MEMORANDUM


TO:
LINDA
RUDOLPH,
DEPUTY
DIRECTOR
OF
CHRONIC
DISEASE
PREVENTION
AND
HEALTH

PROMOTION
FOR
THE
CALIFORNIA
DEPARTMENT
OF
PUBLIC
HEALTH

FROM:
Marisa
Rimland

DATE:
December
2008

RE:

CAP‐AND‐TRADE
IN
CALIFORNIA
THROUGH
A
PUBLIC
HEALTH
LENS


 



Executive
Summary

Climate
change
and
the
health
outcomes
of
air
pollution
are
two
of
the
greatest

problems
affecting
the
world’s
population
today
and
both
share
common
origins.
The

majority
of
negative
health
outcomes
suffered,
including
increased
mortality,
decreased

lung
function,
and
respiratory‐related
hospital
admissions,
are
a
result
of
exposure
to

ground‐level
ozone
(O3)
and
particulate
matter
(PM)
which
are
emitted
primarily
during

fossil
fuel
combustion
along
with
carbon
dioxide
(CO2),
a
greenhouse
gas
(GHG).1
In

2006,
California
passed
The
Global
Warming
Solutions
Act
which
seeks
to
curb
emissions

of
GHGs,
including
CO2.
Included
in
the
statutory
language
is
the
intent
to
consider,

whenever
possible,
“overall
societal
benefits,
including
reductions
in
other
air

pollutants,
diversification
of
energy
source
economy,
environment,
and
public
health.”2




As
part
of
the
plan
to
meet
the
stringent
emissions
reductions
required,
California
plans

on
creating
a
cap‐and‐trade
program.
A
cap‐and‐trade
program
is
a
regulatory

mechanism
that
caps
the
total
amount
of
a
pollutant
facilities
under
that
cap
may

lawfully
emit.
In
order
to
maximize
GHG
emission
reductions,
achieve
public
health

benefits
and
help
save
on
health
care
costs,
California
should
be
mindful
of
the

opportunities
available
for
achieving
these
goals
through
strategic
design
decision‐
making.

Recommendations

1. California
should
mandate
that
a
percentage
of
auction
revenue
be
allocated
for

public
health
purposes,
with
a
focus
on
communities
disproportionately

impacted
by
capped
industry
emissions.

2. California
should
incentivize
offsets
that
have
public
health
co‐benefits
within

the
State
by
giving
those
offset
projects
a
credit
multiplier,
encouraging

investment
in
public
transportation
improvements
that
have
quantifiable
GHG

emissions
reductions,
and
result
in
improved
air
quality/reduced
negative
health

outcomes.




1
D. Bailey, K. Knowlton -and- M. Rotkin-Ellman, “Improving Air Quality and Health by Reducing Global
Warming Pollution in California”, Natural Resources Defense Council, June 2008: 4
2
California Assembly Bill No. 32, “The Global Warming Solutions Act”: 8

1
Air
Pollution
and
Climate
Change:
Common
Origins

Climate
change
and
the
health
outcomes
of
air
pollution
are
two
of
the
greatest

problems
affecting
the
world’s
population
today
and
both
share
common
origins.
More

Californians’
health
suffers
per
capita
due
to
the
fact
that
California’s
air
quality
is

disproportionately
worse
than
the
majority
of
the
United
States.
The
bulk
of
these

negative
health
outcomes
occur
as
a
result
of
exposure
to
ambient
air
pollutants
such
as

nitrogen
oxides
(NOx),
an
O3
precursor
and
PM,
in
addition
to
a
variety
of
other

pollutants
simultaneously
emitted.
3
These
pollutants
are
a
result
of
fossil
fuel

combustion
activity
from
transportation
and
large
industrial
facilities,
such
as
cement

plants,
oil
refineries
and
power
plants.
There
are
approximately
24,000
premature

deaths
each
year
and
tens
of
thousands
of
illnesses
as
a
result
of
air
pollution
exposure.4

These
pollution
sources
are
also
emitters
of
GHGs,
such
as
CO2.





A
recent
study
conducted
found
that
global
warming
pollution
emissions
from
human

activities
may
be
causing
1,000
air‐pollution
related
deaths
and
20—30
additional
cases

of
cancer
in
the
United
States
for
each
1
degree
Celsius
rise
in
temperature
with
200
of

these
deaths
occurring
in
California.5
These
human
health
impacts
are
in
addition
to
the

environmental
effects
that
climate
change
is
causing
in
California
and
across
the
globe.

These
environmental
effects
include
observations
of
increases
in
global
average
air
and

ocean
temperatures,
widespread
melting
of
snow
and
ice,
and
rising
global
average
sea

level.
6
Therefore,
policies
that
limit
fossil
fuel
burning
emissions
both
reduce
global

warming
pollution
and
improve
overall
air
quality.
The
dominant
policy
design
for

curbing
these
emissions
in
California
is
the
cap‐and‐trade
mechanism.



This
analysis
will:
1)
provide
an
overview
of
the
cap‐and‐trade
mechanism,
2)
discuss

two
essential
elements
of
cap‐and‐trade
(auction
revenue
and
offset
use),
2)
conduct
a

stringent
analysis
of
the
proposed
cap‐and‐trade
mechanism
within
the
State
of

California
focusing
on
these
elements,
3)
identify
and
summarize
current
air
pollution

regulations
of
co‐pollutants
within
the
mechanism,
4)
delineate
the
health
outcomes

and
health
care
costs
associated
with
air
pollution
within
the
State,
and
5)
recommend

auction
revenue
use
and
offset
design
which
incorporate
public
health
goals.






Defining
Cap‐and‐Trade

A
cap‐and‐trade
program
is
a
regulatory
mechanism
that
caps
the
total
amount
of
a

pollutant,
in
this
case
GHG
emissions,
which
are
allowed
for
facilities
to
emit
under
the

cap.
The
State
sets
a
cap
for
each
compliance
period
of
the
program
and
sets
a
limit
on

emissions
that
declines
over
time.7
The
emissions
allowed
under
the
cap
will
be


3
D. Bailey: 4
4
D. Bailey: 4
5
M.Z. Jacobson, “On the Causal Link Between Carbon Dioxide and Air Pollution Mortality”, Geophysical
Research Letters, February 2008: 4
6
Intergovernmental Panel On Climate Change, “Climate Change 2007: Synthesis Report”:1
7
California Air Resources Board, “Climate Change Proposed Scoping Plan Appendices Volume I:
Supporting Documents and Measure Detail”, October 2008: C-21

2
denominated
in
metric
tons
of
carbon
dioxide
equivalent
(CO2E),
in
the
form
of

allowances,
which
the
State
will
issue
based
upon
the
total
emissions
allowed
under
the

cap
during
any
specific
compliance
period.
These
emission
allowances
can
be
traded
or

banked
for
future
use,
encouraging
early
reductions
and
reducing
market
volatility.



