Guidance and Best Practices for Development of Greenhouse Gas Emissions and Vehicle Miles Traveled Mitigation Banks or Exchanges

I. Objective

The purpose of this research contract is to build on existing research in providing guidance to the State, regional, and local jurisdictions on the best framework, practices and protocols to implement both Greenhouse Gas (GHG) Mitigation and Vehicle Miles Traveled (VMT) Mitigation Banks and Exchanges (MBEx).

II. Background

This contract builds upon Appendix D: Local Actions (Appendix D) to CARB’s 2022 Climate Change Scoping Plan, often referred to as CARB’s Local Actions Appendix. Appendix D provides California Environmental Quality Act (CEQA) guidance, recommends actions for local governments that align with the State’s climate goals, provides local GHG reduction strategies and a GHG mitigation hierarchy, and discusses opportunities for projects to mitigate their GHG and VMT impacts. One recommendation is to create a statewide GHG mitigation bank. This contract explores the viability of developing both Statewide and regional or local GHG/VMT MBEx for CEQA purposes.

The creation of statewide, regional, or local MBEx may help address some of the challenges with mitigating GHG or VMT impacts. Lead agencies that administer CEQA face administrative and cost challenges with verification, evaluation, and monitoring of CEQA mitigation measures. Project sponsors face barriers using offsite GHG/VMT mitigation for projects subject to CEQA due to their perceived high cost and a lack of awareness of local project opportunities. Lead agencies also have limited or no experience administering GHG/VMT MBEx. At the same time, local projects that reduce VMT or GHG emissions, or which can capture and store GHGs, often lack consistent funding sources. A CARB-sponsored report by Steer entitled “Sustainable Financing Tools and Strategies for Equitable, Community-Based Mobility and Transportation Solutions” evaluated 30 innovative funding and financing tools and strategies from the transportation and other sectors and recommended mitigation banks as one of the funding mechanisms.^[1]

A 2018 Berkeley Center for Law, Energy & the Environment report entitled “An Analysis of Vehicle Miles Traveled Banking and Exchange Frameworks” explains that “in a mitigation bank developers would commit funds instead of undertaking specific on-site mitigation projects, and then a local or regional authority could aggregate these funds and deploy them to top-priority mitigation projects throughout the jurisdiction. Similarly, in a mitigation exchange, developers would be permitted to select from a list of pre-approved mitigation projects throughout the jurisdiction (or propose their own), without needing to mitigate their transportation impacts on-site.” It is important that there are appropriate measures to verify the claimed VMT reduction as well as whether it is “not otherwise required.” The report also points out the importance of ensuring that disadvantaged communities would benefit from and not be negatively impacted by off-site mitigation. Examples of VMT reduction strategies include transit developments, alternative transportation infrastructure, and infill development. GHG MBEx would operate in a similar way with comparable requirements.

GHG Mitigation

In its Local Actions Appendix, CARB provides guidance on GHG mitigation for projects subject to CEQA and describes ways that a lead agency can mitigate impacts and avoid statements of overriding considerations by prioritizing CEQA GHG mitigation according to a geographic hierarchy. GHG mitigation for CEQA projects should occur on-site first. In cases where on-site measures are not enough and more mitigation is required, CARB recommends that the lead agency pursue local, off-site direct GHG mitigation (within the community or neighborhood in the vicinity of the project). If that is not possible, CARB then recommends non-local, off-site mitigation. And if such mitigation is not feasible, then CARB recommends the purchase and retirement of carbon credits. GHG mitigation exchanges would facilitate off-site GHG mitigation projects and mitigation banks would facilitate the purchase and retirement of offset credits.

To address some of the barriers to CEQA GHG mitigation, CARB recommends in Appendix D that local jurisdictions pursue regional collaboration and partnerships to leverage data, best practices, and opportunities for equitable GHG mitigation. CARB’s Local Actions Appendix also suggests that there may be a role for the State to ensure that all regions have access to mitigation opportunities. One way to accomplish this would be through the creation of a statewide GHG mitigation bank designed for CEQA mitigation purposes.

Vehicle Miles Traveled (VMT) Mitigation

Reducing the state’s VMT is crucial to achieving the state’s goal of carbon neutrality and requires providing drivers with other transportation options and land use changes that support less driving.

