BILL ANALYSIS Ó
SB 535
Page 1
Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 535 (De Léon) - As Amended: June 21, 2011
SENATE VOTE : 23-15
SUBJECT : California Communities Healthy Air Revitalization
Trust
SUMMARY : Directs a minimum of 10 percent of non-administrative
revenues generated pursuant to the California Global Warming
Solutions Act (AB 32) to the California Communities Healthy Air
Revitalization Trust (CalCHART) to be awarded for specified
purposes to benefit socioeconomically disadvantaged communities
impacted by air pollution and climate change.
EXISTING LAW , under AB 32:
1)Requires the Air Resources Board (ARB) to adopt a statewide
greenhouse gas (GHG) emissions limit equivalent to 1990 levels
by 2020 and adopt regulations to achieve maximum
technologically feasible and cost-effective GHG emission
reductions.
2)Authorizes ARB to adopt fees to be paid by the sources of GHG
emissions regulated pursuant to AB 32. Fee revenues must be
deposited in the Air Pollution Control Fund and may be spent
for purposes of carrying out AB 32.
3)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, to be
adopted by 2011 and operative by 2012, once specified
conditions are met. Prior to adopting a market-based
compliance mechanism, to the extent feasible and in
furtherance of achieving the statewide GHG emissions limit,
ARB must:
a) Consider the potential for direct, indirect, and
cumulative emission impacts from these mechanisms,
including localized impacts in communities that are already
adversely impacted by air pollution.
b) Design any market-based compliance mechanism to prevent
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any increase in the emissions of toxic air contaminants or
criteria air pollutants.
c) Maximize additional environmental and economic benefits
for California, as appropriate.
4)Further requires ARB, to the extent feasible and in
furtherance of achieving the statewide GHG emissions limit,
to:
a) Design market-based and certain other regulations,
including distribution of emissions allowances where
appropriate, in a manner that is equitable, seeks to
minimize costs and maximize the total benefits to
California, and encourages early action to reduce GHG
emissions.
b) Ensure that activities undertaken to comply with the
regulations do not disproportionately impact low-income
communities, and complement efforts to achieve and maintain
federal and state ambient air quality standards and to
reduce toxic air contaminant emissions.
5)Requires ARB to ensure that the GHG emission reduction rules,
regulations, programs, mechanisms, and incentives under its
jurisdiction direct public and private investment toward the
most disadvantaged communities in California and provide an
opportunity for small businesses, schools, affordable housing
associations, and other community institutions to participate
in and benefit from statewide efforts to reduce GHG emissions.
THIS BILL :
1)Allocates at least 10 percent of the non-administrative
revenues deposited in the Air Pollution Control Fund (APCF)
pursuant to AB 32 to CalCHART to provide funding to the most
impacted and disadvantaged communities for programs or
projects that reduce GHG emissions or mitigate direct health
impacts of climate change, through competitive grants, loans,
or other funding mechanisms. Projects may include "green
collar" employment or training.
2)Defines "most impacted and disadvantaged communities" as
either those areas having the highest 10 percent air pollution
exposure and socioeconomic vulnerability within an air basin
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that does not meet one or more national or state ambient air
quality standards, or those areas having the highest 10
percent socioeconomic vulnerability to direct health or
environmental impacts of climate change.
3)Requires ARB to administer CalCHART funds and begin
implementation of the program within 90 days of finding that
more than $5 million has been deposited. Authorizes up to
five percent of CalCHART funds to be spent on administration.
4)Requires ARB to conduct a public process and prepare a report
regarding implementation, the types of programs and projects
to be funded, the selection and oversight process, and
eligibility criteria.
5)Requires ARB, in consultation with the Climate Action Team,
to:
a) Adopt, and update every three years, a list of the most
impacted and disadvantaged communities.
b) Report to the Legislature regarding the CalCHART program
by September 1, 2015 and every three years thereafter.
