BILL ANALYSIS Ó SB 1204 Page 1 Date of Hearing: June 16, 2014 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair SB 1204 (Lara) - As Amended: May 6, 2014 SENATE VOTE : 26-10 SUBJECT : Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program SUMMARY : Creates a new program to be administered by the California Air Resources Board (ARB) and funded with cap and trade revenues to develop zero- and near-zero emission truck, bus, and off-road vehicle and equipment technologies and related projects. Specifically, this bill : 1)Creates the California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program (program) to be administered by ARB in conjunction with the State Energy Resources Conservation and Development Commission (CEC). 2)Provides that the program be funded from cap and trade auction proceeds. 3)Provides that the program is to fund development, demonstration, pre-commercial pilots, and early commercial deployments of zero- and near-zero emission truck, bus, and off-road vehicle and equipment technologies. 4)Requires that priority be given to projects in disadvantaged communities. 5)Limits expenditure of program funds for projects that: a) Develop a market, demonstrate, and pilot commercial deployment of zero- and near-zero emission medium- and heavy-duty truck technology, including projects that facilitate clean goods movement; b) Develop zero- and near-zero emission bus technology, demonstrate pre-commercial pilots, and provide early commercial deployments, including pilots of multiple vehicles at one site or region; SB 1204 Page 2 c) Develop, demonstrate, pilot, and deploy zero- and near-zero emission off-road vehicle and equipment in port, agricultural, marine, construction, and rail sectors; and, d) Develop purchase incentives, including point-of-sale incentives, for commercially available zero- and near-zero emission truck, bus, and off-road vehicle and equipment technologies and fueling infrastructure to accelerate market acceptance. 6)Requires that ARB, in consultation with CEC, develop guidelines, as specified, for the implementation of the Program consistent with the AB 32, California Global Warming Solutions Act (Nunez, Chapter 488, Statutes of 2006). 7)Provides that projects required pursuant to state or federal law, rules, regulations, are not eligible for funding under the program. 8)Requires ARB, in consultation with CEC, to create a multiyear framework and plan that articulates the overarching vision for the Program, outlines performance criteria, and describes agency roles. EXISTING LAW : 1) AB 32 required ARB to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level to be achieved by 2020. Under AB 32, ARB is authorized to include the use of market-based mechanisms to comply with these regulations (such as cap and trade). 2) Requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan to guide allocations of cap and trade revenues. 3) Requires the investment plan to allocate a minimum of 25% of the available moneys in the fund to projects that provide benefits to disadvantaged communities, and a minimum of 10% of the available moneys to projects located within disadvantaged communities. 4) Requires moneys from cap and trade revenues to be used to SB 1204 Page 3 facilitate the achievement of GHG emissions reductions consistent with AB 32. 5) Under the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007 (AB 118, Nunez, Chapter 750, Statutes of 2007), requires CEC to implement the Alternative and Renewable Fuels and Vehicle Technology Program (ARFVTP) to provide funding measures to specified entities to develop and deploy technologies and alternative and renewable fuels in the marketplace to help attain the state's climate change policies. 6) Creates the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts, to fund air quality improvement projects. 7) Establishes certain vehicle and vessel related surcharges and fees, until January 1, 2016, to fund the AQIP and ARFVTP, among others. 8) Establishes the Carl Moyer Program, administered by ARB, to fund the incremental cost of cleaner-than-required vehicles, engines, and equipment and authorizes the funding of projects reducing NOx, particulate matter (PM) and reactive organic gases emissions under the Carl Moyer Program until January 1, 2015, after which date, only the reduction of NOx emission reduction projects will be eligible for funding. FISCAL EFFECT : According to the Senate Appropriations Committee, the bill would incur costs of approximately $619,000 and 4 personnel years (PYs) in 2014-15, and ongoing costs of $454,000 and 3 PYs to adopt the specified funding plan and administer the components of that plan. Additional costs include ongoing costs of approximately $165,000 and 1 PY beginning in 2014-15 to develop and administer the new programs, $344,000 and 2 PYs, beginning in 2016-17, to develop and