Senate Bill 743, which was signed into law in 2013, resulted in an update to CEQA Guidelines, changing how lead agencies evaluate transportation impacts under CEQA to better measure the transportation-related environmental impacts of any project. As a result, in July 2020, agencies began to analyze the transportation impacts of new projects using VMT instead of Level of Service, the previous metric used to measure automobile delay. The California Governor’s Office of Planning and Research has a VMT Technical Advisory on how to evaluate transportation impacts and a CEQA SB 743 website on transportation impacts.

CARB’s 2022 Climate Change Scoping Plan Appendix E: Sustainable and Equitable Communities presents a policy framework and actions for the state to create more sustainable and equitable communities that reduce driving. It includes an action to “establish guidance for regional and local agencies on how to administer SB 743 mitigation banks or exchanges and how revenue should be spent to support projects that reduce VMT.”

Building on Past Research

This contract’s research and resulting analysis and recommendations will provide guidance to State, regional, and local agencies in the development of GHG and VMT MBEx. Research under this contract will build on past research conducted by Fehr & Peers in its January 2020 “VMT Mitigation Through Banks and Exchanges” paper, the Berkeley Center for Law, Energy, and the Environment (CLEE) 2018 report referenced earlier, the 2022 Berkeley Center for Law, Energy & the Environment report entitled “Implementing SB 743: Design Considerations for Vehicle Miles Traveled Mitigation Bank and Exchange Programs and others. The Fehr & Peers report covers mitigation approaches such as a VMT-based transportation impact fee program, mitigation banks, and mitigation exchanges and outlines their requirements, pros and cons, project types, implementation steps including statutory references and detailed considerations, risks, and examples of impact fees or mitigation programs such as the LA Metro Transit Pass Subsidy. The 2022 Berkeley Center for Law, Energy & the Environment report provides guidance to state, regional, and local leaders developing plans for VMT MBEx. It includes guidance for decision making on design elements including geographic scope and administrative design, project prioritization and selection, pricing and fiscal matters, mitigation monitoring, additionality and equity.

Research and analysis under this contract will take the next step to address the challenges that have occurred in setting up GHG/VMT MBEx.

III. Scope of Work

The draft scope of work below outlines CARB’s goals, desired outcomes, and potential deliverables for this research project. The pre-proposal should address at a high level how the applicant will approach these tasks. Applicants are not required to stay within these specific parameters and are encouraged to suggest alternative tasks and methods for realizing project goals, based on their own expertise and understanding of the project and budget. The final contract and scope of work will be developed through an iterative process with CARB and the selected contractor and will include a detailed timeline as well as guidance on deliverables (e.g., white paper contents).

The contractor will develop a white paper that provides guidance and recommendations to State, regional, and local agencies on establishing GHG/VMT MBEx. The researcher will review relevant literature and analyze lessons learned and best practices from existing or developing mitigation banks and exchanges.

Task 1: Project Management

Task 1.1: Project Kick-off Meeting

Hold an initial kick-off meeting between the Contractor and the CARB contract manager. The Contractor and the CARB contract manager will review the terms of the contract and the deliverable schedule.

Work with CARB staff at the beginning of the project to create a one- to two-page plain-language outreach deliverable for the public describing the project’s goals, process, and planned deliverables (available in multiple languages, template will be provided).

Task 1.2: Ongoing Coordination

Meet monthly with CARB’s contract manager and additionally as needed throughout the contract term.

Develop the agenda for monthly meetings and prepare quarterly progress reports for the contract manager and applicable staff.

Deliverables:

- One- to two-page outreach deliverable for the public
- Monthly agendas
- Quarterly progress reports

Task 2: Past and Existing GHG/VMT MBEx and Other Mitigation Efforts

Research and summarize existing efforts to mitigate the GHG/VMT impacts of projects. And research and summarize programs that mitigate other impacts besides GHGs and VMT (i.e., farmland conversion) and that may provide interesting insights about how to create a mitigation market.

Consider any programs that could inform the design of a GHG/VMT MBEx, including the CAPCOA GHG Exchange, SB 27 natural and working lands climate registry, conservation and mitigation banks, advanced mitigation programs, in lieu fee programs, transportation demand management programs, transfer of development rights programs, programs within and outside of California including international programs. Special consideration should be given to new markets created to mitigate impacts from one project through purchasing reductions generated outside by an external project.

