BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 26
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          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  








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               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  








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            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
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               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
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          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          None on file

           Opposition 
           
          California Manufacturers and Technology Association

           
          Analysis Prepared by  :  Lawrence Lingbloom / NAT. RES. / (916)  
          319-2092