BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 535
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          (  Without Reference to File  )

          SENATE THIRD READING
          SB 535 (De León)
          As Amended  August 31, 2012
          Majority vote 

           SENATE VOTE  :23-15  
           
           NATURAL RESOURCES   6-3         APPROPRIATIONS      12-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Chesbro, Brownley,        |Ayes:|Gatto, Blumenfield,       |
          |     |Dickinson, Huffman,       |     |Bradford,                 |
          |     |Monning, Skinner          |     |Charles Calderon, Campos, |
          |     |                          |     |Davis, Fuentes, Hall,     |
          |     |                          |     |Hill, Cedillo, Mitchell,  |
          |     |                          |     |Solorio                   |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Knight, Grove, Halderman  |Nays:|Harkey, Donnelly,         |
          |     |                          |     |Nielsen, Norby, Wagner    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Requires the investment plan related to the Greenhouse 
          Gas (GHG) Reduction Fund (GHGR Fund) that is developed and 
          submitted to the Legislature pursuant to AB 1532 (John A. Pérez) 
          to allocate:  1) a minimum of 25% of the available moneys in the 
          fund to projects that provide benefits to identified 
          disadvantaged communities; and, 2) a minimum of 10% of the 
          available moneys in the fund to projects located within 
          identified disadvantaged communities.  This bill is contingent 
          on the enactment of AB 1532.  Specifically,  this bill:
           
          1)Requires the California Environmental Protection Agency 
            (CalEPA) to identify disadvantaged communities for investment 
            opportunities.

          2)Requires disadvantaged communities to be identified based on 
            geographic, socioeconomic, public health, and environmental 
            hazard criteria, which may include either of the following:

             a)   Areas disproportionately affected by environmental 
               pollution and other hazards that can lead to negative 








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               public effects, exposure, or environmental degradation; 
               and,

             b)   Areas with concentrations of people that are of low 
               income, high unemployment, low levels of homeownership, 
               high rent burden, sensitive populations, or low levels of 
               educational attainment.

          3)Requires the investment plan related to the GHGR Fund to 
            include all of the following allocations:

             a)   A minimum of 25% of the available moneys in the fund to 
               projects that provide benefits to identified disadvantaged 
               communities; and,

             b)   A minimum of 10% of the available moneys in the fund to 
               projects located within identified disadvantaged 
               communities.  This minimum 10% allocation may be for 
               projects included, in whole or in part, in the set of 
               projects supported by the minimum 25% allocation described 
               above.

          4)Requires any funding guidelines developed for administering 
            agencies to include guidelines for how the agencies should 
            maximize benefits for identified disadvantaged communities.

          5)Includes reporting requirements, as specified. 

          6)Declares that nothing in the bill shall be construed as 
            resulting in any taxpayer paying a higher tax.

          7)Prohibits the bill from becoming operative unless AB 1532 
            (John A. Pérez) is enacted.

           EXISTING LAW  , under the California Global Warming Solutions Act 
          of 2006 (AB 32 (Núñez and Pavley), Chapter 488, Statutes of 
          2006):

          1)Requires the Air Resources Board (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.









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          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.

             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 








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            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 GHGR 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 GHGR 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 GHGR Fund, unless the 
            Legislature passes a bill on or before August 31, 2012, that 
            establishes a long-term spending strategy for moneys in the 
            GHGR Fund.  Requires any state agency, prior to expending any 
            moneys appropriated from the GHGR 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 GHGR Fund, 
            and make commensurate reductions to General Fund expenditure 
            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  :  Unknown

           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.  








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           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 GHGR 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 GHGR Fund, unless the 
          Legislature passes a bill on or before August 31, 2012, that 
          establishes a long-term spending strategy for moneys in the GHGR 
          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 
          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 and many of the supporters, "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."  









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          This bill is contingent on the enactment of AB 1532.  AB 1532 
          requires GHGR Fund moneys to be used to facilitate the 
          achievement of feasible and cost-effective reductions of GHG 
          emissions.


           Analysis Prepared by  :    Mario DeBernardo / NAT. RES. / (916) 
          319-2092 


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