One
central
design
feature
of
the
cap‐and‐trade
mechanism
involves
the
method
of

allowance
allocation.
Allocation
is
the
process
of
periodic
distribution
of
emissions

allowances
under
an
emissions
cap‐and‐trade
system.8
Allowances
can
be
allocated

either
by
auction,
giveaway,
or
a
combination
of
both.
Each
individual
allowance

constitutes
a
temporary
permit
for
the
allowance‐holder
to
emit
one
unit
of
GHG

emissions
within
the
compliance
period.9
At
the
end
of
each
compliance
period,
all

regulated
sources
within
a
cap‐and‐trade
program
must
surrender
allowances
equal
to

their
total
emissions
during
that
compliance
period.
Enabling
allowances
to
be
bought

and
sold
like
a
traditional
commodity
creates
a
market
that
sets
the
allowance
price
to

reflect
the
marginal
cost
of
reducing
emissions.
The
ability
to
trade
incentivizes

regulated
sources
to
pursue
low‐cost
emission
reduction
strategies
at
their
facilities.
The

ability
to
trade
also
allows
facilities
to
adjust
to
changing
conditions
and
take
advantage

of
reduction
opportunities
when
those
opportunities
are
less
expensive
than
buying

additional
emissions
allowances.10




It
is
essential
that
an
effective
cap‐and‐trade
system
be
well
designed,
and
include

strong
monitoring,
reporting
and
enforcement
rules,
as
well
as
strict
penalties
for
non‐
compliance.
A
well‐designed
cap‐and‐trade
system
ensures
that
the
emissions
limit
will

be
met
while
simultaneously
creating
a
price
for
GHG
emissions
that
accurately
reflects

the
cost
of
the
reductions
necessary
to
meet
the
environmental
goal.
This
price
signal

determines
the
decisions
made
by
producers
and
consumers
about
the
energy
and

services
that
they
provide
or
use.11
Under
a
cap‐and‐trade
system,
facilities
have
a

continuous
incentive
to
reduce
emissions
in
order
to
reduce
their
compliance
costs.
The

market
creates
an
opportunity
for
facilities
that
can
reduce
emissions
at
lower
cost
to

do
so.
One
example
of
a
cap‐and‐trade
program
is
the
U.S.
EPA’s
acid
rain
trading

program,
a
national
program
to
decrease
acid
rain
by
reducing
emissions
of
sulfur

dioxide
(SO2).




The
Use
of
Offsets
in
a
Cap‐and‐Trade
System

Previous
cap‐and‐trade
mechanisms
have
utilized
the
offset
usage
to
provide
additional

low‐cost
emissions
reductions.
Offsets
are
measurable
reductions,
avoidances,
or

sequestrations
of
GHG
emissions
from
a
source
that
is
not
part
of
an
emission
reduction


8
Climate Change Proposed Scoping Plan Appendices Volume I: C-19
9
Climate Change Proposed Scoping Plan Appendices Volume I: C-12
10
California Air Resources Board, “Climate Change Proposed Scoping Plan: A Framework For Change”,
October 2008: 30
11
Climate Change Proposed Scoping Plan Appendices Volume I: C-11

3
program.12
They
are
typically
project‐based.
These
projects’
ownership
can
be

transferred
to
others
and
are
developed
to
achieve
the
desired
emission
reduction
from

activities
that
are
not
regulated,
covered
under
an
emissions
cap,
or
a
product
of

government
incentives
but
ultimately
result
in
an
emissions
reduction
that
can
be

quantified
and
verified.
If
a
cap‐and‐trade
program
includes
offsets,
regulated
sources

have
the
opportunity
to
purchase
them
to
help
meet
compliance
obligations.13




The
primary
benefit
for
allowing
offsets
is
improved
cost‐effectiveness.
The
ability
to

generate
offsets,
which
could
be
sold
as
emission
credits,
would
incentivize
non‐
regulated
sources
to
reduce,
avoid,
or
sequester
emissions
that
may
not
have
been

done
otherwise.
Additionally,
including
offsets
in
a
cap‐and‐trade
mechanism
could

potentially
expand
emission
mitigation
opportunities
and
result
in
reduced
compliance

costs
for
regulated
sources.
Many
offset
projects
have
the
potential
to
offer

environmental
benefits
also.14




The
main
concern
with
offsets
is
whether
or
not
they
represent
real
emission

reductions.
For
an
offset
to
be
credible,
a
ton
of
CO2E
emissions
from
an
offset
project

should
equate
to
a
ton
reduced
from
a
covered
emission
source,
such
as
a
smokestack

or
exhaust
pipe.
This
qualification
is
problematic
because
many
offsets
are
difficult
to

measure.
If
illegitimate
offset
credits
are
permitted
to
enter
into
an
emissions
trading

program,
the
program
will
fail
to
reduce
GHG
emissions
and
not
achieve
its
goals.

Another
concern
is
whether
including
offsets
would
send
the
appropriate
price
signal
to

encourage
the
development
of
long‐term
mitigation
technologies.15
A
broader
concern

with
offsets
is
that
they
may
discourage
bringing
the
unregulated
region
under
its
own

cap.16
Some
maintain
that
if
developed
nations
use
all
of
the
low‐cost
offsets
in

developing
nations,
these
developing
nations
will
face
higher
compliance
costs
as
a

result
if
and
when
they
establish
GHG
emission
reduction
requirements.
Therefore,

international
offsets
may
serve
as
a
disincentive
for
developing
nations
to
enact
laws
or

regulations
limiting
GHG
emissions
because
they
would
lose
funding
from
the
offset

market.
17



California:
Global
Warming
Solutions
Act
of
2006
(AB
32)

The
State
of
California
has
begun
addressing
global
warming
through
a
series
of

regulations.
California
has
traditionally
broken
new
ground
in
efforts
to
reduce
air

pollution,
dating
back
to
1963
when
the
California
New
Motor
Vehicle
Pollution
Control


12
Jonathan L. Ramseur, “The Role of Offsets in a Greenhouse Gas Emissions Cap-and-Trade Program:
Potential Benefits and Concerns”, Congressional Research Service: CRS-1
13
Climate Change Proposed Scoping Plan: 36
14
Jonathan L. Ramseur: CRS-12
15
Jonathan L. Ramseur: CRS-12
16
Personal Communication With Lee Friedman, December 14, 2008.
17
Jonathan L. Ramseur: CRS-25

4
Board
adopted
the
nation’s
first
motor
vehicle
emission
standards.18
California
has,
in

effect,
served
as
an
incubator
for
innovative
standards
and
technologies,
which
in

subsequent
years
became
the
national
norm.19
In
2006,
California
passed
AB
32,
the

Global
Warming
Solutions
Act
of
2006.
This
Act
requires
California
to
reduce
its
total

greenhouse
gas
emissions
to
1990
levels
by
2020,
a
reduction
of
approximately
25%

percent
from
current
levels.
Governor
Schwarzenegger
also
signed
Executive
Order
S‐3‐
05
in
2005,
which
requires
additional
reductions
to
80%
below
1990
levels
by
2050.20

Within
the
bill,
California
states
that,
“In
adopting
regulations
pursuant
to
this
section

and
Part
5
(commencing
with
Section
38570),
to
the
extent
feasible
and
in
furtherance

of
achieving
the
statewide
greenhouse
gas
emissions
limit,
the
state
board
shall

consider
overall
societal
benefits,
including
reductions
in
other
air
pollutants,

diversification
of
energy
source
economy,
environment,
and
public
health.”21
An
integral

part
of
California’s
plan
to
achieve
these
ambitious
goals
and
to
reduce
global
warming

is
a
cap‐and‐trade
regulatory
mechanism
that
will
limit
emissions
of
CO2E.
This

mechanism
is
currently
under
design.