implement a certification program for truck and bus hybrid and zero-emission vehicle retrofits and remanufactures and unknown ongoing costs to fund additional program expenditures, likely in the millions to tens of millions annually. COMMENTS : California has made great strides in its efforts to curb GHG emissions and improve air quality and appears to be on target to meet GHG emissions reduction goals set forth in AB 32. SB 1204 Page 4 However, a much more demanding target looms beyond the AB 32 horizon. Executive Order (EO) S-3-05, signed by Governor Schwarzenegger in June of 2005 calls for California's GHG emissions to be reduced by 80% below 1990 levels by 2050. ARB indicates that much of the "low hanging fruit" has been addressed when it comes to quickly and easily reducing emissions to meet the 2020 goal and that more assertive measures need to be taken if California is to achieve its 2050 emissions goal. Given that cars and trucks are responsible for nearly 40% of California's GHG emissions, it stands to reason that addressing transportation sector emissions represents the logical next step toward achieving the 2050 emissions reduction goal as outlined in EO S-3-05. To this end, California has worked diligently to address transportation sector emissions across many platforms, but particularly toward replacing existing fleets (light-duty through heavy-duty) with zero- and near-zero emissions vehicles and equipment. The light-duty fleet side has made much progress and these clean cars are well on their way to becoming mainstream choices for consumers. This progress was made through technology programs and specific manufacture and sales requirements paired with incentive programs and infrastructure development. Unfortunately, turning over the fleet for medium- and heavy-duty vehicles has not been on the same trajectory despite the fact that these vehicles not only represent a significant source of GHGs, they are powered by diesel engines which produce fine particulate matter that leads to poor air quality and severe health impacts--particularly in low-income and disadvantaged communities that are often within close proximity to heavily industrialized areas (such as the port) and along major transportation corridors. While programs at ARB and CEC address both light- and heavy-duty vehicle sectors, there are some who believe that additional, focused efforts are needed for the medium- and heavy-duty zero- and near-zero-emission vehicles and equipment to improve market penetration and make the purchase and use of this technology a viable, and affordable option for medium- and heavy -duty fleet operators. Generally, the programs in place to address the medium- and heavy-duty vehicle sector reside within ARBs and CEC's AQIP and ARFVTP programs. SB 1204 Page 5 Air Quality Improvement Program (AQIP) : AB 118 established the 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, 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 also establishes the ARFVTP, administered by the California Energy Commission (CEC). 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. Although these programs have been somewhat successful in developing and deploying zero and near-zero-emission medium- and heavy-duty vehicles, the total number of these vehicles in use in California remains very low. To achieve widespread deployment, the authors believe that additional standards and technology studies and development need to be performed. The authors contend that additional funding is needed to fully develop and test actual systems, with a focus on performance improvements and cost reduction. They cite a need for early demonstration projects to explore performance and integration challenges which need to be followed up with larger pre-commercial demonstrations to evaluate real world performance. Once these systems are developed and tested, the authors note that targeted incentive programs must be created to achieve full market penetration. SB 1204 Page 6 The authors point out that many of the efforts that are needed to develop and deploy zero- and near-zero-emission medium and heavy duty vehicles, are not fully addressed in AQIP and ARFVTP. They note that while it may be possible to add these requirements into AQIP and ARFVTP, they contend that greater progress would likely be achieved by creating a single overarching program that is singularly focused on developing and deploying these vehicles. For example, the development of studies and advanced research, including advanced technology business case and feasibility studies to develop standards do not fall neatly into AQIP or ARFVTP and the same is true for development of pre-commercial commercial demonstration programs. The authors note that some existing technological development and deployment (incentives) programs can be tailored to address medium- and heavy-duty transportation