BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1532
                                                                  Page  1

          Date of Hearing:   May 16, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                 AB 1532 (John A. Perez) - As Amended:  May 01, 2012 

          Policy Committee:                              Natural 
          ResourcesVote:5-3

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill establishes the Greenhouse Gas Reduction Account 
          (GHGRA) to receive regulatory fee revenue from the auction of 
          greenhouse gas emission allowances and directs eligible uses of 
          those revenues.  Specifically, this bill: 

          1)Creates the GHGRA within the Air Pollution Control Fund.

          2)Directs all greenhouse gas emission allowance auction revenue 
            to the GHGRA.

          3)Limits use of money in the GHGRA to purposes consistent with 
            the requirements of the Sinclair Paint decision that 
            facilitate cost-effective reductions of greenhouse gas 
            emissions.

          4)Charges the Air Resources Board (ARB) and any other state 
            agency identified by the Legislature with implementing a 
            program, pursuant to guidelines adopted by the board, of 
            grants, revolving loans, loan guarantees, loans or other 
            funding measures to achieve greenhouse gas reductions by 
            investments in the following categories:

             a)   Clean and efficient energy.

             b)   Low-carbon transportation and infrastructure.

             c)   Natural resource protection.

             d)   Research, development and deployment of innovative 
               technologies and measures.








                                                                  AB 1532
                                                                  Page  2


          5)Requires ARB to adopt, every three years, an investment plan, 
            to include an investment plan prepared by the Public Utilities 
            Commission (PUC), of anticipated expenditures from the GHGRA.

           FISCAL EFFECT  

          Costs to develop and implement the financial assistance program 
          created by this bill are unknown but certainly will be 
          substantial and likely will vary, somewhat proportionally, with 
          the amount of revenue deposited into the GHGRA and available for 
          program use.  ARB estimates annual revenue from the auction of 
          greenhouse gas emission allowances to range from $2 billion to 
          $5 billion in 2013, with that amount increasing to between $17 
          billion and $67 billion in later years.  

          ARB estimates it will cost approximately $9.3 million in 2012-13 
          and in 2013-14, and approximately $13.5 million in 2014-15, to 
          develop and administer the financial assistance program required 
          by this bill, with costs growing in future years as ARB 
          administers substantially greater amounts of funds.  ARB 
          activities will include establishing funding allocation 
          guidelines; developing a triennial investment plan; allocating 
          program funds; reporting to the Legislation on program 
          activities; and providing general administrative services.  ARB 
          cautions that its costs may rise substantially in future years 
          as GHGRA funding increases and as its role becomes better 
          defined (GHGRA).

          Other agencies, including, but likely not limited, to the PUC, 
          which the bill explicitly requires to develop an investment, 
          also will experience costs in implementing the program required 
          by this bill.  While unknown, these cost will likely be 
          substantial, though less than ARB's (GHGRA).

          For perspective on the magnitude of the costs estimates provided 
          above, it is worth considering recent, voter-approved bond 
          measures that limited administrative costs to no more than 5% of 
          bond proceeds.  If 5% of greenhouse gas emission allowance 
          auction revenues were to go to program administration, then 
          costs to administer a program using auction revenue would be 
          between $100 million and $250 million in 2012-13 and $850 
          million and $3.35 billion in later program years.

           COMMENTS  








                                                                  AB 1532
                                                                  Page  3


           1)Rationale.   The author intends this bill to provide statutory 
            direction for the expenditure of greenhouse gas regulatory fee 
            revenue.  
             
           2)Background .  AB 32 (Núñez, Chapter 455, Statutes of 2006) 
            requires California to limit its emissions of GHGs so that, by 
            2020, those emissions are equal to what they were in 1990. To 
            that end, AB 32 requires ARB to quantify the state's 1990 GHG 
            emissions and to adopt, by January 1, 2009, a "scoping plan" 
            that describes the board's plan for achieving the maximum 
            technologically feasible and cost-effective reductions of GHG 
            emissions reductions by 2020. In keeping with AB 32, ARB 
            adopted its AB 32 scoping plan in December of 2008.

            Consistent with AB 32, the scoping plan includes both direct 
            regulatory measures and market-based compliance mechanisms. 
            Direct regulatory requirements of the type that have typified 
            California's regulation of environmental quality, such as 
            efficiency and emissions standards, account for over 
            three-quarters of the plan's GHG emissions reductions. The 
            remainder of the plan's GHG emissions reductions-about 
            20%-result from a cap-and-trade market in which regulated 
            emissions sources-mainly large industrial sources and 
            electricity generators--buy and sell emissions allowances that 
            give the holder the right to emit a quantity of GHGs.

            ARB will issue emissions allowances through quarterly auctions 
            at which time a portion of these allowances will be made 
            available for purchase. For 2012-13, ARB's auctions are 
            estimated to generate roughly $660 million to upwards of $3 
            billion (though ARB's recent communications estimate auction 
            revenue will generate between $2 billion and $5 billion in 
            2012-13). The Governor's budget for 2012-13 assumes that the 
            state will receive $1 billion from such auctions.

           3)Support  .  This bill is supported by the Natural Resources 
            Defense Council, Environmental Defense Fund and a long list of 
            nonprofit and community-based groups supportive of AB 32's GHG 
            reduction goals, and Waste Management.
                
            4)Opposition  .  This bill is opposed by the California Chamber of 
            Commerce and other industry groups who  

           Analysis Prepared by  :    Jay Dickenson / APPR. / (916) 319-2081 








                                                                  AB 1532
                                                                  Page  4