rail system.
  • Greater use of solar panels.

AB 32 and its attendant regulations will likely affect, directly or indirectly, any sizable business that emits greenhouse gases and does business in California. As CARB continues the process of implementing AB 32's extensive mandates, businesses will face the complex task of understanding their obligations and opportunities under AB 32.