sector needs, but given that much of the effort in these programs is currently going toward light-duty clean cars, it is unclear whether or not adding these programs into existing efforts would produce the desired results. This concern has led the authors to introduce this bill which creates a separate and distinct program with the singular focus of developing and deploying these technologies so that the goal of fleet turnover can be achieved. The authors believe that by combining all efforts for this transportation sector into one program, along with increased investments will ultimately result in broad full-scale deployment of these clean vehicles, particularly in disadvantaged communities. Authors' amendments : The authors intend to take amendments in committee to: 1)Clarify that pilot programs and other programs focus on technology, rather than market, development. 2)Specify that the program include non-vehicle based projects as intelligent transportation systems, autonomous vehicles, and other freight information and operations technologies. 3)Require the development of guidance through the existing AQIP Funding Plan process rather than the development of new program guidelines. 4)Clarify that allowances for remanufactured and retrofitted SB 1204 Page 7 vehicles that may qualify for incentives must be subject to ARB approval. 5)Specify that the program is subject to sustainability goals that minimize impacts to natural resources on state and federal lands; 6)Amends the requirement for the creation of a multiyear program plan and instead requires ARB, in consultation with CEC, to create an annual program plan. Related legislation : SB 913 (DeSaulnier) would require ARB and the Bureau of Automotive Repair to cooperate in issuing a specified number of vouchers through EFMP and the Consumer Assistance Program. That bill is scheduled to be heard in the Assembly Transportation Committee on June 23, 2014. SB 1275 (De León) would require ARB to expand EFMP to provide for ridesharing and car-sharing vouchers and that ARB to adopt a funding plan for projects under AQIP and establish programs to increase benefits from electric transportation for disadvantaged and low- and moderate-income communities. That bill is scheduled to be heard today in the Assembly Transportation Committee. Previous legislation : AB 8 (Perea), Chapter 401, Statutes of 2013, extended until January 1, 2024, extra fees on vehicle registrations, boat registrations, and tire sales in order to fund the AB, the Carl Moyer Program, and AB 923 (Firebaugh, Chapter 707, Statutes of 2004) programs that support the production, distribution, and sale of alternative fuels and vehicle technologies, as well as air emissions reduction efforts. SB 359 (Corbett) Chapter 415, Statutes of 2013, provided money for ARB projects and programs aimed at encouraging deployment of zero-emission and hybrid vehicles. SB 535 (De Leon), Chapter 830, Statutes of 2012, required the Department of Finance, when developing the three-year investment plan for cap-and-trade monies, to allocate twenty-five percent of the funds to projects that benefit disadvantaged communities, and to allocate a minimum of ten percent of available cap and trade revenues to projects located within disadvantaged communities. SB 1204 Page 8 AB 1532 (J. Perez), Chapter 807, Statues of 2012, created the Greenhouse Gas Reduction Fund Investment Plan and Communities Revitalization Act to set procedures for the investment of regulatory fee revenues derived from cap and trade revenues. AB 118 (Nunez), Chapter 750, Statutes of 2007 established the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts, and funded through surcharges on vehicle and vessel registration fees, smog abatement fees, and identification plates fees. AB 32 (Nunez), Chapter 488, Statutes of 2006 required the ARB to develop a plan of how to reduce emissions to 1990 levels by the year 2020 and also required ARB to ensure that, to the extent feasible, GHGs reduction requirement and programs direct public and private investment toward the most disadvantaged communities. REGISTERED SUPPORT / OPPOSITION : Support American Lung Association Breathe California California Association of Port Authorities California Bus Association California League of Conservation Voters CALSTART Center for Transportation and the Environment City of Long Beach City of Salinas Coalition for Clean Air Communities for a Better Environment Environment California Environmental Defense Fund Greenlining Institute Los Angeles County Metropolitan Transportation Authority Natural Resources Defense Council Sierra Club Union of Concerned Scientists UPS Opposition SB 1204 Page 9 California Chamber of Commerce California League of Food Processors California Manufacturers and Technology Association Analysis Prepared by : Victoria Alvarez / TRANS. / (916) 319- 2093