BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 64
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          Date of Hearing:  June 26, 2014

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                     SB 64 (Corbett) - As Amended:  June 14, 2013

           SENATE VOTE  :  not relevant
           
          SUBJECT  :  Clean Technology Innovation Account

           SUMMARY  :  Requires the Governor's Office of Business and  
          Economic Development (GO-Biz) to expend greenhouse gas (GHG)  
          allowance auction revenues appropriated from the Greenhouse Gas  
          Reduction Fund (GHGRF) for various expenses associated with the  
          development of technologies that have the potential to reduce  
          GHG emissions.

           EXISTING LAW  :

          1)Requires ARB, pursuant to California Global Warming Solutions  
            Act of 2006 [AB 32 (Nunez), Chapter 488, Statutes of 2006], 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.  AB 32 authorizes ARB to permit the use of  
            market-based compliance mechanisms to comply with GHG  
            reduction regulations, once specified conditions are met.

          2)Establishes the GHGRF 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 GHGRF and available for appropriation  
            by the Legislature.

          3)Establishes the GHGRF Investment Plan and Communities  
            Revitalization Act [AB 1532 (John A. Pérez), Chapter 807,  
            Statutes of 2012] to set procedures for the investment of GHG  
            allowance auction revenues.  AB 1532 authorizes a range of GHG  
            reduction investments, including funding in research,  
            development, and deployment of innovative technologies,  
            measures, and practices related to GHG reduction programs, and  
            establishes several additional policy objectives.

          4)Requires the investment plan to allocate (1) a minimum of 25  








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            percent of the available moneys in the GHGRF to projects that  
            provide benefits to identified disadvantaged communities and  
            (2) a minimum of 10 percent of the available moneys in the  
            GHGRF to projects located within identified disadvantaged  
            communities [SB 535 (De Leon), Chapter 830, Statutes of 2012].  
             

          5)Establishes the Economic Revitalization Act, which created  
            GO-Biz as the lead entity for economic strategy and the  
            marketing of California on issues relating to business  
            development, private sector investment, and economic growth.  










































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           THIS BILL  :

          1)Establishes the Clean Technology Innovation Account (Account)  
            within the GHGRF and requires the Legislature to appropriate  
            moneys to the Account from the GHGRF or other funds.

          2)Requires that funds in the Account be expended by GO-Biz, upon  
            appropriation, for the following purposes:

               a)     To evaluate the efficacy of a new technology or  
                 product to potentially reduce GHG emissions reduction "on  
                 a per unit basis," as specified.   

               b)     To provide grants for technologies or products that  
                 have been evaluated and confirmed to have the potential  
                 to reduce GHG emissions and that require financial  
                 assistance for commercialization.  

               c)     To provide grants on a competitive basis to entities  
                 that operate programs that specifically target  
                 technologies or products that have the potential to  
                 reduce GHG emissions, as specified.  Funds may be used  
                 for activities that include, but aren't limited to: 
                     i.          Entrepreneurial training, emphasizing  
                      skills and abilities needed to successfully create  
                      and run small businesses; 
                     ii.         Providing access to capital and strategic  
                      partners by assisting early-stage companies to  
                      identify potential investors and strategic partners,  
                      facilitating connections, and securing capital; 
                     iii.        Providing demonstration or prototyping  
                      capabilities and equipment; 
                     iv.         Providing long-term structured programs  
                      to support startup businesses; and,
                     v.          Providing a physical site to operate the  
                      business. 

          3)Requires that priority be given to entities that are nonprofit  
            501(c)(3) organizations; have a board of advisors with  
            specified expertise; demonstrate strong evidence of investors  
            and corporate relationships; and, have data collection on  
            start-ups and ventures served, as well as services provided,  
            with performance and service metrics being collected for a  
            minimum of three years.  









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          4)Requires GO-Biz to establish a Science and Business Review  
            Committee (Committee) to provide programmatic and technical  
            expertise and specifies the membership of the Committee.  

          5)Requires the Committee to develop criteria for GHG emissions  
            evaluation and efficacy programs, funding priorities and  
            policy guidelines, and evaluate and score funding requests.  

          6) Requires the Committee to develop guidelines for the grant  
            programs authorized by the bill and do the following: 

               a)     Consult with interested parties; 

               b)     Establish policies regarding intellectual property  
                 rights arising from research and projects funded by the  
                 grants; 

               c)     Establish policies to recapture grants to new and  
                 existing companies that fail to maintain a substantial  
                 business presence within California for a reasonable  
                 amount of time; and,

               d)     Establish reporting requirements and other  
                 conditions necessary to manage the program. 

          7)Specifies that not more than five percent of the funds  
            appropriated from the Account be used for administration of  
            the program. 

