BILL ANALYSIS Ó AB 2223 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2223 (Gray) - As Amended April 11, 2016 ----------------------------------------------------------------- |Policy |Natural Resources |Vote:|8 - 1 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Agriculture | |10 - 0 | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allocates up to $100 million from AB 32 cap-and-trade revenues (Greenhouse Gas Reduction Fund) to the California Department of Food and Agriculture (CDFA), upon appropriation, to fund incentives for dairy digesters and other dairy methane reduction projects. FISCAL EFFECT: AB 2223 Page 2 1)Cost pressures of up to $100 million (Greenhouse Gas Reduction Fund) for CDFA to provide methane reduction incentives. 2)If this this funding is appropriated, CDFA estimates requiring approximately $6 million to cover costs associated with scientific and technical project oversight and grant administration. 3)California Air Resources Board (ARB) costs are within existing resources. COMMENTS: 1)Purpose. According to the author, ARB's strategy to improve manure management calls for putting digesters on more than several hundred dairies in the state. Based on a CDFA estimate, this bill is intended to provide the funding necessary to support the development of a widespread manure management infrastructure. 2)Methane. Short-lived climate pollutants (SCLPs) are GHGs that remain in the atmosphere for less time than carbon dioxide, but have a much greater climate impact. SLCPs include black carbon, fluorinated gases, and methane, which is the primary GHG emitted by dairies. AB 2223 Page 3 According to ARB, methane is the principal component of natural gas and is also produced biologically under anaerobic conditions in ruminants, landfills, and waste handling. While methane does not linger in the atmosphere as long as carbon dioxide, it is over 80 times more potent than carbon dioxide over the first 20 years. ARB identifies dairies as the source of 35% of the state's methane emissions and pinpoints a number of technologies and processes that have the potential to greatly reduce dairy methane emissions. 3)Dairy Digesters. Dairy digesters are a renewable technology that uses livestock manure to produce methane, which is a renewable source of electrical energy generation and transportation fuel. The technology has many environmental and social benefits. CDFA has developed the Dairy Digester Research and Development (DDRD) Program. Eleven million dollars in competitive grant funding has been, and an estimated $500,000 will be, made available for research and demonstration projects that improve the economic performance of dairy digesters in California. Governor Brown's 2016-17 budget proposes $35 million for the DDRD Program. 4)The California Global Warming Solutions Act of 2006 (AB 32) AB 32 requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations, including market-based compliance mechanisms, to achieve maximum technologically feasible and cost-effective GHG emission reductions. 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 AB 2223 Page 4 deposited into the GGRF available for appropriation by the Legislature. The 2014-15 Budget Act allocated cap-and-trade revenues for the 2014-15 fiscal year and established a long-term plan for the allocation of cap-and-trade revenues beginning in fiscal year 2015-16. The Budget continuously appropriates 35% of 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% are to 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. An expenditure plan for the 40% was not included in the 2015-16 Budget Act, with the exception of $227 million appropriated to continue funding for specified existing programs. The remaining 2015-16 revenues, along with 2016-17 revenues totaling $3.1 billion, are available for appropriation this year. The Governor's 2016-17 proposed budget provides $35 million for the DDRD Program. AB 2223 Page 5 Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081