Cap‐and‐Trade
in
California:
Implemented
In
2
Phases

The
California
Air
Resources
Board
(ARB)
plans
to
implement
California’s
cap‐and‐trade

measure
in
two
phases.
Phase
I,
the
first
compliance
period
that
begins
in
2012,
will

include:
1)
all
electricity
generation,
including
any
which
is
imported
into
the
State,
and

2)
any
large
industrial
sources
which
emit
above
25,000
metric
tons
of
CO2E,
including

any
“high
global
warming
potential
gases
that
are
part
of
the
industrial
process.”
Phase

II,
the
second
compliance
period
that
begins
in
2015,
will
include:
1)
upstream

treatment
of
industrial
fuel
combustion
at
facilities
with
emissions
at
or
below
25,000

metric
tons
of
CO2E,
and
all
fuel
combustion,
both
commercial
and
residential,
and
2)

upstream
treatment
of
transportation
fuels.22
For
analytical
purposes,
this
paper
will

focus
on
the
second
element
of
Phase
I
(large
industrial
sources
emitting
high
amounts

of
CO2E)
due
to
its
unique
relevance
to
the
public
health
issues
under
discussion.




Cap‐and‐Trade
in
California:
Linking
To
Western
Climate
Initiative
Partners

California
has
decided
to
collaborate
with
six
other
states
and
four
Canadian
provinces

in
the
Western
Climate
Initiative
(WCI)
in
order
to
design
a
regional
greenhouse
gas

emissions
reduction
program
that
includes
a
cap‐and‐trade
mechanism.
By
participating

in
WCI,
California
creates
an
opportunity
to
hopefully
provide
substantially
greater

reductions
in
greenhouse
gas
emissions
throughout
the
region
than
California
could

accomplish
on
its
own.
There
are
additional
benefits
as
well.
The
larger
scope
of
the

program
will
expand
the
market
for
clean
technologies
and
help
to
avoid
leakage
‐
the


18
Staff of California Air Resources Board, Staff Proposal Regarding the Maximum Feasible and Cost-
Effective Reduction of Greenhouse Gas Emissions From Motor Vehicles”, June 14, 2004
19
Declaration of Michael Walsh, Central Valley Chrysler-Jeep, Inc. vs. Catherine Witherspoon, et al., May
2006
20
Office of The Attorney General of California, http://ag.ca.gov/globalwarming/index.php
21
California Assembly Bill No. 32, “The Global Warming Solutions Act”: 8
22
Climate Change Proposed Scoping Plan Appendices Volume I : C-15

5
emissions
source
relocation
from
within
California
to
other
sources
outside
the
state.23




Despite
this
eventual
linkage
to
a
regional
trading
program,
California’s
cap
and

apportionment
will
continue
to
be
consistent
with
the
California‐specific
(AB32)

economy‐wide
emissions
goal.
A
firm
regional
cap
with
strong
reporting
and

enforcement
rules
will
provide
a
high
degree
of
confidence
that
emissions
will
not

exceed
targeted
levels.
ARB
has
committed
to
ensuring
the
system
as
a
whole
has

integrity
before
California
participates
in
the
WCI
market
system.24
Without
ensuring

system
integrity,
California
cannot
be
certain
of
its
ability
to
maintain
AB
32’s
goals
if
it

participates
on
the
regional
level.




Cap‐and‐Trade
in
California:
Allowance
Allocation

The
decisions
made
surrounding
how
allowances
will
be
allocated
within
California’s

cap‐and‐trade
design
will
be
extremely
influential
on
how
the
system
functions
as
a

whole
and
are
a
significant
aspect
of
the
rule‐making
process.
The
allowance
allocation

method
will
largely
determine
the
economic
impact
that
a
cap‐and‐trade
system
has

among
regulated
entities,
consumers
and
other
parties
and
how
that
impact
is

distributed
amongst
those
involved.25
The
California
Public
Utilities
Commission
and
the

California
Energy
Commission
explored
the
issues
surrounding
this
crucial
decision

between
free
allocation
and
auction
of
allowances
and
ultimately
recommended
that

ARB
transition
to
100
percent
auction
for
the
electricity
sector
by
2016.
Additionally,

ARB’s
Market
Advisory
Committee
(MAC)
have
also
recommended
transitioning
to
full

auction
within
the
cap‐and‐trade
program,
noting
that
a
system
in
which
California

ultimately
auctions
all
of
its
emission
allowances
is
consistent
with
fundamental

objectives
of
“cost‐effectiveness,
fairness
and
simplicity.”26





It
has
not
yet
been
determined
with
certainty
how
ARB
will
ultimately
decide
to
allocate

allowances
but
they
will
definitely
keep
its
distribution
design
within
the
general

guidelines
established
in
the
WCI
program
design
framework.
This
guarantees
a

minimum
of
10
percent
of
allowances
be
auctioned
within
the
first
three‐year

compliance
period
and
increasing
to
25
percent
in
2020.27
This
minimum
is
a
simple

floor,
however,
and
ARB
is
free
to
auction
off
a
greater
percentage
if
they
choose
to
do

so.
The
primary
decisions
surrounding
allowance
auctions
are
how
the
auction
process

will
be
conducted
and,
once
auctioned,
how
the
auction
revenue
will
be
spent.
WCI

Partner
jurisdictions,
including
California,
will
be
developing
a
coordinated
regional

auction
process
that
will
allow
California
and
the
other
WCI
Partner
jurisdictions
to

auction
allowances
throughout
the
WCI
region
and
receive
their
individual
auction


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proceeds.28




Given
these
fairly
low
initial
percentages
of
allowances
being
auctioned,
ARB
is
currently

considering
the
method
of
allocation
of
the
remaining
allowances,
with
a
focus
on
give‐
away
methodology.
For
any
allowances
that
are
distributed
for
free,
ARB
has
said
that

they
will,
in
concert
with
other
WCI
Partner
jurisdictions,
establish
criteria
that
will

determine
who
should
be
receiving
allowances
for
free.
Free
distribution
can
be

determined
by
considering
performance
standards
(benchmarks),
historical
emissions

