BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
SB 1762 S
Senator Perata B
As Amended April 24, 2008
Hearing Date: April 29, 2008 1
Health & Safety Code 7
KB:jd 6
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SUBJECT
Greenhouse gas reduction
DESCRIPTION
This bill would, among other things, provide that it is
unlawful for any person to represent in an advertisement,
in promotional material on the Internet, or in any other
sales or promotional materials made available to the
public, for the sale or use of a greenhouse gas credit or
emission reduction, that the credit or reduction reduces
greenhouse gas emissions, unless it meets one or more of
the specified conditions.
Additionally, this bill would provide that any person who
represents in an advertisement, in promotional material on
the Internet, or in any other sales or promotional
materials, for the sale or use of a greenhouse gas credit
or emission reduction, shall maintain in written form and
make available to the public (1) the basis for the
representation, and (2) information on any significant
adverse environmental or public health impacts associated
with the creation and manufacture of the credit or emission
reduction.
Finally, this bill would provide that a violation of its
provisions is punishable by civil penalties and creates a
civil cause of action that may be brought by an individual
or a district attorney.
BACKGROUND
(more)
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A greenhouse gas credit, or a carbon offset, can generally
be described as a financial instrument representing a
reduction in greenhouse gas emissions. In recent years,
two primary markets have developed for carbon credits. In
the larger compliance market, companies, governments, and
other entities buy carbon credits in order to comply with
caps on the total amount of carbon dioxide they are allowed
to emit. In the smaller, voluntary market, individuals and
companies purchase carbon credits to mitigate their own
greenhouse gas emissions from transportation, electricity
use, and other sources. Credits are typically generated
from various emissions-reducing projects, such as
destruction of industrial pollutants or agricultural
byproduct, destruction of landfill methane, and forestry
projects.
Carbon offsetting is beginning to gain popularity among
consumers who wish to neutralize the potentially negative
environmental effects of their lifestyles. However, due to
their intangible nature, the quality of carbon offsets is
difficult for consumers to verify. This, coupled with the
lack of a uniform standard for the independent
certification of carbon credits, has created a situation
where consumers risk purchasing credits that do not
actually yield any reduction in carbon emission. Further,
industrial companies may be profiting from doing very
little by selling the carbon credits they have gained for
implementing "greener" technology or practices, which would
have occurred regardless of the sale.
Earlier this year, the Offices of Attorneys General from
various states sent a joint letter to the Federal Trade
Commission commenting, from a consumer protection
standpoint, on the issue of carbon offsets. The letter
emphasized the need for enacting consumer protections in
light of the rising importance of carbon offsets in the
market. This bill, in recognition of the rapidly
developing market for carbon offsets, and California's
stated policy in emission reduction, seeks to establish
consumer protections in the sale of these intangible
products.
This bill was double referred to the Senate Committee on
Environmental Quality.
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CHANGES TO EXISTING LAW
Existing law requires the State Air Resources Board to
adopt regulations to require the reporting and verification
of statewide greenhouse gas emissions and to monitor and
enforce compliance with the program. (Health & Safety Code
38500 et seq.)
Existing law generally prohibits the use of false or
misleading statements in advertising. (Business &
Professions Code 17500.)
Existing law provides specified remedies and penalties for
violations, including civil penalties and injunctive
relief. (Business & Professions Code 17534.5, 17535,
17536.)
This bill would provide that it is unlawful for any person
to represent in an advertisement, in promotional material
on the Internet, or in any other sales or promotional
materials made available to the public, for the sale or use
of a greenhouse gas credit or emission reduction, that the
credit or reduction reduces greenhouse gas emissions unless
it meets one or more of the following conditions:
The credit or emission reduction has been approved
by the State Air Resources Board as being in
compliance with Division 25.5 of the Health & Safety
Code;
The credit or omission reduction complies with one
or more protocols for voluntary emissions reductions
of greenhouse gases adopted by the California Climate
Registry; and
The person demonstrates and discloses in any
advertising or other sales or promotional material
made available to the public, that the credit or
emission reduction meets all of the following
conditions:
1. The credit or emission reduction is
quantifiable and measurable.
2. The credit or emission reduction is surplus,
and is in addition to any greenhouse gas emission
reduction that would otherwise occur.
3. The credit or emission reduction is verifiable
and enforceable by a state, regional, or local
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agency within the State of California.
4. The credit or emission reduction does not
result in an increase in the emission of criteria
pollutants or toxic air contaminants.
This bill would provide that any person who represents in
an advertisement, in promotional material on the Internet,
or in any other sales or promotional materials, for the
sale or use of a greenhouse gas credit or emission
reduction, shall maintain in written form and make
available to the public all of the following information
and documentation supporting the validity of the
representation:
the basis for the claim; and
information on any significant adverse
environmental or public health impacts associated with
the creation and manufacture of the credit or emission
reduction.
This bill would provide that a retailer that does not
initiate a representation by advertising or through other
means available to the public shall not be deemed to be in
violation of this section.
This bill would provide that a violation of its provisions
is punishable by a civil penalty not to exceed $2,500 per
violation, and by the cost of the purchase of the emission
reduction credit, offset, or emission reduction.
This bill would provide that a violation of its provisions
creates a civil cause of action that may be brought by an
individual or a district attorney.
This bill would provide that a violation of its provisions
is not a crime.
