A Cost Driver proposal to expand the state air board’s authority to regulate certain sources of emissions passed the Assembly Natural Resources Committee this week despite objections that it will lead to higher prices for goods and services.
AB 1777 (Garcia; D-Rancho Cucamonga) grants the California Air Resources Board (CARB) sweeping new authority to regulate indirect sources of emissions statewide.
In opposing AB 1777, the California Chamber of Commerce pointed out that the bill authorizes broad, undefined statewide regulation of facilities that attract mobile sources of emissions, driving new compliance costs across key sectors and increasing prices for goods and services.
Reflecting the broad impact of the bill, also opposing AB 1777 were statewide groups from all sectors of the California economy — including manufacturers, contractors, builders, agriculture, grocers, retailers, shippers, ports, laborers and unions representing longshore and warehouse workers.
No Guardrails
CalChamber pointed out that AB 1777 authorizes CARB to adopt regulations to reduce or mitigate emissions from indirect emission sources whenever it decides the action is “necessary” to achieve ambient air quality standards.
The bill places no limits on the scope of CARB’s authority, the types of facilities that may be regulated or the nature and cost of required mitigation measures.
Without clear guardrails or cost-containment measures, AB 1777 creates an “open-ended framework for future regulatory expansion that introduces significant uncertain for regulated entities,” CalChamber warned. “This uncertainty increases compliance risk, raises the cost of capital, and inhibits long-term investment in California.”
Conflict with Local Rules
CalChamber highlighted the economic harm that would result from allowing CARB to develop and enforce statewide indirect source rules that risk creating conflict for facilities like warehouses, ports and large commercial developments. Those facilities already must comply with local zoning, housing and land-use decisions.
It is most appropriate for indirect source regulation to be developed and implemented at the local level, where regulators can tailor requirements to the geographic, economic and infrastructure conditions of a given region, CalChamber asserted.
A program designed for the Port of Long Beach, one of the largest and most complex container ports in the world, should differ from that for a smaller port serving different commodity markets having distinct logistics and transportation networks, CalChamber said.
Hidden Costs for Consumers
Ultimately, AB 1777 affects the physical infrastructure — warehouses, ports and retail centers — that forms the backbone of California’s supply chain, CalChamber said.
The costs of new compliance requirements and mitigation fees (which amount to a surcharge on the movement of goods) are passed along to California households in the form of higher prices for groceries, consumer goods, and essential services.
These expenses have a disproportionate impact on low- and middle-income families.
“In a state that desperately needs to expand its housing stock and modernize its transportation networks,” CalChamber concluded, “the redundant regulations proposed by AB 1777 may stall progress and make essential development even more prohibitively expensive.”
Key Vote
Assembly Natural Resources voted 9-4 on March 23 to send AB 1777 to the Assembly Appropriations Committee:
Ayes: Bryan (D-Los Angeles), Connolly (D-San Rafael), Garcia (D-Rancho Cucamonga), Haney (D-San Francisco), Kalra (D-San Jose), Pellerin (D-Santa Cruz), Schultz (D-Glendale), Wicks (D-Oakland), Zbur (D-Hollywood).
Noes: Alanis (R-Modesto), Ellis (R-Bakersfield), Hoover (R-Folsom), Macedo (R-Tulare).
Not voting: Muratsuchi (D-Torrance).
