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) SB 1204 (Lara) Page 1 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: SB 1204 (Lara) Page 2 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 SB 1204 (Lara) Page 3 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 SB 1204 (Lara) Page 4 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.