This bill would define "greenhouse gas credit," "emission
reduction," "credit," "reduction," or any similar terms as
a voluntary reduction in the production of greenhouse gases
undertaken for the purposes of selling, trading, or
otherwise providing the credit for emission reduction to
another party.
This bill would incorporate the definition of "person" from
Business and Professions Code 17577.1(c).
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This bill would make findings and declarations regarding
global warming and the protections necessary to ensure
consumers are purchasing emission reduction credits that
actually result in emission reductions.
COMMENT
1.Need for the bill to create a separate cause of action
for consumers in the sale of carbon offsets
A report by Clean Air, Cool Planet entitled "A Consumer's
Guide to Retail Carbon Offsets Providers," states, "[a]s
the threats posed by global warming become more obvious,
not only to scientists, but also to the general public,
the concept of being able to go "carbon neutral" is an
attractive one. Carbon neutrality offers individuals,
businesses, and other institutions (e.g., universities)
the opportunity to take personal responsibility for the
global warming implications of their lifestyles."
Carbon neutrality generally refers to neutralizing one's
greenhouse gas emissions by offsetting all or some of the
emissions associated with one's lifestyle or activities.
Consumers may purchase, through various companies and
organizations, enough offsets that will make them, their
vehicles, and households carbon neutral.
However, the overarching question of what constitutes a
real offset of carbon emissions remains difficult to
answer and the subject of much debate. The lack of
common standards and definitions, along with the
intangible nature of carbon offsets, makes it difficult
if not impossible for consumers to verify that they are
receiving what they paid for and creates a significant
potential for deceptive claims.
This bill is intended to ensure that carbon offsets meet
specified standards, and to provide appropriate recourse
to consumers.
2.This bill would create a civil right of action for false
advertising in the sale of carbon offsets
California's Unfair Competition Law (UCL) protects
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consumers and businesses from a wide variety of
"unlawful, unfair or fraudulent business acts or
practices and unfair, deceptive, untrue or misleading
advertising." (Business and Professions Code Section
17200 et seq.) Section 17500 makes it unlawful for any
person or corporation to induce the public through any
manner or means to buy products or services through
untrue or misleading advertising. Remedies for
violations of Business and Professions Code Section 17500
et seq. include injunctive relief, restitution, and civil
penalties of up to $2,500 for each violation.
Essentially, this bill creates a private right of action
modeled after those currently available for victims of
false advertising under the UCL. The creation of
additional consumer remedies in the context of a rapidly
developing market for carbon offsets is appropriate
considering the potential for deceptive practices.
Consumers should have the right to certain disclosures
and assurances about the type of carbon offset they are
purchasing, just as in any other type of retail market,
particularly since carbon offsets are much more complex
than other products. Although the remedy provisions of
this bill are largely duplicative of those in Section
17500, it is important to note that, in contrast to those
under Section 17500, violations of this bill would not
constitute a crime. Further, although this bill does not
specifically require actual injury, it is difficult to
see how a cause of action arises otherwise under this
provision.
3. This bill is a proper exercise of the state's
regulatory powers
In 2006, the Legislature enacted the California Global
Warming Solutions Act (AB 32, Nu?ez, Chapter 488,
Statutes of 2006), which established a comprehensive
program of regulatory and market mechanisms to achieve
reductions of greenhouse gases. The State Air Resources
Board is the state agency charged with monitoring and
regulating sources of emissions of greenhouse gases that
cause global warming in order to reduce emissions of
greenhouse gases. The California Climate Action Registry
is a private non-profit organization originally formed by
the State of California, which develops and promotes
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credible and consistent greenhouse gas reporting
standards and tools for organizations to measure,
monitor, and verify their greenhouse gas emissions.
Currently, there are no federal greenhouse gas emissions
reduction mandates, nor are there federal standards for
the certification of carbon offsets. Without question,
California may regulate the sale of carbon offsets that
occur within its borders through intrastate commerce.
Further, in the absence of preemptive federal
legislation, California may regulate the sale of carbon
offsets occurring through interstate commerce so long as
the regulation effectuates a legitimate local public
interest, and does not pose an undue burden on interstate
commerce. ( See Pike v. Brace Church, Inc. (1970) 397
U.S. 137, 142 ("Where the statute regulates even-handedly
to effectuate a legitimate local public interest, and its
effects on interstate commerce, are only incidental, it
will be upheld unless the burden imposed on such commerce
is clearly excessive in relation to the putative local
benefits.") California has an interest in ensuring that
products that are purposefully directed at California
residents meet specified standards designed for consumer
protection. This is consistent with existing law that
generally regulates the obligations of sellers in retail
markets.
Support: None Known
Opposition:None Known
HISTORY
Source:Author
Related Pending Legislation:None Known
Prior Legislation:AB 32 (Nu?ez, Chapter 488, Statutes of
2006) enacted the California Global Warming
Solutions Act of 2006.
AB 3994 (Sher, Chapter 1413, Statutes of
1990) made it unlawful for any person to
represent that any consumer good, which it
manufactures or distributes is "ozone
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friendly," "biodegradable,"
"photodegradable," "recyclable," or
"recycled" unless the item meets specified
definitions or meets definitions
established in trade rules adopted by the
federal trade commission. The bill also
required any person who represents that any
consumer good which it manufactures or
distributes is not harmful to, or is
beneficial to, the environment through the
use of specified terms, to maintain in
written form in its records information and
documentation supporting the validity of
the representation.
Prior Vote: Senate Committee on Environmental Quality
(To be heard in Committee on April 28,
2008.)
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