BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1204 (Lara) - California Clean Truck, Bus, and Off-Road  
          Vehicle and Equipment Technology Program.
          
          Amended: May 6, 2014            Policy Vote: T&H 11-0; EQ 6-1
          Urgency: No                     Mandate: No
          Hearing Date: May 23, 2014      Consultant: Mark McKenzie
          
          SUSPENSE FILE.
          
          
          Bill Summary: SB 1204 would require the Air Resourced Board  
          (ARB), in conjunction with the Energy Resources Conservation and  
          Development Commission (CEC), to administer a California Clean  
          Truck, Bus, and Off-Road Vehicle and Equipment Technology  
          Program (program) to fund specified projects to develop and  
          demonstrate technologies for zero- and near-zero emission medium  
          and heavy duty trucks, buses, and off-road vehicles and  
          equipment.  The program would be funded with revenues from the  
          Greenhouse Gas Reduction Fund (GGRF) and priority would be given  
          to projects located in disadvantaged communities.  

          Fiscal Impact: 
              ARB indicates it will incur costs of approximately $644,000  
              in 2015-16 as follows: $344,000 and 2 PY of staff to develop  
              and adopt program guidelines, and an additional $300,000 to  
              conduct market research for the development of performance  
              criteria and metrics for deployment incentives. (GGRF)

              ARB indicates it will incur ongoing costs of approximately  
              $344,000 and 2 PY to develop a multiyear framework and plan,  
              and to administer the program.  Actual costs and staffing  
              needs would depend upon the amount of funding dedicated to  
              the program, which is unspecified in the bill.

              CEC indicates it will incur one-time costs of approximately  
              $250,000 and 2 PY of staff to assist in the development of a  
              multiyear framework and plan.  Ongoing costs for  
              consultation with ARB would be absorbable.  (GGRF)

              Unknown ongoing costs to fund program expenditures and  
              grants, likely in the tens of millions annually. (GGRF)









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          Background: Existing law, AB 32 (Nunez), Chap. 488/2006,  
          requires ARB to adopt greenhouse gas (GHG) emission reduction  
          measures to ensure that statewide emissions are reduced to 1990  
          levels by 2020.  As part of the implementation of AB 32  
          market-based compliance measures, ARB adopted a cap-and-trade  
          program that caps the allowable statewide emissions and provides  
          for the auctioning of emission credits, the proceeds of which  
          are quarterly deposited into the GGRF.   Existing law, SB 535  
          (deLeón), Chap. 830/2012, requires that a minimum of 10 percent  
          of cap-and-trade revenues fund projects located within  
          disadvantaged communities, and that 25 percent of available  
          revenues fund projects that benefit those communities.  To date,  
          ARB has conducted six auctions of GHG emission allowances,  
          generating approximately $663 million.

          Existing law, AB 118 (Nunez), Chap. 750/2007, established  
          additional surcharges and fees on vehicle and vessel  
          registrations and certain identification plates, and increased  
          the smog abatement fee as funding sources for several new air  
          quality and emission reduction programs.  Specifically, AB 118  
          established the Air Quality Improvement Program (AQIP),  
          comprised of three specified programs administered by ARB in  
          conjunction with local air districts that provide, among other  
          things, vouchers for the purchase of hybrid and zero-emission  
          trucks and buses, and grants that fund advanced technology  
          vehicle, equipment, or emission-control projects that are not  
          yet commercialized.  AB 118 also established the Alternative and  
          Renewable Fuel and Vehicle Technology Program (ARFVTP),  
          administered by CEC, to provide 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, among other things,  
          improvement of light-, medium-, and heavy-duty vehicle  
          technologies, and retrofitting medium- and heavy-duty on-road  
          and off-road vehicle fleets.  The fees and surcharges  
          established by AB 118 provide approximately $180 million  
          annually for these programs.