Deliverables:

Draft summary table of existing or developing GHG/VMT/Other MBEx, how they work, what they mitigate, who administers them, how they are monitored, and at what scale they operate (i.e., local regional, state, national)
Final summary table

Task 3: Interviews with Relevant Stakeholders

Interview representatives of lead agencies, jurisdictions with existing or developing MBEx, CAPCOA GHG Rx, state agencies (e.g., Caltrans, Office of Planning and Research, Natural Resources Agency), NGOs, and project sponsors. Interviews should be used to obtain insights and observations from those who have been or are currently involved in past or existing MBEx. Interviews should also include questions that focus on many of the issues listed in Task 4.6.

Deliverables:

List of prospective interviewees
Summary of each interview and overall key takeaways

Task 4: Data Analysis and Development of Design Components and Concepts

Building on the previous tasks and other relevant literature, identify challenges and opportunities in the development of GHG/VMT MBEx and begin to develop design components and concepts for GHG/VMT MBEx. Examine, at minimum:

The differences in the possible design elements for mitigation banks versus exchanges and the advantages and disadvantages of different design elements depending on the circumstances (e.g., urban versus rural geography).
The advantages and disadvantages of statewide versus regional or local GHG MBEx.
How to ensure sufficient accuracy in quantification of GHG/VMT mitigation strategies.
How to ensure GHG/VMT mitigation strategies are chosen that have lasting efficacy, or how to account for diminishing efficacy.
Approaches to develop and implement robust additionality criteria for GHG/VMT mitigation strategies.
Approaches to ensuring accountability, monitoring, and enforcement (considering geographic scope, administrative entity, fiscal framework, mechanisms to ensure mitigation is meeting requirements under CEQA, etc.) for GHG/VMT MBEx.
Whether (and to what extent) the existence of a mitigation bank is a barrier to a lead agency resorting to a statement of overriding considerations
Approaches to ensuring equity is a high priority in the GHG/VMT MBEx frameworks.
How to address potential legal issues (high-level).
Identify VMT mitigation costs for different types of measures such as pedestrian, bicycle, transit, etc. and in different geographic contexts such as urban, suburban, rural and in banks or exchanges.
Consideration of barriers to GHG/VMT mitigation such as those listed below and how these barriers may be addressed:

Perceived high mitigation project costs, especially to meet the standard compliance offsets requirements (real, additional, quantifiable, permanent, verifiable, and enforceable).
High cost of administering the GHG emission reduction programs and a lack of trained staff and available staff capacity.
Complexities in quantifying project’s GHG/VMT reduction.
Lack of awareness of opportunities for local CEQA mitigation projects and challenges matching project proponents with projects that reduce VMT/GHG emissions.
Double-counting VMT/GHG emissions and challenges properly identifying the “ownership” of VMT/GHG emission reductions.
Lack of a market for local projects due to the above-mentioned challenges.

Deliverable:

Draft summary report of the data analysis and design elements and concepts. This analysis should form the basis for a portion of the white paper.

Task 5: Recommendations on Approach

Based on findings from the previous tasks and building on work from previous reports mentioned above, recommend mitigation bank or exchange frameworks and describe best practices and other necessary components. Recommendations should include at least one example of a Statewide mitigation MBEx and another of a regional or local MBEx but may include additional examples at the researcher’s and CARB’s discretion. Compare the pros and cons of a mitigation bank versus a mitigation exchange and what situations are best suited for one or the other. Consider various scenarios for the frameworks, such as use for GHG or VMT mitigation, the type of geography (urban, suburban or rural), project type (e.g., land use project or transportation infrastructure project), and local capacity for bank or exchange, and how the types of mitigation employed might influence whether a bank or exchange functions better.

Select at least 5 project types that may be used as GHG or VMT mitigation (e.g., urban forestry, electric vehicle charging infrastructure installation, energy efficiency retrofits of existing buildings, public transit and active transportation infrastructure) and outline what sort of accounting protocols, methods of tracking/monitoring mitigation measures implemented, and other necessary components may be needed for the specific project types to be used as mitigation within the recommended frameworks.

Deliverables:

Draft description and analysis of the GHG/VMT MBEx frameworks and recommendations for the state and regional or local jurisdictions. These recommendations should form the basis for a portion of the white paper.
Final description and analysis of the GHG/VMT MBEx frameworks and recommendations for the state and regional or local jurisdictions

Task 6: White Paper, Policy Brief, and Presentation

Develop a white paper, policy brief and seminar presentation that builds on the information, analysis, and recommendations compiled in the previous tasks. Research will address Tasks 2-4 and provide a framework, set of best practices, accounting protocols, and methods of tracking for a GHG/VMT MBEx and for seeding local governments and regional collaborations to develop and connect mitigation opportunities under CEQA. Note that the draft white paper must be submitted three months prior to the end of the contract to allow sufficient time for review.