6)Requires ARB to appoint a seven-member review panel, in
consultation with the Senate pro Tempore and the Speaker of
the Assembly. Each member must have demonstrated expertise,
and a minimum of seven years of working experience, in the
areas of air pollution, public health, energy efficiency,
transportation, economics, or running a small business. Three
members must have demonstrated knowledge and experience in
advancing community interests in the area of environmental
protection for at least seven years.
7)Requires CalCHART project awards to be approved by a majority
(four members) of the review panel.
8)Provides that ARB may only approve a program or project for
funding after determining that the use of moneys for that
program or project is consistent with the requirements for the
use of moneys derived from valid regulatory fees, as
established by the California Supreme Court in Sinclair Paint
Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866 and
reaffirmed in California Farm Bureau Federation v. State Water
Resources Control Bd. (2011) 51 Cal.4th 421 (except for
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penalty moneys, if those moneys are segregated from fee
moneys).
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. AB 32 authorizes ARB to adopt via regulation "a
schedule of fees to be paid by the sources of greenhouse gas
emissions" and deposit revenues into the Air Pollution Control
Fund. AB 32 also authorizes, but does not require, the use of
market-based mechanisms to achieve GHG emission reductions,
provided specified conditions are met.
Thus far, ARB has proposed to use its fee authority only for
the limited purpose of funding its own and other state
agencies' AB 32 implementation costs, and to repay loans of
other state funds that previously have been approved by the
Legislature for these purposes - amounting to not more than
$55 million annually. However, it's possible that a more
expansive fee on GHG emitters, the auction of GHG emission
allowances, or another market mechanism will produce
significantly higher revenues over the course of AB 32
implementation.
AB 32 also requires ARB to ensure that the GHG emission
reduction rules, regulations, programs, mechanisms, and
incentives under its jurisdiction direct public and private
investment toward the "most disadvantaged communities" in
California and provide an opportunity for small businesses,
schools, affordable housing associations, and other community
institutions to participate in and benefit from statewide
efforts to reduce GHG emissions.
With regard to any market-based compliance mechanisms, ARB is
required to: "consider the potential for direct, indirect, and
cumulative emissions impacts from these mechanisms, including
localized impacts in communities that are already adversely
impacted by air pollution." In addition, in adopting and
implementing AB 32, ARB is required to "ensure that activities
undertaken to comply with the regulations do not
disproportionately impact low-income communities." With
regard to "co-pollutants," AB 32's GHG-reduction regulations
must be designed and implemented to "prevent any increase in
the emissions of toxic air contaminants or criteria air
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pollutants" and "complement efforts to achieve and maintain
federal and state ambient air quality standards and to reduce
toxic air contaminant emissions."
In December 2010, ARB adopted a proposed cap-and-trade program
that would apply to an estimated 600 regulated entities
engaged in stationary combustion, cement manufacturing,
cogeneration, petroleum refining, hydrogen production,
aluminum production, facility operators calcining carbonates,
CO2 supplier or transfer recipient, electricity generation,
glass production, iron and steel production, lime production,
natural gas transmission and distribution, nitric acid
production, oil and gas extraction field operation, production
of industrial gases, pulp and paper production, soda ash
production, electricity deliverers, transportation fuel
deliverers, and natural gas deliverers.
In a cap-and-trade program, a limit, or cap is put on the
amount of pollutants (GHGs) that can be emitted. Each
allowance equals one metric ton of carbon dioxide equivalent.
The total number of allowances created is equal to the cap set
for cumulative emissions from all the covered sectors. These
allowances may be auctioned and/or freely given to companies
or other groups. In addition to allowances, emissions
reductions from sources that are outside the cap coverage,
called offsets, could be authorized. This would allow
emissions in the capped sectors to exceed the allowances
issued. After initial distribution of allowances-or in the
use of offsets-compliance instruments may be traded among
entities. At the end of each compliance period, covered
entities are required to turn in, or surrender, enough
compliance instruments to match their emissions during this
time period. ARB has proposed to give allowances to regulated
entities during the first, three-year compliance period, but
eventually, sale of allowances by ARB could generate
significant revenues that would be deposited in the Air
Pollution Control Fund and subject to appropriation by the
Legislature.