          Proposed Law: SB 1204 would establish the California Clean  
          Truck, Bus, and Off-Road Vehicle and Equipment Technology  
          Program to fund the development, demonstration, pre-commercial  
          pilot, and early commercial development of zero- and near-zero  
          emission truck, bus, and off-road vehicle and equipment  
          technologies.  Specifically, this bill would:








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                 Require ARB, in consultation with CEC, to develop  
               guidelines for the implementation of the program that are  
               consistent with AB 32 and SB 535.
                 Require the guidelines to, among other things, outline  
               performance metrics for deployment incentives, ensure  
               investments are coordinated with AQIP and ARFVTP programs,  
               promote investment in medium- and heavy-duty trucking,  
               structure purchase incentives to increase sales of the  
               cleanest vehicles in disadvantaged communities and ensure  
               remanufactured and retrofitted vehicles qualify for  
               incentives, and maximize leveraging of federal or private  
               funding.
                 Specify that ARB, in conjunction with CEC, would  
               administer the program with moneys appropriated from the  
               GGRF.
                 Limit projects funded by the program to: (1)  
               development, demonstration, pre-commercial pilots, and  
               early commercial deployments of zero- and near-zero  
               emission medium- and heavy-duty truck, bus, and off-road  
               vehicle and equipment technologies, and (2) purchase  
               incentives for commercially-available zero- and near-zero  
               emission truck, bus, and off-road vehicle and equipment  
               technologies and fueling infrastructure.
                 Authorize ARB to fund studies, technology development,  
               and demonstration projects focused on improving performance  
               and financial payback, multi-vehicle and early commercial  
               scale deployments, and deployment of early commercially  
               available advanced vehicles and equipment.
                 Explicitly specify that projects that must be undertaken  
               pursuant to state or federal law, district rules or  
               regulations, government entity memoranda of understanding,  
               or other legally binding agreements are not eligible  
               projects.
                 Require ARB to give priority to projects that benefit  
               disadvantaged communities, leverage additional funding,  
               have the potential for co-benefits or replication, have  
               regional and collaborative benefits, and support  
               technologies with broad market and emission reduction  
               potential and address barriers not addressed elsewhere.
                 Require ARB, in consultation with CEC, to create a  
               multiyear framework and plan developed through a public  
               process that articulates a vision for moving technologies  
               through the commercialization process, outlines specified  
               technology categories that may be funded, and describes the  








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               roles of agencies and a process for collaboration.

          Related Legislation: SB 1275 (de León), pending before this  
          committee, would require ARB to expand the Enhanced Fleet  
          Modernization Program to provide for ridesharing and car-sharing  
          vouchers as an alternative to vehicle replacement vouchers.  SB  
          1275 would also establish the "Charge Ahead California  
          Initiative" to establish a plan to implement the goals of  
          placing at least 1 million zero-emission and near-zero-emission  
          vehicles in service by 2023, and increasing access to these  
          vehicles for disadvantaged and low- and moderate-income  
          communities.

          Staff Comments: The California Clean Truck, Bus, and Off-Road  
          Vehicle and Equipment Technology Program established by this  
          bill is focused on the medium- and heavy-duty vehicle sector and  
          funded through the GGRF.  The projects that would be eligible  
          for expenditure under this bill could currently be funded  
          through the existing AQIP and ARFVTP programs.  Rather than  
          creating new programs, the Legislature may wish to consider  
          augmenting existing programs with additional GGRF allocations.

          The Governor's 2014-15 proposed budget includes appropriations  
          of $850 million in cap-and-trade revenues to fund various  
          projects and programs designed to reduce GHG emissions.  As part  
          of the Administration's overall strategy, ARB submitted a Budget  
          Change Proposal (BCP) requesting $200 million from the GGRF and  
          15 PY of staff to support the expansion of existing clean  
          transportation programs that provide incentives for sustainable  
          freight technology, zero and low-emission vehicles, and clean  
          trucks and buses.  According to the BCP, these funds would  
          benefit disadvantaged communities through the retirement and  
          replacement of older, high-emitting vehicles with low-emission  
          passenger vehicles in these communities, and supporting the  
          demonstration of advanced freight technology to move cargo,  
          which will benefit communities near freight hubs.  This proposal  
          is consistent with the May 2013 Cap-and-Trade Auction Proceeds  
          Investment Plan, which emphasizes investments in existing  
          programs in sectors which have the greatest GHG emissions,  
          namely transportation, energy, waste, and natural resources,  
          with proposed investments commensurate with relative emissions.   
          Investment in existing programs, rather than creating new  
          programs, expedites investments in GHG-reducing projects.  Staff  
          notes that this bill, which establishes a new program for  








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          investment of GGRF funds, is not consistent with ARB's budget  
          proposal, but the Legislature has yet to act on the  
          Administration's proposal.  It could be modified to incorporate  
          the goals and expenditures envisioned by this bill.