Climate change: market-based compliance mechanism: price ceiling.

Assembly Member Irwin's climate change legislation modifies California's greenhouse gas emissions pricing framework by requiring the State Air Resources Board to incorporate the U.S. Environmental Protection Agency's November 2023 social cost metrics when setting allowance price ceilings.

The bill amends the California Global Warming Solutions Act's market-based compliance mechanisms, which currently authorize the board to establish price ceilings for emission allowances through 2030. Under existing law, the board must consider various factors in setting these ceilings, including potential economic impacts, auction reserve prices, and the general social cost of greenhouse gas emissions. The new requirement specifies that the board must use the EPA's November 2023 determination of these social costs rather than developing its own metrics.

This change affects the broader emissions trading system that requires covered entities to obtain allowances for their greenhouse gas emissions. The system includes price containment points below the ceiling and allows entities to meet a portion of their obligations through offset credits - up to 4% through 2025 and 6% from 2026-2030. When allowance reserves are depleted, the board can offer additional allowances at the ceiling price, with proceeds funding verified emissions reductions elsewhere. The amended provisions remain in effect until January 1, 2031.