BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: AB 1527
          SENATOR ALAN LOWENTHAL, CHAIRMAN               AUTHOR:  lieu
                                                         VERSION: 6/1/09
          Analysis by:  Jennifer Gress                   FISCAL:  yes
          Hearing date:  June 30, 2009






          SUBJECT:

          Motor vehicle emission reduction projects

          DESCRIPTION:

          This bill makes it easier to use funds from multiple state  
          programs to fund an emission reduction project.

          ANALYSIS:

          Existing law establishes several programs designed to reduce  
          emissions associated with motor vehicles.  Some programs are  
          intended to reduce emissions of criteria pollutants, which are  
          six common pollutants that harm human health and the  
          environment. Criteria pollutants include particle pollution  
          (often referred to as particulate matter or PM), ground-level  
          ozone, carbon monoxide, sulfur oxides, nitrogen oxides, and  
          lead.  The United States Environmental Protection Agency has  
          established National Ambient Air Quality Standards for each of  
          these pollutants that regions throughout the U.S. must attain.  
          Other motor vehicle emission reduction programs focus on the  
          problem of climate change and seek to reduce greenhouse gas  
          emissions.  The emission reduction programs pertinent to this  
          bill are described below.

           Goods Movement Emission Reduction Program (GMERP)
           In November 2006, voters approved the Highway Safety, Traffic  
          Reduction, Air Quality and Port Security Bond Act of 2006, also  
          known as Proposition 1B, that, among other things, provided one  
          billion dollars to reduce emissions associated with the movement  
          of freight along California's trade corridors.   SB 88  
          (Committee on Budget and Fiscal Review), Chapter 181, Statutes  
          of 2007, provided guidance to ARB to implement the program,  
          referred to as the Goods Movement Emission Reduction Program  




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          (GMERP).  

          The GMERP provides incentive grants for projects that reduce  
          goods movement-related emissions.  SB 88 defined "emissions" as  
          including, but not limited to, diesel particulate matter, oxides  
          of nitrogen, oxides of sulfur, and reactive organic gases, which  
          are criteria pollutants or precursors to them.  Projects  
          eligible for funding include the replacement, repower, or  
          retrofit of heavy-duty diesel trucks, locomotives, harbor craft,  
          and cargo handling equipment, and the provision of on-shore  
          electrical power (i.e., cold-ironing) for cargo ships, portable  
          shore-side power generation projects, or electrification  
          infrastructure to reduce engine idling and the use of internal  
          combustion auxiliary power systems.  Projects are awarded on a  
          competitive basis and ranked according to a combination of two  
          factors:  the total amount of emissions reduced by the project  
          and the project's cost-effectiveness, which is defined as the  
          total pollutant-weighted emission reduction measured over the  
          life of the project, per state dollar invested.

           Carl Moyer Memorial Air Quality Standards Attainment Program  
          (Carl Moyer)  
          The Carl Moyer program provides incentive grants for engines,  
          equipment, and other sources of pollution that exceed the  
          standards established by law or regulation, thereby providing  
          early or extra emission reductions.  The program is designed to  
          reduce emissions of oxides of nitrogen (NOx), particulate matter  
          (PM), and reactive organic gas (ROG), which are necessary for  
          the state to attain the National Ambient Air Quality Standards.  
          Eligible projects include on-road, off-road, marine, locomotive,  
          and stationary agricultural pump engines.  ARB approves projects  
          on the basis of their cost-effectiveness.  The  
          cost-effectiveness for the Carl Moyer program is established in  
          statute, which prohibits grants for projects with a  
          cost-effectiveness that exceeds $13,600 per ton of NOx reduced.   
          For projects that obtain ROG and PM emission reductions, ARB  
          weights those reductions to produce an adjusted  
          cost-effectiveness standard consistent with statute.
          
           AB 118 (N??ez), Chapter 750, Statutes of 2007
           AB 118 provides approximately $200 million annually through 2015  
          for three new programs to fund air quality improvement projects  
          and develop and deploy technology and alternative and renewable  
          fuels.  The three new programs are: the Air Quality Improvement  
          Program administered by ARB, the Alternative and Renewable Fuel  
          and Vehicle Technology Program administered by the Energy  




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          Commission, and the Enhanced Fleet Modernization Program  
          administered by the Bureau of Automotive Repair (BAR).  The AQIP  
          and the Alternative and Renewable Fuel and Vehicle Technology  
          Program, which are subject to this bill, are described below.

