BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 1204 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: lara VERSION: 3/24/14 Analysis by: Erin Riches FISCAL: yes Hearing date: April 1, 2014 SUBJECT: Vehicle emissions reductions: California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program DESCRIPTION: This bill creates a California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program to fund development, demonstration, pilot projects, and commercial deployment of zero- and near-zero-emission truck, bus, and off-road vehicle and equipment technologies. This bill provides that the program shall be funded from the Greenhouse Gas Reduction Fund, and shall prioritize projects located in disadvantaged communities. ANALYSIS: California Global Warming Solution Act of 2006 and Greenhouse Gas Reduction Fund AB 32 (Núñez), Chapter 488, Statutes of 2006, requires the state Air Resources Board (ARB) to develop a plan of how to reduce emissions to 1990 levels, by 2020. AB 32 also requires ARB to ensure that greenhouse gas (GHG) emission reduction requirements and programs, to the extent feasible, direct public and private investment toward the most disadvantaged communities in the state. It authorizes ARB to adopt a schedule of fees to be paid by GHG emission sources regulated under AB 32 and deposited into the Greenhouse Gas Reduction Fund (commonly known as cap-and-trade), available upon appropriation by the Legislature to carry out AB 32 requirements. SB 535 (De Leon), Chapter 830, Statutes of 2012 requires the Department of Finance, when developing the three-year investment plan for cap-and-trade monies, to allocate 25 percent of these funds to projects that provide benefits to disadvantaged communities, and to allocate a minimum of 10 percent of SB 1204 (LARA) Page 2 available cap-and-trade monies to projects located within disadvantaged communities. The bill outlines a process to identify these communities and allows for periodic modification as necessary. Air Quality Improvement Program (AQIP) AB 118 (Núñez, Chapter 750, Statutes of 2007) establishes the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts. This program is funded through surcharges on vehicle registration fees, a portion of vessel registration fees, a portion of the Smog Abatement Fee (paid to register vehicles less than six model years old and therefore exempt from smog check), and an increase in the fee for identification plates for various types of vehicles, such as farm trailers and logging vehicles, operated on public roads. This program provides competitive grants to fund projects to improve the air quality impacts of alternative fuels and vehicles, vessels, and equipment technologies. AQIP encompasses several programs, including the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP). HVIP, which is administered by ARB and its contractor, CALSTART, provides vouchers to California fleet owners to help purchase hybrid and zero-emission trucks and buses. Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) AB 118 (Núñez, Chapter 750, Statutes of 2007) also establishes the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP), administered by the state Energy Commission. This program provides funding for development and deployment of alternative and renewable fuels and advanced transportation technologies to help attain the state's climate change goals. Eligible projects include, for example, development, improvement, and production of alternative and renewable low-carbon fuels; improvement of light-, medium-, and heavy-duty vehicle technologies; and expansion of infrastructure connected with existing fleets, public transit, and transportation corridors. This bill creates a California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program, to be administered by ARB in conjunction with the state Energy Commission. This bill provides that the program shall be funded from the Greenhouse Gas Reduction Fund, and shall prioritize projects located in SB 1204 (LARA) Page 3 disadvantaged communities. Specifically, this bill requires the California Clean Truck Bus, and Off-Road Vehicle and Equipment Program to fund: Development, demonstration, and pilot deployment of zero- and near-zero-emission medium- and heavy-duty truck technology projects. Pilot deployment of large numbers of zero- and near-zero-emission buses to demonstrate the impact of clean buses in disadvantaged communities, the difficulty of transit operators to afford clean buses, and the possibility of finding applications for these technologies in other heavy-duty vehicles. Development, demonstration, and pilot deployment of zero- and near-zero-emission technologies to be used in off-road vehicles and equipment, including port equipment, agricultural equipment, and marine and rail equipment. Development of commercially available zero- and near-zero-emission trucks, buses, and off-road vehicles and equipment using streamlined purchase incentives pursuant to HVIP. This bill requires ARB, as part of this program, to develop solicitations in consultation with