Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market Based Compliance Mechanisms Regulation Final Environmental Analysis State of California AIR RESOURCES BOARD Revised Release Date: December 10, 2018 Please be advised that this document contains two additional non- substantive changes since initial release on December 3, 2018, to page 57 and page 12 of Attachment B This page intentionally left blank. Cap-and-Trade Regulation Amendments Final Environmental Analysis TABLE OF CONTENTS LIST OF ABBREVIATIONS ........................................................................................... III 1.0 INTRODUCTION AND BACKGROUND ............................................................... 1 A. Introduction .................................................................................................... 2 B. Background Information on Cap-and-Trade Regulation ................................. 3 C. Prior Environmental Analysis ......................................................................... 5 D. Environmental Review Process ................................................................... 13 E. Existing Cap-and-Trade Program ................................................................ 15 F. Organization of the Environmental Analysis ................................................ 17 G. Public Review Process for the Environmental Analysis ............................... 17 H. Incorporation of Documents by Reference ................................................... 18 2.0 PROJECT DESCRIPTION .................................................................................. 21 A. Project Objectives ........................................................................................ 22 B. Proposed Recommended Actions and Reasonably Foreseeable Compliance Responses ............................................................................... 27 3.0 ENVIRONMENTAL AND REGULATORY SETTING ......................................... 37 4.0 IMPACT ANALYSIS AND MITIGATION MEASURES ....................................... 39 A. Basis for Environmental Impact Analysis and Significance Determinations ............................................................................................. 39 B. Resource Area Impact Analysis and Mitigation Measures ........................... 40 C. Impacts Associated with Regulatory Amendments to Reflect Legislative Direction under AB 398, Specify Leakage Assistance Factors for Allocation Post-2020 and for the Third Compliance Period, Streamline Program Implementation ............................................................ 42 5.0 CUMULATIVE AND GROWTH-INDUCING IMPACTS ...................................... 71 A. Approach to Cumulative Analysis ................................................................ 71 B. Significance Determinations and Mitigation ................................................. 79 C. Cumulative Impacts by Resource Area ........................................................ 79 i Cap-and-Trade Regulation Amendments Final Environmental Analysis 6.0 MANDATORY FINDINGS OF SIGNIFICANCE .................................................. 93 7.0 ALTERNATIVES ANALYSIS ............................................................................. 95 A. Approach to Alternatives Analysis................................................................ 95 B. Project Objectives ........................................................................................ 96 C. Description of Alternatives ........................................................................... 96 8.0 REFERENCES ................................................................................................. 107 ATTACHMENTS Attachment A: Environmental and Regulatory Setting Attachment B: Summary of Environmental Impacts and Mitigation Measures ii Cap-and-Trade Regulation Amendments Final Environmental Analysis List of Abbreviations LIST OF ABBREVIATIONS 2010 FED Functional Equivalent Document prepared for the California Cap on GHG Emissions and Market-Based Compliance Mechanisms AB Assembly Bill CARB or Board California Air Resources Board BCS biogas control system CaCO3 lime CCS carbon capture and sequestration CEQA California Environmental Quality Act CFC chlorofluorocarbon CFR Code of Federal Regulations CHP Combined Heat and Power CITSS Compliance Instrument Tracking System Service CO2 carbon dioxide CO2e carbon dioxide equivalent dbh diameter at breast height DNDC DeNitrification-DeComposition EA Environmental Analysis EGU electric generating unit EIR environmental impact report FSOR Final Statement of Reasons GHG greenhouse gas GSC General Stationary Combustion H2S hydrogen sulfide HCFC hydrochlorofluorocarbon HFC