BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2223


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          Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2223 (Gray) - As Amended April 11, 2016


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          |Policy       |Natural Resources              |Vote:|8 - 1        |
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          |             |Agriculture                    |     |10 - 0       |
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          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:








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          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.  











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            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  








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            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. 



















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          Analysis Prepared by:Jennifer Galehouse / APPR. / (916)  
          319-2081