(grandfathering),
or
some
other
relevant
metric.
The
MAC
has
recommended
that
ARB

base
any
free
allocation
of
allowances
on
environmental
performance
benchmarks,
and

that
they
design
the
auction
process
to
encourage
voluntary
early
reductions
by
firms,

municipalities,
and
individual
consumers.29




California
may
take
the
opportunity
to
incentivize
certain
actions
and
activities
through

the
allocation
process.
Allowance
set‐asides
are
one
method
for
creating
these

incentives.
An
allowance
set‐aside
is
a
pool
of
allowances
distributed
based
on

alternative
criteria
not
being
considered
in
the
primary
method
of
allocation
that
can
be

used
with
any
allocation
methodology.
Allowance
set‐asides
can
direct
a
certain
portion

of
allowances
from
within
the
cap
to
recognize
actions
previously
taken
or
further

incentivize
future
actions
which
benefit
the
policy
goal.
However,
creating
such

allowance
set‐asides
will
have
a
financial
impact
on
the
system,
if
such
allowances
are

given
away.30
Therefore,
it
is
crucial
that
the
decisions
regarding
these
allowance
set‐
asides
be
made
with
stringent
consideration
of
achieving
maximum
benefit
to
California.




Considerations/Guiding
Principles
For
Allowance
Allocation
Decisions

ARB
has
developed
guiding
principles
that
they
plan
to
follow
while
developing
its

recommendations
on
these
issues.
Their
recommendations
will:

• “Minimize
the
economic
burden
of
the
program
on
consumers
(especially
low‐

income
consumers),
workers,
local
governments,
and
businesses



• Ensure
fair
treatment
amongst
and
within
included
sectors—including
new
market

entrants


• Minimize
cost
volatility
for
covered
sectors


• Maximize
market
liquidity
and
minimize
opportunities
for
market
manipulation


• Avoid
GHG
leakage
and
overall
employment
loss


• Recognize
and
reward
early
action
from
covered
sectors


• Avoid
windfall
profits
and
other
unnecessary
wealth
transfer


• Encourage
energy
efficiency
and
the
development
of
low
GHG‐emitting

technologies


• Avoid
criteria
and
toxic
air
pollutant
emissions
increases,
especially
in


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7
 communities
already
disproportionately
impacted
by
those
pollutants”31


The
principle
that
is
most
relevant
to
this
analysis
is
the
final
one,
which
directly

addresses
the
public
health
effects
of
co‐pollutants.
This
analysis
will
focus
on
that
goal.




Cap‐and‐Trade
in
California:
Use
of
Offsets

California
plans
to
work
with
the
WCI
Partner
jurisdictions
to
ensure
that
the
western

regional
market
includes
clear
and
consistent
rules
for
use
of
offsets.
The
WCI
Partner

jurisdictions
are
considering
allowing
individual
regulated
entities
to
use
a
limited

amount
of
tradable
units
(offsets
and
allowances)
from
other
government‐regulated

GHG
emission
trading
systems
for
compliance
purposes.
Additionally,
California
is
also

considering
limiting
the
amount
of
offsets
and
non‐WCI
tradable
units
that
could
be

used
by
individual
regulated
entities
for
compliance.
32
In
that
endeavor,
ARB
will

establish
a
quantitative
limit
on
offsets
so
that
it
is
certain
that
the
bulk
of
emission

reductions
come
from
within
the
capped
sectors.
ARB
will
set
a
49
percent
offset

reductions
ceiling,
apply
this
ceilings
to
each
compliance
period
and
will
encourage
WCI

Partner
jurisdictions
to
do
the
same
in
order
to
ensure
real
reductions
from
capped

sectors
within
the
first
compliance
period.33




While
it’s
clear
that
offsets
will
be
allowed
within
California’
cap‐and‐trade
mechanism,

what
isn’t
clear
is
how
these
offsets
will
be
designed
in
order
to
maximize
emissions

reductions
and
meet
AB32’s
other
goals,
(improving
overall
air
quality
and
public
health)

in
addition
to
the
cap‐and‐trade
specific
principle
of
not
increasing
emission
of
co‐
pollutants
for
communities
who
are
already
disproportionately
impacted.
Additionally,

there
are
key
issues
under
discussion
currently
that
would
have
an
impact
on
these

stated
goals.
Location
of
offsets
is
one
of
these
issues.
There
are
several
options
for

location
of
offsets.
They
can
be:
1)
kept
within
California,
2)
restricted
to
the
WCI
region,

3)
allowed
anywhere
within
the
United
States,
or
4)
be
unlimited
geographically.
While

there
is
no
clear
stated
preference
in
the
Scoping
Plan
on
offset
allocation,
it
appears

that
ARB
is
leaning
towards
allowing
out‐of‐state
offsets
and
certainly
considering

international
usage
in
countries
like
Mexico.
Only
positives
are
mentioned
for
both
of

these
possibilities.
ARB
states
its
belief
that
out‐of
–
state
offsets
encourage
energy

efficient
innovations
outside
of
the
State
and
that
they
lower
compliance
costs
for

regulated
entities
as
well.
They
also
indicate
interest
in
projects
in
the
Mexican
border

region,
stating
that
they
provide
the
opportunity
to
realize
considerable
co‐benefits
in

both
countries.34




Language
In
AB
32
Bill
Itself:
Public
Health
Specifically
Mentioned

AB
32
makes
several
assertions
regarding
the
dangers
of
climate
change.
Primary

amongst
these
assertions
is
that,

“Global
warming
poses
a
serious
threat
to
the


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8
economic
well‐being,
public
health,
natural
resources,
and
the
environment
of

California.
The
potential
adverse
impacts
of
global
warming
include
the
exacerbation
of

air
quality
problems,
a
reduction
in
the
quality
and
supply
of
water
to
the
state
from
the

Sierra…and
an
increase
in
the
incidences
of
infectious
diseases,
asthma,
and
other

human
health‐related
problems.”35
And,
as
previously
mentioned,
the
language
within

the
bill
clearly
states
that
it
will
also
consider
greater
societal
benefits,
including

reducing
air
pollution
and
improving
public
health.36
Due
to
these
goals,
public
health

should
be
involved
and
duly
considered
in
the
cap‐and‐trade
design
process
in
order
to

mitigate
the
negative
health
outcomes
which
occur
as
a
result
of
criteria
pollutant

exposure
and
climate
change,
as
well
as
climate
change
mitigation
itself.
This
can
be

achieved
by
targeting
auction
revenue
for
public
health
projects
which
simultaneously

improve
public
health
and
contribute
to
the
achievement
of
additional
GHG
reductions.

Additionally,
public
health
can
be
improved
by
incentivizing
offsets
which
have
public

health
implications
in
addition
to
meeting
the
stringent
criteria
of
quantifying,

monitoring
the
required
GHG
emission
reductions.



