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