transit operators to fund at least two large-scale zero- or near-zero-emission bus pilot deployment projects of between 10 and 40 buses, to be located in or near disadvantaged communities. This bill also requires ARB to create a multiyear framework and plan for HVIP incentives, as follows: Focus on providing incentives for zero- and near-zero-emission medium- and heavy-duty vehicles as they become commercially available. Structure incentives to drive acquisition volumes by reducing payback times for these vehicles. Provide long-term certainty about incentives while remaining flexible and open to new technologies. Examine opportunities to link HVIP vehicle funding with infrastructure funding to provide coordinated funding for both vehicles and related infrastructure. Provide for sufficient HVIP incentives for plug-in and SB 1204 (LARA) Page 4 zero-emission vehicles in disadvantaged communities to increase sales of the cleanest vehicles in communities where they are needed most. COMMENTS: 1.Purpose . The author notes that 40 percent of California's contribution to climate pollution comes from cars, trucks, trains, and other mobile sources. While technology for light-duty cars has progressed significantly, making it widely available for commercial use, technology for heavy-duty trucks and buses is severely lagging. It is essential to reduce GHG emissions and improve air quality in areas that suffer disproportionately from air pollution, such as those near ports or major transportation corridors. The region surrounding the ports of Los Angeles and Long Beach, for example, ranks as one of the most polluted in the country. The author states that this bill will make it easier for truck owners to transition to zero- and near-zero technology and improve the health of millions of Californians who live in communities that are burdened daily by transportation-related pollution. 2.Why a new program ? As described above, the Energy Commission's ARFVTP provides funding for development and deployment of alternative and renewable fuels and advanced transportation technologies, while ARB's HVIP helps California fleet owners purchase hybrid and zero-emission trucks and buses. The author notes that creating a new program is appropriate because this bill allows for a broader range of projects than AQIP and ARFVTP, and helps further prioritize investment in heavy-duty technology. It is not entirely clear, however, what projects are eligible for the new program that are not currently eligible for AQIP or ARFVTP. 3.Other issues to consider . As the bill moves forward, the author may wish to consider addressing the following issues: This bill requires ARB to create a "multiyear framework and plan" for HVIP. It may be appropriate to provide ARB flexibility to evaluate this plan each year pursuant to program funding levels and the state of emerging technologies. This bill requires ARB, in the multiyear HVIP plan, to "provide long-term certainty about incentives." This SB 1204 (LARA) Page 5 requirement appears to imply that ARB must establish long-term funding for these incentives. It may be appropriate to provide ARB flexibility to evaluate and adjust the HVIP plan each year pursuant to program funding levels. This bill requires ARB to fund "near-zero-emission" technologies. It may be appropriate to define "near-zero-emission." 1.Private fleets . The California Bus Association has taken a "support if amended" position. The association states that making private charter-party carriers eligible for the program created by this bill would help drive investment in the private as well as public sector. 2.Double-referral . The Rules Committee has referred this bill to both this committee and to the Environmental Quality Committee. Therefore, if this bill passes this committee, it will be referred to the Environmental Quality Committee. RELATED LEGISLATION: This committee will hear two related bills at today's hearing: SB 913 (DeSaulnier) requires ARB and the Bureau of Automotive Repair to cooperate in issuing a specified number of vouchers through EFMP and the Consumer Assistance Program to retire high-polluting cars, and a specified number of vouchers through EFMP to replace high-polluting cars. SB 1275 (De León) requires ARB to expand EFMP to provide for ridesharing and car-sharing vouchers as an alternative to vehicle-replacement vouchers. It also requires ARB to adopt a funding plan for projects under AQIP, adopt specified revisions to AQIP, and establish programs to increase access to and direct benefits from electric transportation for disadvantaged and low- and moderate-income communities. POSITIONS: (Communicated to the committee before noon on Wednesday, March 26, 2014.) SB 1204 (LARA) Page 6 SUPPORT: American Lung Association of California Breathe California CALSTART Center for Transportation and the Environment Communities for a Better Environment Coalition for Clean Air Environment California Environmental Defense Fund Greenlining Institute Natural Resources Defense Council Sierra Club California OPPOSED: California Chamber of Commerce