Cap‐and‐Trade
Mechanism:
Does
Not
Directly
Account
for
Co‐Pollutants

While
AB
32’s
goals
are
commendable
and
will
certainly
improve
overall
air
quality
in

California
in
addition
to
lowering
GHG
emissions,
there
are
criteria
pollutants
emitted

along
with
CO2E
that
are
not
part
of
the
cap‐and‐trade
mechanism
and
have
negative

public
health
effects.
The
co‐pollutants
that
this
paper
focuses
on
are
NOx
PM
and
O3.

NOx,
an
O3
precursor,
and
PM
and
are
primarily
emitted
by
fossil‐fuel
combustion
from

transportation,
power
plants
and
other
industries
which
fall
under
the
proposed
cap.37

PM
air
pollution
is
an
air‐suspended
mixture
of
solid
and
liquid
particles
that
vary
in

number,
size,
shape
and
surface
with
PM2.5
(the
smallest
particle)
being
the
most

dangerous
to
human
health.
The
effects
from
these
pollutants
can
be
ameliorated

through
innovative
design
efforts.
These
co‐pollutants
can
and
should
be
accounted
for

within
the
design
in
order
to
ensure
that
California
maximizes
the
opportunities
that
AB

32
presents
in
achieving
its
stated
goal
of
real
reductions
in
other
pollutants
as
well
as

improving
public
health
for
all
Californians.
In
addition,
AB
32
includes
specific
criteria

that
ARB
must
consider
before
adopting
regulations
for
market‐based
measures,
and

directs
the
Board
to
the
extent
feasible
to
design
any
market‐based
compliance

mechanisms
to
prevent
any
increase
in
the
emissions
of
toxic
air
contaminants
or

criteria
air
pollutants.




Regulations
of
Co‐pollutants
Outside
of
AB
32:
Particulate
Matter

In
2006,
ARB
adopted
an
emission
reduction
plan
for
ports
and
goods
movement

activities
called
the
Emission
Reduction
Plan
for
Ports
and
Goods
Movement
which
is

part
of
the
larger
Goods
Movement
Plan.
ARB
has
also
adopted
regulations
to
reduce

pollution
from
commercial
harbor
craft,
ship
auxiliary
engines,
cargo
handling


35
California Assembly Bill No. 32: 2
36
California Assembly Bill No. 32: 8
37
D. Bailey: 4

9
equipment,
port
trucks
and
shore
power
for
at‐
berth
ocean‐going
vessels.
Emissions

from
locomotives
and
rail
yard
operations
are
being
negotiated
with
the
rail
industry.

ARB
also
recently
adopted
regulations
for
already
in‐use
off‐road
equipment
including

construction
and
mining
equipment,
and
agricultural
pumps.
Later
this
year,
separate

regulations
will
address
heavy‐duty
diesel
trucks.
State
ambient
air
quality
standards
are

also
periodically
reviewed
to
assess
their
adequacy
in
protecting
public
health,
and
this

new
information
will
be
considered
when
the
PM
standards
are
next
reviewed.

Reductions
in
PM2.5
from
California’s
existing
programs
and
2007
SIP
measures
are

estimated
to
result
in
3,700
avoided
premature
deaths
statewide
in
the
same
timeframe

as
AB
32.38
However,
ARB
has
stated
that
these
regulations
are
not
enough
due
to
the

new
information
regarding
the
health
dangers
of
exposure.
They
indicate
that
there
is
a

need
to
continue
reducing
public
exposures
to
PM2.5.39
Therefore,
California
would
be

best
served
by
incorporating
design
elements
that
aid
in
this
further
reduction.




Regulations
of
Co‐pollutants
Outside
of
AB
32:
NOx
and
Ozone

O3
is
regulated
in
California
as
a
criteria
air
pollutant.
In
April
of
2005,
ARB
approved
an

O3
standard
with
special
consideration
toward
children’s
health.
An
8‐hour‐
average

standard
for
O3
was
established
as
0.070
parts
per
million
(ppm),
and
a
1‐
hour‐average

O3
standard
was
set
at
0.09
ppm.40
These
standards
rely
on
local
air
pollution
control
or

air
quality
management
districts
for
the
adoption
of
rules
and
regulations
to
control

emissions
from
stationary
sources
to
assure
that
these
standards
are
achieved
and

maintained.
The
ARB
is
responsible
for
adoption
of
emission
standards
for
mobile

sources
and
consumer
products.
A
number
of
different
implementation
measures
are

possible,
and
each
could
have
its
own
environmental
or
economic
impact.41
The
only

regulations
currently
in
place
on
the
State‐level
for
NOx,
involve
regulation
of
diesel

vehicles
and
other
transportation‐related
reductions
as
part
of
the
State

Implementation
Plan
(SIP).
Emissions
from
other
sources,
like
large
industrial
facilities,

are
not
part
of
those
regulations.
However,
there
are
some
regional
regulations
in
place

for
stationary
sources.
In
Southern
California,
The
South
Coast
Air
Quality
Management

District
(SCAQMD)
has
created
a
facility‐specific
cap‐and‐trade
mechanism
to
reduce
the

presence
of
NOx
and
Sulfur
Oxides
(SOx)
in
the
Los
Angeles
basin.
42






38
Scoping Plan: 88
39
California Air Resources Board, “Facts About Particulate Matter Mortality: New data revealing greater
dangers from PM2.5”, May 30,2008:2
40
California Air Resources Board, “Ozone and Ambient Air Quality Standards,”
<http://www.arb.ca.gov/research/aaqs/caaqs/ozone/ozone.htm>
41
California Air Resources Board, “Review of the California Ambient Air Quality Standard
For Nitrogen Dioxide: Staff Report Initial Statement of Reasons for Proposed Rulemaking”, January 5,
2007: 8
42
Craig Burnside and Martin Eichenbaum, “A Mixed Bag: Assessment of Market
Performance and Firm Trading Behavior in the Nox Reclaim Program”, Federal Reserve Bank of Chicago,
August 1996: 5

10
What
AB
32
Will
Do
to
Improve
Air
Quality

While
the
cap‐and‐trade
design
only
focuses
on
reducing
emissions
of
CO2E,
it
is
true

that
AB
32
will
result
in
improved
air
quality
and
reduced
emissions
of
the
ambient
air

pollutants
at
concern
here.
ARB
predicts
that
the
primary
direct
public
health
benefits

will
be
reductions
in
smog
forming
emissions
and
toxic
diesel
particulate
matter.
NOx

will
be
significantly
reduced,
as
will
particulate
pollution
and
directly
emitted
PM2.5.43

These
additional
benefits
of
the
Proposed
Scoping
Plan
in
2020
are
significant
and

should
increase
with
further
reductions
in
fossil
fuel
combustion,
the
primary
basis
for

the
estimated
public
health
benefits.




ARB’s
proposal
in
its
scoping
plan
for
reducing
smog‐forming
pollutants
would
reduce

approximately
61
tons
per
day
of
NOx
and
15
tons
per
day
of
PM2.5
in
2020
in
California.

