BILL ANALYSIS                                                                                                                                                                                                    Ó

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 535 (De Leon)
          Hearing Date: 05/16/2011        Amended: 03/24/2011
          Consultant: Brendan McCarthy    Policy Vote: EQ 5-1
          BILL SUMMARY: SB 535 requires at least ten percent of any 
          revenues generated under AB 32 be used in disadvantaged 
          communities for greenhouse gas emission reduction projects, 
          mitigation of health impacts of climate change, and support for 
          green collar jobs.
                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
          Program implementation Likely in the tens of millions per 
          yearSpecial *

          Program administration Likely in the millions per year      
          Special *                                     
          * California Communities Healthy Air Revitalizations Trust.

          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File. 

          Under current law (AB 32, Nunez, 2006), the Air Resources Board 
          is required to reduce greenhouse gas emissions to 1990 levels by 
          2020. AB 32 authorizes the Air Resources Board to impose 
          administrative fees on greenhouse gas emitters to carry out the 
          provisions of AB 32. The Air Resources Board is also authorized 
          to adopt market-based compliance measures, such as a cap and 
          trade program, to achieve the state's goals. Under a cap and 
          trade program, the total amount of allowed emissions would be 
          capped by the Air Resources Board. Emitters of greenhouse gasses 
          would either be given permits to emit, permits would be 
          auctioned off, or some combination of the two. Emitters could 
          then trade emission permits between themselves in order to meet 
          the overall emission reduction target at least cost. The Air 
          Resources Board is developing a cap and trade program, which 


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          will be implemented by 2012. (The environmental documentation of 
          the cap and trade regulation is currently under judicial 
          review.) At first, most of the emission credits will be given to 
          regulated entities. The limited initial auction of emission 
          credits is expected to generate about $100 million in 2012. In 
          future years, the portion of emission credits that is to be 
          auctioned will grow, as will auction revenues.

          SB 535 creates the California Communities Healthy Air 
          Revitalization Trust (Trust). Under the bill, not less than ten 
          percent of any revenues generated under AB 32 (excluding fees 
          charged by the Air Resources Board to cover administrative 
          costs), are to be deposited in the Trust. Using funds in the 
          Trust, the Secretary for Environmental Protection is required to 
          fund programs that reduce greenhouse gas emissions or mitigate 
          public health impacts of climate change or support green collar 
          jobs. All expenditures are to be made in communities that are 
          the most impacted and disadvantaged, as determined by the 
          Secretary. The bill caps administrative costs at five percent of 
          total expenditures.

          Total expenditures under the bill are unknown and will depend on 
          future revenues generated from the cap and trade program. 
          Nevertheless, based on initial projections of cap and trade 
          auction revenues, total program expenditures are likely to be in 
          the tens of millions per year.

          This bill is similar to AB 1405 (De Leon) of 2009. That bill was 
          vetoed by Governor Schwarzenegger.

          SB 237 (Wolk) creates a program to use revenues generated under 
          the AB 32 cap and trade program for the support of agricultural 
          activities relating to climate change. That bill is on this 
          committee's suspense file.

          SB 246 (De Leon) requires the Air Resources Board to follow 
          specified criteria if the Board allows greenhouse gas compliance 
          offsets to be used in a cap and trade program under AB 32. That 
          bill will be heard in this committee.

          SB 533 (Wright) makes changes to the process for adopting 
          regulations under AB 32. That bill has been moved to the Senate 
          Floor pursuant to Senate Rule 28.8.


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