          Air Quality Improvement Program (AQIP).  AQIP will provide about  
          $50 million per year for grants to fund clean vehicle and  
          equipment projects that reduce criteria and toxic air  
          pollutants, as well as research on the air quality impacts of  
          alternative fuels and advanced technology vehicles.  AB 118  
          established eight broad project types that are eligible for AQIP  
          funding:

           On- and off-road equipment projects;
           Projects to mitigate off-road gasoline exhaust and evaporative  
            emissions;
           Research on the air quality impact of alternative fuels;
           University of California research to increase sustainable  
            biofuels production and improve collection of biomass  
            feedstock;
           Lawn and garden equipment replacement;
           Medium- and heavy-duty vehicle/equipment projects including  
            lower emission school buses, electric or hybrid  
            vehicles/equipment, and regional air quality programs in the  
            most impacted parts of California;
           Workforce training related to advanced technology to reduce  
            air pollution; and
           Projects to identify and reduce emissions from high-emitting  
            light-duty vehicles.

          Projects will be awarded in the form of competitive grants,  
          revolving loans, or loan guarantees, and will be evaluated on  
          the basis of the potential to reduce criteria or toxic air  
          pollutants, cost-effectiveness, contribution to regional air  
          quality improvement, and the ability to promote the use of clean  
          alternative fuels and vehicle technologies.

          Alternative and Renewable Fuel and Vehicle Technology Program.   
          This program is administered by the Energy Commission and  
          provides competitive grants and other financial incentives to  
          help the state achieve its climate change goal, primarily by  
          reducing greenhouse gas emissions.  AB 118 establishes 11  
          criteria by which to evaluate projects and provides a broad list  
          of eligible projects, including:

           Alternative and renewable fuel projects to develop and improve  




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            alternative and renewable low-carbon fuels;
           Demonstration and deployment projects that optimize  
            alternative and renewable fuels for existing and developing  
            engine technologies;
           Projects to produce alternative and renewable low-carbon  
            fuels;
           Projects to decrease the overall impact of an alternative and  
            renewable fuel's life cycle carbon footprint and increase  
            sustainability;
           Alternative and renewable fuel infrastructure, fueling  
            stations, and equipment;
           Projects to develop and improve light-, medium-, and  
            heavy-duty vehicle technologies that provide for better fuel  
            efficiency and lower greenhouse gas emissions, alternative  
            fuel usage and storage, or emission reductions;
           Programs and projects that accelerate the commercialization of  
            vehicles and alternative and renewable fuels;
           Programs and projects to retrofit medium- and heavy-duty  
            on-road and nonroad vehicle fleets with technologies that  
            create higher fuel efficiencies;
           Infrastructure projects that promote alternative and renewable  
            fuel infrastructure development connected with existing  
            fleets, public transit, and existing transportation corridors,  
            including physical measurement or metering equipment and truck  
            stop electrification;
           Workforce training programs related to alternative and  
            renewable fuel;
           Block grants administered by not-for-profit technology  
            entities for education and program promotion, and the  
            development of alternative and renewable fuel and vehicle  
            technology centers;
           Analyses performed by a state agency to determine the impacts  
            of increasing the use of low-carbon transportation fuels and  
            technologies and to assist in program implementation.
           
           This bill  :

           Requires ARB and the Energy Commission to revise their project  
            guidelines by January 1, 2011 to allow funding from federal  
            sources, the AQIP, and the Alternative and Renewable Fuel and  
            Vehicle Technology Program to be used for a project also  
            funded by the GMERP or the Carl Moyer program without those  
            other funds being factored into the cost-effectiveness  
            calculations for criteria pollutants under the GMERP or Carl  
            Moyer program. 





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           Provides that GMERP and Carl Moyer projects that receive  
            funding from those other sources must still meet all  
            requirements provided under existing law. 
          
          COMMENTS:

           1.Purpose  .  According to the sponsor, CalStart, this bill is  
            designed to promote better coordination between state funding  
            programs for clean transportation. The bill allows federal and  
            AB 118 funds to be paired with Carl Moyer or Proposition 1B  
            funds to "upgrade" projects to achieve even greater air  
            quality benefits and greenhouse gas emission reductions.  
            Current program guidelines require that funds from all public  
            funding sources are summed when calculating  
            cost-effectiveness.  The higher the state subsidy, the less  
            cost-effective a project is.  Because of this, using state  
            funds from multiple programs makes it difficult or impossible  
            to demonstrate the cost-effectiveness of the project and thus  
            be awarded a grant.  