This
equates
to
an
estimated
air
quality‐related
public
health
benefit
of
400
avoided

premature
deaths
statewide.44
While
these
public
health
benefits
are
commendable,

utilizing
the
opportunity
to
save
additional
lives
and
reduce
negative
health
outcomes

would
only
benefit
California
and
its
citizens
and
should
be
seized.





Health
Outcomes
of
Nitrogen
Oxide,
Ozone
and
Particulate
Matter

Air
pollution
kills
50,000‐100,000
each
year
in
the
United
States.
The
main
causes
of
air‐
pollution‐related
death
are
asthma,
bronchitis,
emphysema,
lung
disease,
heart
disease,

and
respiratory
allergies.
About
40%
of
fatalities
are
due
to
power
plant
emissions
and

50%,
to
on‐
and
offroad
vehicle
emissions.45
Both
NOx
and
PM
are
the
primary
causes
of

these
negative
health
outcomes.
Ground‐level
ozone
and
PM
have
been
linked
to

hospital
admissions
and
emergency
room
visits
for
respiratory
problems,
decreased
lung

function,
and
increased
mortality
related
to
cardiovascular
and
respiratory
illness.46

Studies
have
demonstrated
associations
between
ambient
fine
particulate
air
pollution

and
elevated
risks
of
both
cardio‐pulmonary
and
lung
cancer
mortality.47A
recent
ARB

review
of
scientific
literature
revealed
that
the
effects
of
PM2.5,
the
smallest
classified

size
of
PM,
are
much
more
severe
than
previously
thought.
According
to
ARB,
every

increase
of
10
micrograms
per
cubic
meter
of
PM2.5
exposure
creates
a
ten
percent

increase
in
risk
of
premature
death.
There
are
14,000
to
24,000
deaths
which
may
be

associated
with
exposures
to
PM2.5
in
California
annually.
A
majority
of
these
deaths

occur
in
densely
populated
areas
such
as
the
South
Coast,
San
Joaquin
Valley
and
San

Francisco
Bay
air
basins.
PM2.5
often
concentrates
in
areas
near
roadways
and
power


43
Scoping Plan: 88
44
Scoping Plan: 88
45
Mark Z. Jacobson, “Addressing Global Warming, Air Pollution Health Damage,
and Long-Term Energy Needs Simultaneously”, Stanford University, June 6, 2006: 3
46
D. Bailey: 4
47
C. Arden Pope III, Richard T. Burnett, Michael J. Thun, Eugenia E. Calle, Daniel Krewski, Kazuhiko
Ito, George D. Thurston, “Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine
Particulate Air Pollution”, Journal of the American Medical Association, March 2002: 1137

11
plants.
48
Exposure
to
NOx
is
associated
with
respiratory
symptoms,
episodes
of

respiratory
illness
and
impaired
lung
functioning.
Ozone,
a
powerful
oxidant
that
can

damage
the
respiratory
tract
and
cause
inflammation
and
irritation
has
been
individually

associated
with
several
negative
health
outcomes
including
cardio‐pulmonary
mortality

and
onset
of
asthma.




Levels
of
air
pollutants
such
as
O3
are
typically
higher
on
warmer
days
and
contribute
to

negative
health
outcomes
such
as
respiratory
conditions
and
diminished
lung
function.49

Numerous
studies
that
have
been
conducted
reveal
that
higher
O3
concentrations

aggravate
existing
asthma
conditions.50
Deaths
related
to
O3
exposure
may
increase
by

4.5
percent
due
to
climate
change
alone
by
2050.
When
other
regional
characteristics

are
included,
such
as
projected
population
growth
and
anthropogenic
O3
precursor

emissions
increases,
related
mortality
would
increase
by
59.9
percent
in
the
2050s

compare
to
the
1990s.
These
increases
in
mortality
would
be
largely
contained
within

at‐risk
populations.51



Communities
With
Low
Socioeconomic
Status
Are
Most
Affected

While
all
Californians
suffer
when
air
quality
is
low,
the
communities
who
are
most

drastically
affected
by
both
ozone
and
PM
are
characterized
by
their
low
socioeconomic

status
(SES).
The
fossil
fuel
infrastructure
is
disproportionately
located
in
low‐income

communities.
Additionally,
there
is
evidence
that
negative
health
outcomes
from

ambient
air
pollution
are
also
associated
with
racial
segregation.
Asthma
prevalence,

hospitalization
and
mortality
are
three
times
greater
among
minorities
than
among

whites.52
Uneven
industrial
development,
real
estate
speculation,
discrimination
in

government
and
private
financing,
workplace
discrimination
and
exclusionary
zoning

have
led
to
systemic
racial
segregation
in
diverse
urban
areas
with
important

implications
for
community
health
and
individual
well‐being.53
Estimated
cancer
risks

associated
with
ambient
air
toxics
were
found
to
be
highest
in
metropolitan
areas
that

were
highly
segregated.
Disparities
between
racial/ethnic
groups
were
also
wider
in

more
segregated
metropolitan
areas.54




These
differences
will
only
become
more
marked
as
climate
change
impacts
the
amount


48
Facts About Particulate Matter Mortality: 1
49
K. Knowlton, J.E. Rosenthal and C. Hogrefe. “Assessing ozone-related health impacts under a changing
climate,” Environmental Health Perspectives November 2004: 1557
50
Lawrence D. Frank and Peter Engelke. “Multiple Impacts of the Built Environment on Public Health:
Walkable Places and the Exposure to Air Pollution,” International Regional Science Review:205
51
K. Knowlton: 1557
52
Maxine Burkett, “Just Solutions to Climate Change: A Climate Justice Propoosal for a Domestic Clean
Development Mechanism”, Buffalo Law Review: 9
53
Rachel Morello-Frosch and Bill M. Jesdale, Separate and Unequal: Residential Segregation and
Estimated Cancer Risks Associated with Ambient Air Toxics in US Metropolitan Area”, Environmental
Health Perspectives, March 2006: 386
54
Rachel Morello-Frosch: 386

12
of
ambient
air
pollution
like
ozone,
which
are
made
markedly
worse
by
sun
and
heat.

Levels
of
air
pollutants
such
as
O3
are
typically
higher
on
warmer
days
and
contribute
to

negative
health
outcomes
such
as
respiratory
conditions
and
diminished
lung
function.55


Numerous
studies
that
have
been
conducted
reveal
that
higher
O3
concentrations

aggravate
existing
asthma
conditions.56
Poverty
is
often
positively
correlated
with

increasing
susceptibility
to
climate‐sensitive
health
outcomes.
Increased
vulnerability

will
make
adapting
to
changing
weather
conditions
much
more
difficult.
Without
proper

adaptation,
those
in
the
lowest
socio‐economic
stratus
will
be
unable
to
protect

themselves
from
these
health
outcomes
and
their
health
will
suffer
as
a
result.57



Cap‐and‐trade
mechanisms
can
also
concentrate
pollution
in
communities
where

factories
purchase
emissions
reduction
credits
rather
than
reduce
actual
emissions.