Although slated for final adoption later this year and
implementation beginning in 2012, ARB's proposed cap-and-trade
program has been sidetracked by a recent court ruling in a
lawsuit filed by environmental justice groups alleging
deficiencies in ARB's CEQA analysis. On May 20, the San
Francisco Superior Court, in Association of Irritated
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Residents, et al v. ARB, ruled that ARB had failed to comply
with CEQA in adopting its AB 32 Scoping Plan and enjoining any
further cap-and-trade rulemaking until ARB remedies its CEQA
analysis. The court found that ARB's discussion of
alternatives was inadequate and that ARB improperly approved
the Scoping Plan prior to completing its environmental review.
On June 13, ARB released a revised alternatives analysis
intended to comply with the Superior Court ruling, which is
scheduled for board consideration in August. ARB has also
appealed the ruling.
2)Purpose of the bill. According to the author:
Currently, ARB is authorized to collect revenues from
regulated GHG emitters through a market-based mechanism. As
directed by AB 32, revenues collected would be deposited
into the Air Pollution Control Fund. The problem is that
AB 32 did not provide a definition for California's most
impacted and disadvantaged communities, nor direction on
how the state will mitigate adverse impacts from climate
change in these communities, nor direction on how the state
will ensure these communities can participate in and
receive investments from activities taken pursuant to
Assembly Bill 32 and not experience disproportionate
impacts.
SB 535 ensures that as California takes steps to address
global warming, we invest in the neighborhoods that
continue to suffer from higher levels of pollution and who
are least able to confront the expected impacts of the
climate crisis. SB 535 outlines a process to identify
disadvantaged communities and allows for a periodic
modification, when necessary. It requires that a minimum
of ten percent of revenues deposited in the Air Pollution
Control Fund pursuant to AB 32, other than administrative
fees, to be allocated to projects that reduce greenhouse
gas emissions and mitigate health impacts in disadvantaged
communities. The projects envisioned will provide
environmental and health benefits, and may include: energy
efficiency upgrades, deployment of pollution reduction
technology and investments in transit. Additionally, a
portion of funds could be used to help these communities
tackle the climate crisis, including anticipated heat waves
and rising sea levels.
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3)Where will the funds come from? As noted above,
non-administrative revenues in excess of $5 million are
necessary to initiate implementation of the CalCHART program.
There is no currently-operative source for these revenues. It
could come from a more expansive regulatory fee (or "carbon
tax") on emitters. However, given ARB's intentions and
actions thus far, revenues are most likely to come from ARB's
direct sale of emission allowances if a cap-and-trade program
is implemented. The amount of revenue is highly uncertain and
depends on several variables, primarily the amount of
allowances sold and allowance price. The range of estimated
funds available to CalCHART (assuming the $5 million trigger
is achieved) is $500,000 to well over $1 billion.
4)Where will the funds go? The bill establishes general
criteria for distribution of funds and very broad criteria for
project eligibility. The distribution criteria (in the
definition of "most impacted and disadvantaged communities")
targets areas with a combination of high air pollution
exposure and poverty. Although there is room for
interpretation how the criteria is applied, this is most
likely to be urban areas near ports, major industrial sources,
freeways and/or railyards, as well as densely-populated
communities in the Central Valley. Funds must go to projects
to "reduce (GHG) emissions or mitigate direct health impacts
of climate change, although the bill also permits "green
collar" employment or training, which probably wouldn't be
otherwise eligible as a direction reduction or mitigation.