            According to the sponsor, ARB is in the process of amending  
            its guidelines for the GMERP in order to allow for limited  
            co-funding.  These new guidelines have not yet been adopted,  
            however, and they do not apply to the Carl Moyer program.   
            Furthermore, the sponsor notes that the draft guidelines do  
            not include natural gas vehicles.  The sponsor explains that  
            the emissions of criteria pollutants are the same for both a  
            2010 diesel truck and a 2010 compressed natural gas (CNG)  
            truck, but that the CNG truck provides a more significant  
            reduction in greenhouse gas emissions. CNG trucks, however,  
            are more expensive than diesel trucks and thus require greater  
            subsidy in order to incentivize their purchase.  Clarifying  
            the state's preference for projects that achieve multiple  
            policy goals would provide clear direction to ARB and could  
            set a precedent for future coordination.

            The need for these changes is particularly acute given today's  
            economic climate. In better times, fleets may have chosen to  
            pay a bit more for cleaner alternative fuel or hybrid  
            vehicles. Today, however, the economics of fleet purchase  
            decisions are likely to steer fleets toward diesel vehicles.  
            Every diesel vehicle purchased is a missed opportunity for  
            greenhouse gas and petroleum reductions, and possibly even  
            additional criteria pollutant reductions.
          
           2.Undermining efforts to reduce emissions of criteria  




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            pollutants  .  Because some federal funds, AQIP, GMERP, and the  
            Carl Moyer program all focus on the reduction of criteria  
            pollutants, and in particular the reduction of oxides of  
            nitrogen and diesel PM, allowing AQIP funds, as well as some  
            federal funds, to be excluded in cost-effectiveness  
            calculations for projects funded by the GMERP and Carl Moyer  
            could result in less money being available to fund other  
            projects intended to reduce criteria pollutants.  Furthermore,  
            to achieve the goals of reducing both criteria pollutant  
            emissions and greenhouse gas emissions, funds permitted to be  
            co-mingled for purposes of calculating cost-effectiveness  
            should be derived from programs designed to serve these  
            different purposes.  For these reasons, the author or  
            committee may wish to consider the following amendments:

                 Delete AQIP funds from the list of funds to be excluded  
               from cost-effectiveness calculations for GMERP and Carl  
               Moyer projects.  

                 Specify that federal funds used in conjunction with, but  
               excluded in cost-effectiveness calculations for, GMERP and  
               Carl Moyer projects, should be derived from programs  
               focused on climate change and designed to reduce greenhouse  
               gas emissions.
          
           3.Fear of the unknown  .  The concept of achieving multiple policy  
            objectives with a single emission reduction project enjoys  
            broad support.  Because this approach is somewhat new, there  
            is concern that it would be implemented in a manner that  
            compromised the effectiveness of individual programs.  How  
            exactly will this idea be implemented?  To help address these  
            concerns, the author or committee may wish to consider  
            amending the bill to state clearly that allowing funds from  
            one program to be excluded from the cost-effectiveness  
            calculation for a project from another program shall not  
            reduce the emission reduction benefits expected to be achieved  
            from those programs individually.  

           4.Consistent with other efforts to coordinate funding  .  As  
            noted, ARB is in the process of revising its guidelines to  
            make it easier to use funding from multiple state programs for  
            a project that aims to achieve multiple policy goals.   
            Additionally, in its funding plan for the AQIP, ARB  
            acknowledges that there may be some overlap between vehicle  
            projects that can be funded in both the AQIP and the  
            Alternative and Renewal Fuel and Vehicle Technology Program  




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            because some technologies achieve both greenhouse gas and  
            criteria pollutant reductions.  According to the AQIP Funding  
            Plan, ARB and the Energy Commission are coordinating on source  
            categories where potential overlap exists and have discussed  
            the possibility of joint funding projects in future years in  
            cases where demand exceeds each agency's available funding.   
            By requiring ARB and the Energy Commission to revise its  
            guidelines for the GMERP and the Carl Moyer program, this bill  
            is consistent with efforts currently underway by ARB and the  
            Energy Commission to provide opportunities to support projects  
            that achieve multiple policy objectives.   

           5.Double-referral  .  This bill is double-referred to this  
            committee and the Committee on Environmental Quality.  If this  
            bill passes this committee, it will be re-referred to the  
            Environmental Quality Committee.
          
          Assembly Votes:
               Floor:    77-0
               Appr: 17-0
               Trans:    11-0

           POSITIONS:  (Communicated to the Committee before noon on  
                     Wednesday,                              June 24,  
                     2009)

               SUPPORT:  CALSTART (sponsor)
                         California Dump Truck Owners Association
                         California Natural Gas Vehicle Coalition
          
               OPPOSED:  None received.