Assembly Bill 32 At-a-Glance
California Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006, requires the reduction of statewide greenhouse gas (GHG) emissions to 1990 levels by 2020, a reduction of about 25% from 2006 levels.
The law authorizes the California Air Resources Board (CARB) to use a wide range of methods (rules, regulation, orders, emission limitations, emissions reduction measures, or market-based compliance mechanisms) to achieve the statewide target. These key strategies are laid out in the agency’s 2008 Scoping Plan.
PG&E supports AB 32, and believes it should be implemented with an eye to maximizing program effectiveness and affordability.
- Cap-and-Trade (implemented by CARB)
- Energy Efficiency Measures
- Building and Appliance Efficiency
- Increased use of Combined Heat and Power (CHP) (implemented by the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC))
- Solar Water Heating (CPUC)
- Renewable Portfolio Standard (CPUC) and Renewable Electricity Standard (CEC/CPUC)
- Million Solar Roofs (CEC and CPUC)
- Regional transportation related GHG targets (i.e., SB 375)
- Regulation on Refrigerants (CARB)
- Advanced Clean Car measures (CARB)
- Sustainable Communities (implemented by individual communities, i.e., SB 375)
- Low Carbon Fuel Standard (CARB)
Under California’s cap-and-trade regulations, companies can buy and sell allowances (or permits) to emit one metric ton of carbon dioxide equivalent (MTCO2e). The CARB will issue a limited -- and shrinking -- number of allowances for entities in sectors regulated under the cap. Entities have an incentive to reduce emissions so they do not need to purchase as many allowances in the market. Entities that need to emit GHGs can: (1) find cost-effective ways to reduce GHGs; (2) buy more allowances if they need to; and/or (3) buy offset credits up to 8% of their compliance obligation.
To curb GHG emissions as effectively as possible, the cap-and-trade program applies to all major sectors that emit GHGs, including refineries, power plants, industrial facilities, and transportation fuels, representing about 85% of statewide GHG emissions. The program imposes a statewide cap on the total emissions that can be emitted collectively by entities within the covered sectors. “Covered entities” will have to surrender “compliance instruments” (allowances and offsets) equal to their reported GHG emissions.
Starting in 2013, the program will initially cover electricity imports and operators of facilities such as large industrial customers and power plants that emit at least 25,000 MTCO2e per year. It will expand in 2015 to include distributors of natural gas and transportation fuels.
An allowance (or permit) will permit the holder to emit one MTCO2e. The number of allowances issued by CARB will be equal to the cap.
Over time, the number of allowances available will decline, leading covered entities to reduce GHG emissions or buy additional allowances from other entities.
Investor Owned Utilities (IOUs) such as PG&E will receive a direct allocation of allowances, which they are required to sell at auctions conducted by CARB. The revenue received from the auction must be passed on to customers as directed by the California Public Utilities Commission (CPUC). The CPUC is currently determining the exact manner in which the allowance revenue will be used for customer benefit.
A key element of the program is that covered entities will be able to trade allowances among themselves; entities can purchase allowances in quarterly auctions, and trading may happen in the secondary market. This is intended to encourage the market to find the most cost-effective way to meet the GHG reductions required under the cap.
An offset credit is a reduction in emissions made by an entity outside the sectors regulated under the cap, such as agriculture and forestry. Each offset credit is equivalent to the reduction of one MTCO2e (as opposed to a permit to emit the same amount) and must be real, additional, quantifiable, permanent, and enforceable.
AB 32 allows for only the limited use of offsets credits -- up to 8% of each entity’s compliance obligation.
Impact on Our Customers
CARB is allocating allowances to utilities for the benefit of electric customers, acknowledging that the electricity sector will be incurring costs associated with cap-and-trade and is already incurring costs for other AB 32 measures such as investments in renewable energy, energy efficiency, and combined heat and power. The CPUC is currently determining how allowance revenues will be returned to customers and is expected to issue a final decision in late 2012 or early 2013. Check back here later for an update.
The cap-and-trade program will begin on January 1, 2013. PG&E anticipates that customer rates will also begin reflecting cap-and-trade costs on January 1, 2013. The start date for returning allowance revenues to customers will be determined based on the CPUC’s decision in late 2012 or early 2013.
The financial impact on customers will depend upon how the CPUC decides to return auction revenue to customers, so it is not known at this time. Check back here later this year for an update.
How PG&E Can Help
The best way for you to minimize impacts on your energy bills and to contribute to the state's effort to reduce GHGs is by improving the energy efficiency of your business. PG&E offers business customers of every size free online and on-site energy assessments, rebates on energy efficient products and equipment, other financial incentives, and 0% on-bill financing for qualified customers. Visit our Rebates, Incentives and Resources website, or call the Business Customer Service Center at
Meeting your energy needs with renewable energy is another way to reduce GHG emissions. PG&E provides financial incentives to lower the upfront cost of installing solar photovoltaic, solar water heating, or other renewable energy systems. A special rate schedule gives you a credit when your PV installation puts energy back on the grid for others to use. Visit our Solar website, or call the Business Customer Service Center at
Certain large customers that need a detailed report of a specific facility's annual natural gas consumption for reporting or planning purposes can check their P&E Detail of Bill or contact their assigned account manager.
To learn more about AB 32 and related energy policy, visit the CARB climate change website.
For more information, please contact your Account Manager,
email us, or contact the Business Customer Service Center at