Within the broad boundaries of these criteria, the bill gives
significant discretion to ARB and the review panel to decide
how to spend the funds (subject at least to annual budgetary
review of the program by the Legislature).
5)Should the review panel decide project awards? The June 21
amendments to this bill restore the 10 percent allocation
previously removed when the bill was approved by the Senate
Appropriations Committee and create a review panel which would
have to concur with ARB in the significant aspects of CalCHART
implementation, including identification of eligible
communities and individual project awards. As a matter of
governance, it seems unusual to subordinate the ARB to a panel
that ARB itself is required to appoint. The author and the
committee may wish to consider amending the bill to limit the
review panel's role to reviewing and making recommendations
regarding program planning and award criteria, but eliminate
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its power to approve and reject project awards.
Alternatively, if the panel is to have a decision-making role,
including approving project awards, the author and the
committee may wish to consider adopt conflict standards to
assure appropriation separation between the panel members and
recipients.
6)Prior legislation. Last year, the Governor vetoed AB 1405 (De
Léon), which directed a minimum of 10 percent of revenues
generated pursuant to AB 32 to a Community Benefits Fund to be
awarded by the Secretary for Environmental Protection to
benefit disadvantaged communities. In his veto message, the
Governor stated:
This bill creates the California Climate Change Community
Benefits fund by requiring a minimum of 10% of revenues
from the sale of compliance instruments for market-based
compliance mechanisms under AB 32 to be deposited into the
fund.
When the Legislature passed and I signed AB 32, we made a
commitment to California's disadvantaged communities that
we would ensure that the impacts of climate change and the
impacts of reducing climate change would not fall
disproportionately on their communities. Throughout the
(ARB) process, they have kept this commitment in mind and
have fashioned every aspect of this program in a manner
that attempts to lessen any disproportionate impact on
these communities.
I am confident ARB with keep on this path as they continue
the important work of fashioning market-based mechanisms
that will reduce the burden on California's business
community while still achieving our climate change
reduction goals.
To that end, this bill is premature. Unfortunately, the
bill proposes to spend money that does not currently exist
and might not ever exist in a fund controlled by the state
of California.
Important work continues at ARB to determine the most
effective and least costly manner to implement AB 32. I
encourage the supporters of this bill to work in earnest
with ARB as they build this program. There will be a time
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to have this discussion. Unfortunately, now is not that
time.
REGISTERED SUPPORT / OPPOSITION :
Support
Asian Neighborhood Design
Asian Pacific Environmental Network
Asian Pacific Policy and Planning Council
Breathe California
California Environmental Justice Alliance
California Interfaith Power and Light
California League of Conservation Voters
California League of Food Processors
California Pan-Ethnic Health Network
Catholic Charities, Stockton Diocese
City Heights Community Development Corporation
Coalition for Clean Air
Communities for a Better Environment
Community Action to Fight Asthma
East Yard Communities for Environmental Justice
Environment California
Environmental Defense Fund
Environmental Health Coalition
Global Alliance for Incinerator Alternatives
Greenlining Institute
Latino Coalition for a Healthy Environment
Los Angeles County Bicycle Coalition
Natural Resources Defense Council
People Organizing to Demand Environmental & Economic Rights
(PODER)
San Diego Coastkeeper
Sierra Club California
Southeast Asian Community Alliance
Tofa, Inc.
Transform
Trust for Public Land
Union of Concerned Scientists
Opposition
American Council of Engineering Companies - California
Building Owners and Managers Association
California Building Industry Association
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California Chamber of Commerce
California Council for Environmental and Economic Balance
California Farm Bureau Federation
California Forestry Association
California Large Energy Consumers Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Retailers Association
Cal-Tax
Chemistry Industry Council of California
Consumer Specialty Products Association
International Council of Shopping Centers
NAOIP - Commercial Real Estate Development Association
Oxnard Chamber of Commerce
Western Growers
Western States Petroleum Association
Western Wood Preservers' Institute
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092