Develop a one-to-two-page policy brief with a summary, issue background, key findings, and recommendations. The policy brief is intended to provide a high-level and digestible summary of the research conducted for non-technical readers and users, which may include some policy makers or elected officials and community members.

In the final month of the contract, present key project findings at a one-hour seminar, to be held either in person at CARB’s Sacramento Headquarters office, CARB’s Southern California Headquarters in Riverside, or via webinar or webcast. Provide CARB’s project manager with a draft of the slide deck for the seminar presentation at least two weeks prior the date of the seminar.

Deliverables:

Draft white paper and policy brief for review and comment by CARB staff and relevant stakeholders.
Final white paper and policy brief
Draft seminar slide deck for presentation
Final seminar slide deck for presentation

IV. Deliverables

The project proposal may include but is not limited to the following deliverables:

Task I: Project Management

- One- to two-page outreach deliverable for the public
- Monthly agendas
- Quarterly progress reports

Task 2: Past and Existing GHG/VMT MBEx and Other Mitigation Efforts

- Draft summary table of existing or developing GHG/VMT mitigation banks or exchanges.
- Final summary table of existing or developing GHG/VMT mitigation banks or exchanges.

Task 3: Interviews with Relevant Stakeholders

List of prospective interviewees
Summary of each interview and overall key takeaways

Task 4: Data Analysis and Development of Design Components and Concepts

Draft summary report of the data analysis and design components and concepts

Task 5: Recommendations on Approach

Draft description and analysis of the GHG/VMT MBEx frameworks and recommendations for the state and regional or local jurisdictions
Final description and analysis of the GHG/VMT MBEx frameworks and recommendations for the state and regional or local jurisdictions

Task 6: White Paper, Policy Brief, and Seminar Presentation

Draft white paper and policy brief for review and comment by CARB staff and relevant agency partners.
Final white paper and policy brief
Draft seminar presentation for CARB review
Final seminar presentation

NOTE: The contractor will be responsible for ensuring their documents comply with the American with Disabilities Act.

Additional deliverables to be determined in consultation with CARB staff.

V. Timeline

It is anticipated this project will be completed in 18 months from the start date (start date is estimated to be in Spring 2024). The estimated budget for this project is up to $150,000.

Scoring Criteria

1. Responsiveness to the goals and objectives outlined in the proposal solicitation (20 points)

The proposal should explain in adequate detail and clear, understandable language—how the proposed project satisfies the project objectives.

This contract should build on existing research in providing guidance to the State, regional, and local jurisdictions on the best framework, practices, and protocols to implement both Greenhouse Gas (GHG) Mitigation and Vehicle Miles Traveled (VMT) Mitigation Banks and Exchanges. The research will address a variety of issues and barriers about GHG/VMT MBEx and result in the development of a framework and design for MBEx as well as recommendations on best approaches.

2. Work experience and subject matter expertise (35 points)

The proposal should demonstrate that the proposers have the work experience or subject matter expertise required to successfully carry out the proposed project as described. Additionally, the proposal should describe how the project will build upon previous relevant work that was funded by CARB, other regional, state, and federal agencies.

The proposers should have knowledge of state, regional, and local policies in support of carbon neutrality and reducing VMT, as well as the California Environmental Quality Act as it pertains to GHG mitigation.

3. Expanding expertise (10 points)

The proposal should explain how the project team expands expertise such as by incorporating multidisciplinary expertise or perspectives, including members from various public universities, non-academic institutions, or community-based organizations, or providing opportunities to build skills and expertise for individuals from underrepresented groups.

4. Explanation of technical or methodological approach (25 points)

The proposal should clearly explain the logic and feasibility of the project’s methodology, spell out the sequence and relationships of major tasks, and explain methods for performing the work. The proposal should include a clear description and plan for how each task will be completed.

5. Allocation of resources and project oversight (10 points)

The proposal should describe how time and resources will be allocated and demonstrate how this allocation ensures the project’s success. Proposal reviewers will evaluate, for example: if the objectives of the project can be met given this allocation, if there is adequate supervision and oversight to ensure that the project will remain on schedule, if time and cost are appropriately divvied up across different project tasks and stages.

[1] Sustainable Financing Tools and Strategies for Equitable, Community-Based Mobility and Transportation Solutions, February 2023, Steer.

California Air Resources Board