SACRAMENTO — The California Air Resources Board released its draft rules this week to govern carbon-capture, removal and underground storage projects across the state, the implementing regulation for SB 905, the 2022 law that directed CARB to write the rulebook the state’s net-zero scenario will be operationalised under. The substance of the draft is the part the industry has cheered and the environmental community has gone to the wall over. The board’s response to the comment period will shape the cost-side and credibility-side of the largest sub-national CCS regime in the United States.
The substantive disagreement is the part to track. Carbon-removal companies, water agencies, fuel interests and carbon-project registries are asking CARB to expand the rulebook beyond conventional geologic storage in deep underground rock formations to include biochar, bio-oil, marine carbon removal, enhanced weathering and water-sector removal. The expansion would give the California programme the broadest definitional scope of any state CCS regulation in the country and would create the regulatory primitives the corporate carbon-removal market has been asking the United States federal government to write since the Inflation Reduction Act. The environmental community is taking a different view.
Conservation and public-interest groups have spent the comment period writing to CARB about a separate problem. Politico’s E&E News reported that the Sierra Club, the Natural Resources Defence Council and a coalition of environmental-justice organisations submitted a joint letter accusing the board of designing a programme that allows the oil and gas industry to largely self-regulate and self-report on its progress in reducing emissions through the technology. The principal concerns are the lack of mandatory third-party monitoring, the absence of detailed financial-responsibility provisions, and the inclusion in the draft of enhanced oil recovery projects, the operating model in which captured CO2 is injected into ageing oil wells to extract more crude.
The SB 905 architecture is the legal scaffold the draft is operationalising. The 2022 law required CARB to write rules covering permitting, monitoring, financial responsibility and the long-term-storage liability of CCS, CCUS and direct-air-capture projects. The legislature’s intent was to head off, in California, the regulatory ambiguity that has slowed CCS expansion in Louisiana and Texas; the practical effect of the draft as written is to extend the model the existing oil-and-gas regulatory community has been operating under to a class of projects with a fundamentally different risk profile. The Sierra Club’s letter argued that the model is not the right one for the new project class.
The substantive question the disagreement turns on is the role of CCS in meeting California’s emissions targets. The state’s 2022 scoping plan, the document the SB 905 rules are operationalising, relies on roughly 100 million tonnes of CCS-and-removal credits a year by 2045 to reach carbon neutrality. The number is significant. It is also one of the larger projected CCS deployments in any sub-national jurisdiction in the world. Whether the credits arrive at that scale on time depends on whether the rulebook produces a system that investors, project developers and regulators are willing to operate, and the comment period CARB is now closing is the part of the procedural calendar that determines whether the design of the rules matches what the scoping plan needs them to do.
The federal context is the part the California rulebook is operating against. The Trump administration sent California’s vehicle-emissions waivers to Congress for repeal this week under the Congressional Review Act, and the EPA has been negotiating with the Department of Energy on the 45Q tax-credit eligibility rules that determine whether CCS projects receive the federal subsidy. The California rulebook is being designed against a federal regulatory backdrop that has been moving in the opposite direction. The state-level architecture is, as in air-quality regulation, the operational substitute for the federal architecture that has been removed.
The role of enhanced oil recovery is the part of the draft that has generated the sharpest environmental-justice response. EOR injects captured CO2 into oil wells that have passed primary and secondary production stages to extract residual crude; the practice has been classified as a form of carbon storage in federal accounting, on the grounds that the CO2 remains underground, while the oil that is produced is then sold and combusted. The net climate effect depends on the substitution mathematics, and the substitution mathematics depends on whether the produced crude displaces other production or simply adds to global supply. The Sierra Club’s position is that the substitution is empirically unsupported and that California should exclude EOR from the rulebook on that basis.
The scientific context the rulemaking sits inside is the part the Indicators of Global Climate Change report published Wednesday by seventy scientists across seventeen countries made unambiguous. The world’s remaining carbon budget for staying below 1.5 degrees of warming is 130 billion tonnes; at current global emissions, the budget runs out in three years. CCS, even at a successful California scale, is unlikely to be the technology that closes that gap. The Sierra Club’s argument is that the role of the technology has been over-specified in the state’s scoping plan and that the bulk of the abatement at the scale the state needs has to come from upstream emissions reduction rather than downstream capture.
The economic stakes are the part the corporate community has been arguing inside. California Governor Newsom released the first 46 million dollars of Proposition 4 climate-bond money on Thursday for the Tijuana River sewage crisis, and the same bond’s revenue stream is one of the financing pools the state is using to underwrite CCS pilot projects in the San Joaquin Valley. The European Union finalised its ETS2 carbon-market design this week, providing the closest international comparator to the California programme and the pricing curve the state’s projects will be tracking against. Whether the California CCS regime ends up at a scale that matters depends on whether the rulebook produces credit prices the international market is willing to recognise.
The procedural calendar from here is straightforward. CARB will close the comment period in the next several weeks, publish a revised draft in the autumn, and finalise the rules through the end of 2026. The first CCS projects under the revised regime are expected to begin operation in 2027, and the first carbon-removal credits issued under the California system are expected in the same window. The environmental-justice community has indicated it will file litigation if the EOR provisions remain in the final version, and the litigation calendar would push first-credit issuance into 2028 in the contested case. The substantive question of whether California can build a working CCS programme by the middle of the decade hinges on whether the rulebook closes the gap between what the industry is asking for and what the environmental community is willing to accept.