          8)Requires GO-Biz to conduct a public meeting to consider public  
            comments before finalizing the guidelines for the grant  
            programs and requires the draft solicitation and evaluation  
            guidelines be posted on its website at least 30 days before  
            the meeting.  

          9)Exempts the criteria and guidelines adopted by GO-Biz under  
            this bill from the Administrative Procedure Act.  

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

           1)Author's statement  :  

               To further capitalize on California's great financial  








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               investments in developing transformative technologies, the  
               state must also focus on effectively transferring  
               technology from the innovators, along the technology  
               development track, through to the end user?SB 64 would  
               establish a Clean Technology Innovation Account with a  
               portion of cap-and-trade revenues for grants and other  
               forms of assistance to technology "accelerators," the  
               organizations that guide successful technology transfer  
               activities.  These "accelerators" can play an important  
               role, much like small business incubators and regional  
               technology alliances in communities throughout the state,  
               in ensuring that California continues to be a major force  
               in fostering cutting-edge technologies in the future,  
               creating jobs, and enhancing a healthy economic and  
               environmental future for the state of California.  

           2)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 2012-13 Budget Act authorized Department of Finance (DOF)  
            to allocate at least $500 million from cap-and-trade revenue,  
            and make commensurate reductions to General Fund (GF)  
            expenditure authority, to support the regulatory purposes of  
            AB 32.  AB 1532 established 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. 
             
            While DOF and ARB developed a three-year investment plan for  
            the auction proceeds pursuant to AB 1532, the 2013-14 Budget  
            Act provided that the first $500 million in auction revenue be  
            loaned to the GF and did not appropriate any funds pursuant to  
            the investment plan.  

            As part of the recently passed 2014-15 Budget, SB 862 (Budget  
            and Fiscal Review) allocates cap-and-trade revenues for the  
            2014-15 fiscal year and establishes a long-term plan for the  
            allocation of cap-and-trade revenues beginning in fiscal year  
            2015-16.  SB 862 continuously appropriates 35 percent of  








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            cap-and-trade funds for investments in transit, affordable  
            housing, and sustainable communities.  Twenty-five percent of  
            the revenues are continuously appropriated to continue the  
            construction of high-speed rail.  The remaining 40 percent  
            will be appropriated annually by the Legislature for  
            investments in programs that include low-carbon  
            transportation, energy efficiency and renewable energy, and  
            natural resources and waste diversion.  The total amount  
            appropriated under SB 862 is $872 million.  Funding for this  
            bill could be appropriated from the 40 percent of  
            cap-and-trade revenues that will be annually appropriated by  
            the Legislature in subsequent budgets.

           3)GO-Biz  .  Speaker Emeritus Peréz established GO-Biz in 2011 (AB  
            29, Chapter 475) for the purpose of serving as the lead state  
            entity for economic strategy and marketing of California on  
            issues relating to business development, private sector  
            investment, and economic growth.  GO-Biz includes the Office  
            of the Small Business Advocate and the Office of Business  
            Assistance.   Currently GO-Biz includes units relating to  
            business investment services; permit streamlining; small  
            business assistance; and, encouraging innovation and  
            entrepreneurship, and international affairs and business  
            development.  This bill would expand GO-Biz's duties and  
            authority to include providing grants and other financial  
            assistance from the Account to evaluate new technologies and  
            products that have the potential to reduce GHG emissions and  
            provide grants for these technologies and products.  It's not  
            clear that GO-Biz has the expertise or is the appropriate  
            entity to evaluate grant applications based on GHG emission  
            reduction value.

           4)Straining the nexus  ?  It's not clear what many of the items  
            listed in this bill have to do with actually reducing GHG  
            emissions.  Is it enough that a technology may have the  
            potential to reduce GHG emissions?  Should GO-Biz use GHGRF  
            funds to support the operation of organizations that support  
            technology development, including training people to run a  
            business and paying the cost of office space?  The bill also  
            requires GO-Biz to give priority to funding entities with  
            specified characteristics which don't appear to have anything  
            to do with the merits of GHG emissions reductions, but do  
            appear to match the profile of the bill's sponsor, Cleantech  
            Open.  









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           5)Too late for this year, or just early for next year  ?  The  
            Legislature approved a cap-and-trade expenditure plan on June  
            15 in the form of SB 862.  If this bill is enacted this year,  
            it's unlikely the Account would be funded prior next year's  
            2015-16 Budget Act, which raises the question:  If there's a  
            will to establish this program and fund it, why not do it in  
            the budget like the rest of the cap-and-trade expenditures?

           
          REGISTERED SUPPORT / OPPOSITION  :

           Support 

           Biosynthetic Technologies
          Can Manufacturers Institute
          CEPA Operations
          Cleantech Open
          High Desert Water District
          Solano County Water Agency

           Opposition 
           
          California Chamber of Commerce


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