hydrofluorocarbon HNO3 nitric acid ISOR Initial Statement of Reasons lbs pounds LPG Liquid Petroleum Gas iii Cap-and-Trade Regulation Amendments Final Environmental Analysis List of Abbreviations LCFS Low Carbon Fuel Standard MMC Mine Methane Capture MRR Mandatory Reporting Regulations MTCO2e metric tons of carbon dioxide equivalent MWh megawatt hour N2 nitrogen N2O nitrous oxide N2O4 nitrogen tetroxide NEPA National Environmental Policy Act NH3 ammonia NO nitric oxide NO2 nitrogen dioxide NOX nitrogen oxides NSPS New Source Performance Standard ODS ozone depleting substances PRC Public Resources Code Proposed Project Proposed Cap-and-Trade Regulatory Amendments Regulation or Program California’s Cap-and-Trade Regulation RPS Renewable Portfolio Standard SB Senate Bill Scoping Plan Climate Change Scoping Plan SIP State Implementation Plan SMCRA Surface Mining Control and Reclamation Act U.S. EPA U.S. Environmental Protection Agency USC United States Code VAM ventilation air methane WCI Western Climate Initiative iv Cap-and-Trade Regulation Amendments Chapter 1 Final Environmental Analysis Introduction and Background PREFACE The California Air Resources Board (CARB or Board) released a Draft Environmental Analysis (Draft EA) for the Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms Regulation (Proposed Project) on September 4, 2018, for a 45-day public review and comment period that concluded October 22, 2018. Revisions to the Proposed Project were released for a 15-Day comment period stating on November 16, 2018 and closing on November 30, 2018. In all, a total of 112 comment letters were received on the Proposed Projects during the public comment periods, eight of which addressed the draft EA or raised a substantial environmental issue. CARB staff made modifications to the Draft EA to create the Final EA. To facilitate identifying modifications to the document, modified text is presented in the Final EA with strike-through for deletions and underline for additions. None of the modifications alter any of the types of foreseeable compliance responses evaluated or conclusions reached in the Draft EA, introduce new significant effects on the environment, or provide new information of substantial importance relative to the EA. As a result, these revisions do not require recirculation of the draft document pursuant to the CEQA Guidelines, California Code of Regulations, Title 14, Section 15088.5, before consideration by the Board. 1 Cap-and-Trade Regulation Amendments Chapter 1 Final Environmental Analysis Introduction and Background 1.0 INTRODUCTION AND BACKGROUND A. Introduction This Draft Final Environmental Analysis (Draft Final EA) is Appendix B to the California Air Resources Board (CARB or Board) staff report presented to the Board for consideration of the Proposed Cap-and-Trade Regulatory Amendments (Proposed Project). Although the Proposed Project amends the existing Cap-and-Trade Program, CARB has decided to prepare an EA for this particular proposed citation rather than a Supplemental EA to address the impacts of the Proposed Project under the California Environmental Quality Act (CEQA). Where a Supplemental EA need only contain the information necessary to make a previous EA adequate for the project as incrementally revised, this EA analyzes the impacts of the proposed project in all resource areas, including impacts that may have been disclosed in a previously-certified EA. Therefore, this EA discloses the entirety of the impacts of the proposed project and the continuation of the existing program to the extent it and the compliance responses have not yet been fully implemented, to the public and decision makers, rather than solely disclosing the difference between the impacts of the current regulations and the proposed regulations. CARB selected this approach for this project to provide the most inclusive, conservative analysis of potential environmental impacts, even though such a comprehensive analysis is not required by CEQA. The Project Description section of this Draft Final EA presents a summary of the Proposed Project, as defined under CEQA. A detailed description of the Proposed Project is included in the “Staff Report: Initial Statement of Reasons for the Proposed 2018 Amendments to the California Cap on Greenhouse Gas Emissions and Market- Based Compliance Mechanisms,” date of release September 4, 2018, which is hereby incorporated by reference. This Draft Final EA is intended to disclose potential adverse environmental impacts, when taking a conservative view, of the Proposed Project and identify potential mitigation measures, if significant environmental impacts are identified. The Proposed Project is intended to generate environmental benefits pertaining