BILL ANALYSIS Ó AB 26 Page 1 Date of Hearing: April 29, 2013 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Wesley Chesbro, Chair AB 26 (Bonilla) - As Amended: April 22, 2013 SUBJECT : California Global Warming Solutions Act of 2006: Greenhouse Gas Reduction Fund SUMMARY : Revises procedures for investment of revenues derived from the auction of greenhouse gas (GHG) allowances pursuant to the cap-and-trade program adopted by the Air Resources Board (ARB) to add criteria related to job training and apply labor standards to specified construction and maintenance work. EXISTING LAW : 1)Requires ARB, pursuant to California Global Warming Solutions Act of 2006 (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 permit the use of market-based compliance mechanisms to comply with GHG reduction regulations, under limited circumstances once specified conditions are met. 3)Establishes the GHG Reduction 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 (i.e., the cap-and-trade program adopted by ARB under AB 32) to be deposited in the Fund and available for appropriation by the Legislature. 4)Establishes the GHG Reduction Fund Investment Plan and Communities Revitalization Act (AB 1532) to set procedures for the investment of GHG allowance auction revenues. AB 1532 authorizes a range of GHG reduction investments and establishes several additional policy objectives. THIS BILL : 1)Amends AB 1532's funding criteria to: a) Add the following additional policy objectives, where AB 26 Page 2 applicable and to the extent feasible: i) Transition the state's workforce away from carbon intensive project job skills to GHG reducing project job skills. ii) Reinvest on a regional basis to meet economic needs resulting from climate change policy. b) Authorize funding for apprenticeship and job training programs associated with GHG reduction technologies. c) Require the Investment Plan to allocate funding consistent with statewide goals, including those described in SB 375 (Steinberg), Chapter 728, Statutes of 2008. 2)Provides that construction, alteration, demolition, installation, repair and maintenance work paid for in whole or in part from the GHG Reduction Fund shall be considered "public works," and therefore subject to prevailing wage laws. 3)Authorizes funding for refinery maintenance to reduce GHG emissions if all work that falls within an "apprenticeable occupation" is performed by "skilled journeypersons" and "registered apprentices." Defines these terms for purposes of this bill. FISCAL EFFECT : Unknown COMMENTS : 1)Background. According to ARB, a total reduction of 80 million metric tons (MMT), or 16 percent compared to business as usual, is necessary to achieve the 2020 limit. Approximately 78 percent of the reductions will be achieved through identified direct regulations. ARB proposes to achieve the balance of reductions necessary to meet the 2020 limit (approximately 18 MMT) through a cap-and-trade program that covers an estimated 600 entities. The first two quarterly auctions of allowances in the cap-and-trade program were held in November 2012 and February 2013. The next auction (the last of the current fiscal year) is scheduled for May 16, 2013. The 2012-13 Budget Act (AB 1464) authorized Department of AB 26 Page 3 Finance (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. AB 1532 (John A. Pérez) establishes a long-term spending strategy for moneys in the Fund, including procedures for deposit and expenditure of cap-and-trade auction revenues pursuant to an investment plan. Pursuant to AB 1532, DOF and ARB are developing a three-year investment plan for the auction proceeds. The investment plan will identify the state's GHG emission reduction goals and priority programs for investment of proceeds to support achievement of those goals. The Governor's proposed 2013-14 Budget includes a brief discussion of Administration priorities for investment, emphasizing investments in the transportation and energy sectors from which large reductions in GHG emissions are possible. In addition, areas to be examined during the planning process include sustainable agriculture practices (including the development of bioenergy), forest management and urban forestry, and the diversion of organic waste to bioenergy and composting. In February 2013, ARB released an investment plan "concept paper" and held public workshops to solicit public input. A draft investment plan will be considered by ARB on April 25, 2013. DOF will submit the final plan to the Legislature in May 2013. Funding will be appropriated to state agencies by the Legislature and Governor through the annual Budget Act, consistent with the plan. 2)Author's statement: Current statute does not address the need to look at regional reinvestment when drafting the investment plan. Certain communities in California will contribute disproportionately to the monies flowing into the (Fund). These communities are the ones which are home to large emitters of carbon. In addition, payments for auction allowances may result in workforce impacts. We want to ensure that Cap and Trade monies can be used for job retraining and apprenticeship programs so that employees affected by these changes can learn new skills to transition to the green economy. As we slowly evolve our economy from carbon intensive strategies, AB 26 Page 4 we need to provide an avenue for workers to be transitioned along with those strategies. By including this (transitioning the state's workforce to GHG emission reduction job skills) on the list of goals to be funded by the GGRF, we are allowing for this to occur. AB 26 also ensures that apprenticeship and job training programs are included on the list of potential investments that may be included in the investment plan. Furthermore, we want to ensure that monies are allocated in harmony with other state goals, such as reducing carbon emissions through land use decisions. Lastly, many of the projects to be funded are likely to be construction related. As a state, we want to be sure that we uphold our commitment to living wages. AB 26 clarifies that construction, alteration, demolition, installation, repair, and maintenance work paid for with (Fund) monies is considered public work. The bill also ensures that all refinery maintenance work which is funded with (Fund) monies uses the tradespeople who are best trained in safety. It is very important that we utilize the best trained persons to ensure the safety of all employees at refineries. 3)Refinery maintenance should not be funded by the Fund if it is "business as usual." In applying labor standards to refinery maintenance supported by the Fund, this bill suggests that refinery maintenance should be eligible for funding from GHG auction revenues. While it may be the case that refinery maintenance can reduce GHG emissions, the author and the committee may wish to consider whether "business as usual" maintenance or work that is required by law or regulation should be excluded from eligibility for funding. 4)Double referral. This bill has been double referred to the Assembly Labor and Employment Committee for review of its labor-related provisions. AB 26 Page 5 REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition California Manufacturers and Technology Association Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916) 319-2092