These
localized
health
risks
from
pollution
sources
are
often
overlooked
due
to
a
focus

on
regional
air
quality
concerns.
The
result
is
a
disproportionate
burden
thrust
on

communities
surrounding
major
pollution
emitters,
which
creates
increased
risks
of

toxic
exposure
and
negative
health
outcomes.
These
localized
toxic
hot‐spots
are

overwhelmingly
low
income
and
populated
by
people
of
color.58
The
issues
surrounding

hot‐spots
is
further
complicated
by
the
emission
of
co‐pollutants
and
precursors
(like

the
ones
discussed
here),
which
may
increase
exposure
to
certain
types
of
chemicals
in

downwind
communities
where
pollution
is
concentrated.
These
issues
are
even
more

pronounced
when
the
cap‐and‐trade
mechanism
itself
does
not
account
for
these
co‐
pollutants.




Healthcare
Costs

One
in
five
Californians
lack
health
insurance.
The
vast
majority
of
those
uninsured

(75%)
are
working
adults
and
their
families.
Estimates
predict
that
the
number
of

Californians
without
health
insurance
will
grow
by
20
percent
over
the
next
five
years.59

The
percentage
of
Californians
who
lack
health
insurance
is
correlated
with
family

income.
(See
Figure
1)
and
a
significant
percentage
are
Latino
(59%).
The
lowest
income

individuals
qualify
for
Medi‐Cal,
a
state
based
health
insurance
program
paid
for
with

public
funds.
The
total
State
costs
in
the
fiscal
year
of
2007‐2008
for
hospitalization
and

professional
care
costs
under
Medi‐Cal
is
$4,657,648,450.60
This
number
is
incredibly

large
in
magnitude.
However,
ARB
does
estimate
that
the
predicted
reductions
in
NOx


55
K. Knowlton: 1557
56
Lawrence D. Frank: 205
57
Kristi L. Ebi, David M. Mills, Joel B. Smith and Anne Grambsch, “Climate Change and Human Health
Impacts in the United States: An Update on the Results of the U.S. National Assessment,” Environmental
Health Perspectives September 2006: 1319.
58
Richard Toshiyuki Drury, Michael E. Belliveau, J. Scott Kuhn , and Shipra Bansal, “Pollution, Trading
and Environmental Injustice: Los Angeles’ Failed Experiment in Air Quality Policy”, 9 Duke Envtl. L. -
and- Pol'y F. 231
59
California Healthcare Foundation, “Snapshot – California’s Uninsured”, 2007: 2
60
California Department of Health Care Services, “Medi-Cal Expenditures By Service Category
Fiscal Year 2007-08”, May 2008 Medi-Cal Estimate: CY Page 5

13
and
PM2.5
will
create
economic
savings
in
the
magnitude
of
$2.2
billion.61
This
figure
is

not
purely
State
money
but
a
combination
of
private
and
public
expenditures.
However,

due
to
the
significant
size
of
the
figure,
it
stands
to
reason
that
if
further
reductions
of

these
criteria
pollutants
were
to
be
achieved,
the
savings
would
be
even
greater,
freeing

up
resources
for
the
State.







Figure
1.
Source
‐
Employee
Benefit
Research
Institute
estimates
of
the
Current
Population
Survey,
March

2001
and
2007
Supplements



Auction
Revenue:
Mandate
Percentage
Be
Used
for
Public
Health

California
would
maximize
the
benefits
of
the
CO2E
cap‐and‐trade
mechanism
if
it

auctioned
off
at
least
a
portion
of
its
allowances
and
eventually
reached
100%
auction.

There
is
a
lot
of
discussion
and
controversy
surrounding
how/whether
to
transition
to

full
auction
and
this
paper
will
not
weigh
in
on
this
decision.
However,
it
is
clear
that
at

least
a
portion
of
any
revenues
received
by
the
State
should
be
directed
towards
public

health‐related
projects
which
have
co‐benefits
of
reducing
California’s
impact
on

climate
change.




The
rationale
behind
Public
Health
agencies
having
the
right
to
monies
from
auction

revenue
refers
back
to
the
original
intent
of
AB
32
itself.
AB
32
clearly
states
that

California
should,
if
possible,
consider
societal
benefits
outside
of
simply
GHG
reduction

including
reducing
other
air
pollutants
and
improving
public
health.62
The
selling
of


61
California Air Resources Board, “Climate Change Proposed Scoping Plan Appendices Volume II:
Analysis and Documentation”, October 2008: H-94
62
California Assembly Bill No. 32: 8

14
emission
allowances
will
result
in
a
revenue
boon
for
the
State
of
California.
That

revenue
can
be
put
to
good
use
in
improving
the
public
health
of
communities
which

are
disproportionately
impacted
by
air
pollution
and
who
are
most
vulnerable
to

climate‐changed
related
health
impacts.
By
investing
in
reducing
air
pollution,
not
only

will
public
health
be
improved
but
further
reductions
in
GHG
can
also
be
achieved.

Additionally,
funds
are
needed
to
aid
low‐income
and
vulnerable
populations
in

adapting.
Funds
could
also
be
directed
towards
achieving
those
goals
due
to
the

increasing
public
health
dangers
that
climate
change
poses.



It
is
worth
mentioning
that,
as
the
Federal
government
begins
to
move
on
climate

change,
that
a
Federal
cap‐and‐trade
system
may
replace
the
State
and
Regional

mechanisms
in
place
and
auction
revenue
will
therefore
become
absorbed
by
the

Federal
government
as
well.
While
this
is
a
possibility,
it
is
not
an
eventuality.
Therefore,

California
should
move
forward
with
its
plans
and
design
its
plan
for
the
long‐term.






Incentivizing
Offsets
With
Public
Health
Co‐benefits
Through
a
Credit
Multiplier

It
is
clear
that
offsets
will
be
permissible
within
California’s
cap‐and‐trade
mechanism.

However,
the
nature
of
those
offsets
is
still
undetermined.
The
use
of
offsets
gives

California
a
great
opportunity
to,
not
only
achieve
its
emissions
reductions
goals,
but
to

simultaneously
realize
public
health
benefits
as
well.
While
there
are
many
projects

within
California
that
could
improve
public
health,
it
is
also
crucial
that
any
proposed

offset
be
verifiable
and
quantifiable
in
terms
of
its
GHG
reduction.
Ideally,
California

should
incentivize
public
health
related
offsets
that
meet
these
criteria.
The
question
is

how.



California
should
give
a
credit
multiplier
to
offset
projects
that
are
located
in
California

and
have
public
health
co‐benefits.
This
credit
multiplier
would
give
capped
industries

more
credit
towards
meeting
their
GHG
emissions
reduction
requirements
if
they

invested
in
public‐health
relate
offsets.
By
utilizing
this
method
of
offset
crediting,

California
would
achieve
societal
benefits
and
achieve
its
stated
AB
32
goals.




