BILL ANALYSIS Ó
SB 535
Page 1
SENATE THIRD READING
SB 535 (De León)
As Amended August 24, 2012
Majority vote
SENATE VOTE :23-15
NATURAL RESOURCES 6-3 APPROPRIATIONS 12-5
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|Ayes:|Chesbro, Brownley, |Ayes:|Gatto, Blumenfield, |
| |Dickinson, Hill, Monning, | |Bradford, |
| |Skinner | |Charles Calderon, Campos, |
| | | |Davis, Fuentes, Hall, |
| | | |Hill, Cedillo, Mitchell, |
| | | |Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Grove, Halderman |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Requires a minimum of 10% of revenues deposited in the
Greenhouse Gas (GHG) Reduction Fund to be allocated, upon
appropriation by the Legislature, to benefit socioeconomically
disadvantaged communities impacted by air pollution and climate
change. Specifically, this bill:
1)Requires the California Environmental Protection Agency
(CalEPA) to develop a methodology that identifies priority
community areas for investment opportunities related to the
bill. Require that these "priority community investment
areas" be identified and updated at least every two years
based on specified geographic, socioeconomic, and
environmental hazard criteria.
2)Requires the Air Resources Board (ARB) to develop and adopt,
beginning April 1, 2013, three investment plans for 2013 to
2014; 2015 to 2017; and, 2018 to 2020. Requires that each
investment plan maximize benefits to priority community
investment areas, as specified, through specified activities.
3)Requires ARB to annually provide the Governor with a plan
consistent with the relevant investment plan detailing
proposed appropriations from the fund.
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4)Requires the Governor, as part of the annual proposed Budget,
to include proposed appropriations consistent with the plan.
5)Finds, if ARB, in consultation with CalEPA, that the
investments made in the prior fiscal year did not result in at
least 25% of the available moneys being allocated to projects
that provide benefits to priority community investment areas,
and that at least 10% of all the available moneys from that
fiscal year were not invested in projects located within
priority community investment areas, requires the Governor to
include in the annual proposed Budget allocations to
administering agencies to make investments in eligible
projects within priority community investment areas, as
specified. States that this allocation shall not be
considered part of the next fiscal year's priority community
investment area and shall be separately identified in the
Governor's annual proposed Budget.
6)Requires ARB to submit a report, on or before December 1 of
each year, to the appropriate committees of the Legislature on
the status of projects and their outcomes; any changes the ARB
recommends to the investment plan; and, a description of how
agencies have maximized the benefits of the investments to
priority community investment areas, as specified.
7)Allocates at least 10% of the revenues derived from the
auction of GHG allowances pursuant to the cap and trade
program adopted by ARB pursuant to the California Global
Warming Solutions Act of 2006 (AB 32 (Nuñez), Chapter 488,
Statutes of 2008) to provide funding to the "most impacted and
disadvantaged communities," as defined, for programs or
projects that reduce GHG emissions or mitigate direct health
impacts of climate change, through competitive grants, loans,
or other funding mechanisms.
8)Defines "most impacted and disadvantaged communities" as
census blocks having the highest 10% of cumulative impacts in
California as identified by the Office of Environmental Health
Hazard Assessment (OEHHA), reported by March 1, 2013, and
updated every three years thereafter. Specifies minimum
evaluation criteria for cumulative impacts, air pollution
exposure, environmental exposure, and socioeconomic
vulnerability.
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9)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.
10)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
penalty moneys, if those moneys are segregated from fee
moneys).
EXISTING LAW , under AB 32:
1)Requires ARB, pursuant to AB 32, to adopt a statewide 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
any increase in the emissions of toxic air contaminants or
criteria air pollutants.
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c) Maximize additional environmental and economic benefits
for California, as appropriate.
4)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.
6)Creates the GHG Reduction Fund (Fund) and requires all moneys,
except for fines and penalties, collected by ARB from the
auction or sale of allowances pursuant to a market-based
compliance mechanism to be deposited in the Fund and available
for appropriation by the Legislature.
7)Requires the Department of Finance (DOF) to submit proposed
legislation, on or before January 10, 2013, that provides a
detailed spending plan for moneys in the Fund, unless the
Legislature passes a bill on or before August 31, 2012, that
establishes a long-term spending strategy for moneys in the
Fund. Requires any state agency, prior to expending any
moneys appropriated from the Fund, to prepare a specified
record.
8)Authorizes the DOF to allocate or otherwise use an amount of
at least $500 million from moneys deposited in the Fund, and
make commensurate reductions to General Fund expenditure
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authority, to support the regulatory purposes of AB 32.
Requires ARB and DOF, at least 60 days prior to allocating any
funds, to submit a plan for the expenditure or use of the
funds to the chairpersons of the Senate and Assembly
Appropriations Committees and the Chairperson of the Joint
Legislative Budget Committee. Prohibits the use of funds for
the purpose of developing a high-speed rail system for at
least two years.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, revenue redirection of an unknown amount, but
possibly in the tens of millions of dollars, and potential
ongoing administrative costs to ARB of an unknown amount, but
possibly in the millions of dollars and no more than 5% of funds
allocated for purposes of the bill.
COMMENTS : According to ARB, a total reduction of 80 million
metric tons (MMT), or 16% compared to business as usual, is
necessary to reduce statewide GHG emissions to 1990 levels by
2020. ARB intends to achieve approximately 78% of the
reductions through identified "regulatory" measures. ARB
proposes to achieve the balance of reductions necessary to meet
the 2020 limit (approximately 18 MMT) through a cap-and-trade
program. The first auction of allowances in the cap-and-trade
program will take place on November 14, 2012, and the auctions
will be held quarterly thereafter.
The 2012-13 Budget Act (AB 1464 (Budget Committee), Chapter 21,
Statutes of 2012) authorizes DOF to allocate at least $500
million from cap-and-trade revenue, and make commensurate
reductions to General Fund expenditure authority, to support the
regulatory purposes of AB 32. The Resources Budget Trailer Bill
(SB 1018 (Budget and Fiscal Review Committee) Chapter 39,
Statutes of 2012) creates the Greenhouse Gas Reduction Fund for
cap-and-trade auction revenues and requires DOF to submit
proposed legislation, on or before January 10, 2013, that
provides a detailed spending plan for moneys in the Fund, unless
the Legislature passes a bill on or before August 31, 2012, that
establishes a long-term spending strategy for moneys in the
Fund.
AB 32 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
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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, including
cap-and-trade, 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 pollutants"
and "complement efforts to achieve and maintain federal and
state ambient air quality standards and to reduce toxic air
contaminant emissions."
According to the author:
Currently, ARB is authorized to collect revenues from
regulated GHG emitters through a market-based mechanism.
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?be allocated to projects that
reduce greenhouse gas emissions and mitigate health impacts
in disadvantaged communities.
The amount of allowance revenue is uncertain and depends on the
amount of allowances sold and allowance price. The range of
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estimated funds available for purposes of this bill (assuming
the $5 million trigger is achieved) is $500,000 to well over $1
billion. 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. 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).
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
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