Offsets:
Improving
Public
Transportation
Infrastructure


There
are
a
limited
number
of
offsets
that
have
both
public
health
benefits
and
achieve

quantifiable
and
verifiable
emissions
reductions.
One
offset
which
both
improves
air

quality
and
results
in
verifiably
lower
GHG
emissions
reduction
is
investment
in
public

transportation.
Studies
show
that
household
Vehicle
Miles
Travelled
(VMT)
are

correlated
with
residential
density
and
access
to
public
transit.63
A
significant
portion
of

California’s
GHG
emissions
(39%)
comes
from
transportation.
(See
Figure
2)
While
there

are
no
studies
available
that
study
how
increased
use
of
public
transportation
could


63
Robert Puentes- Fellow and Director, Metropolitan Infrastructure Initiative Brookings Institution,
"Strengthening the Ability of Public Transportation to Reduce Our Dependence on Foreign Oil”,
Testimony before Committee on Banking, Housing and Urban Affairs- United States Senate September 9,
2008

15
lower
this
percentage
of
GHG
emissions
within
the
State
of
California,
there
has
been
a

study
done
which
quantifies
this
for
the
entire
United
States.
A
study
done
for
the

American
Public
Transportation
Association
found
that
the
carbon
emissions
from
public

transportation
were
12.3
million
metric
tonnes,
or
4.0
million
metric
tonnes
less
than

would
have
been
used
by
personal
vehicles.
Additionally,
using
public
transportation

resulted
in
reduced
congestion
levels
equivalent
to
having
an
additional
340
million

gallons
of
gasoline,
which
equated
to
another
3.0
million
metric
tonnes
of
CO2

reduction.
This
sums
to
a
net
CO2
emission
reduction
of
6.9
million
metric
tonnes
when

including
the
avoided
congestion
fuel
consumption
due.
There’s
also
an
additional

400,000
metric
tonnes
of
additional
GHGs
saved,
including
sulfur
hexafluoride,
HFCs,

perfluorocarbons,
and
chlorofluorocarbons.64
Extrapolating
from
these
figures,
it
is

logical
to
conclude
that
increased
reliance
on
public
transportation
within
California

would
also
achieve
considerable
emissions
reductions.
There
are
equity
benefits
to

improving
public
transportation
systems
as
well.




Over
a
third
of
California’s
residents
do
not
have
drivers’
licenses
and
must
rely
on
other

forms
of
transportation
for
access
to
jobs,
education,
healthcare
and
other
vital
daily

needs.
Despite
this,
about
80%
of
surface
transportation
funds
are
spent
on
highways,

with
less
than
20%
going
to
transit
services.
Low‐income
residents
and
persons
of
color

are
disproportionately
represented
among
the
transit
dependent.65
Locating
such
public

transportation
projects
in
communities
that
surround
high
emissions
industries
would

be
desirable,
given
the
disproportionate
burden
they
already
bear
based
on
their

proximity
to
these
emitters.
Since
there
is
a
local
as
well
as
global
reduction
in

pollutants
from
the
increased
use
of
public
transportation,
this
would
help
improve
local

air
quality




64
Todd Davis and Monica Hale, “Public Transportation’s Contribution to U.S. Greenhouse Gas
Reduction”, Science Applications International Corporation for the American Public Transportation
Association, May 2007: 12
65
Amanda Eaken of the National Resources Defense Council, “Improving Transportation System Equity”,
Comments to California Air Resources Board: 2

16
 



Figure
2.
Source:
California
Air
Resources
Board



Therefore,
incentiving
investment
in
public
transportation
projects
by
both
allowing

such
investments
be
counted
as
an
offset
as
well
as
giving
such
an
offset
an
additional

multiplier
would
result
in
greatly
improved
overall
air
quality
on
both
a
local
and

regional
level
as
well
as
achieving
the
required
GHG
emissions
reduction.



Conclusion

California
has
commendably
included
specific
language
within
The
Global
Warming

Solutions
Act
(AB
32),
which
behooves
the
State
to
consider
public
health
as
part
of
that

bill’s
implementation.
Being
mindful
of
that
specific
language
contained
within
the

statutory
language,
it
becomes
clear
that
California
must
incorporate
public
health

outcomes
into
its
cap‐and‐trade
design.
There
are
two
opportunities
for
them
to
do
so

within
this
design.
First,
California
should
mandate
that
a
percentage
of
auction
revenue

received
by
the
State
through
emission
allowance
sales
be
designated
for
public
health‐
related
purposes
which
also
have
climate
change
mitigation
co‐benefits.
Second,

California
should
incentivize
offset
creation
that
has
public
health
co‐benefits
including,

but
not
limited
to,
investments
in
public
transportation
improvements
with
a
focus
on

communities
located
around
capped
facilities.
By
incorporating
these
recommendations

into
the
cap‐and‐trade
design,
California
will
improve
air
quality
and
reduce
negative

health
outcomes.
These
health
benefits
will
result
in
economic
savings
for
both
the


17
State
and
its
citizens.





WORKS
CITED

Bailey,
D.,

K.
Knowlton
and
M.
Rotkin‐Ellman,
“Improving
Air
Quality
and
Health
by
Reducing
Global

Warming

Pollution
in
California”,
Natural
Resources
Defense
Council,
June
2008.



Burkett,
Maxine,
“Just
Solutions
to
Climate
Change:
A
Climate
Justice
Proposal
for
a
Domestic
Clean

Development
Mechanism”,
Buffalo
Law
Review.



Burnside,
Craig
and
Martin
Eichenbaum,
“A
Mixed
Bag:
Assessment
of
Market


Performance
and
Firm
Trading
Behavior
in
the
NOx
Reclaim
Program”,
Federal
Reserve
Bank
of
Chicago,

August
1996:
5




California
Air
Resources
Board,
“Climate
Change
Proposed
Scoping
Plan:
A
Framework
For
Change”,

October
2008.



California
Air
Resources
Board,
“Climate
Change
Proposed
Scoping
Plan
Appendices
Volume
I:
Supporting

Documents
and
Measure
Detail”,
October
2008



California
Air
Resources
Board,
“Climate
Change
Proposed
Scoping
Plan
Appendices
Volume
II:
Analysis

and
Documentation”,
October
2008.



California
Air
Resources
Board,
“Facts
About
Particulate
Matter
Mortality:
New
data
revealing
greater

dangers
from
PM2.5”,
May
30,2008.



California
Air
Resources
Board,
“Nitrogen
Dioxide
–
Overview”,

<http://www.arb.ca.gov/research/aaqs/caaqs/no2‐1/no2‐1.htm>



California
Air
Resources
Board,
“Ozone
and
Ambient
Air
Quality
Standards,”

<http://www.arb.ca.gov/research/aaqs/caaqs/ozone/ozone.htm>



California
Air
Resources
Board,
“Review
of
the
California
Ambient
Air
Quality
Standard


For
Nitrogen
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