BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DEVELOPMENT
Senator Jim Beall, Chair
2015 - 2016 First Extraordinary
Bill No: SBX1 2 Hearing Date: 9/1/2015
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|Author: |Huff |
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|Version: |6/30/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Erin Riches |
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SUBJECT: Greenhouse Gas Reduction Fund: transportation
expenditures
DIGEST: This bill appropriates Greenhouse Gas Reduction Fund
(GGRF) monies generated from transportation fuels to
transportation infrastructure, excluding high-speed rail.
ANALYSIS:
AB 32: The Global Warming Solutions Act of 2006
Existing law (AB 32, Núñez, Chapter 488, Statutes of 2006)
requires the state Air Resources Board (ARB) to develop a plan
to reduce emissions to 1990 levels by 2020. It also requires
ARB to ensure that programs to reduce greenhouse gas (GHG)
emissions are targeted, to the extent feasible, to the most
disadvantaged communities in the state. AB 32 authorizes ARB to
deposit any fees paid by GHG emission sources into the GGRF.
Existing law (AB 1532, Pérez, Chapter 807, Statutes of 2012)
specifies that GGRF revenues must be used to facilitate the
achievement of GHG emissions reductions.
Existing law specifies that ARB may include market-based
compliance mechanisms in the AB 32 regulations, and requires
that these mechanisms maximize additional environmental and
economic benefits for California, as appropriate. The Scoping
Plan approved by ARB in 2008 outlined a suite of measures aimed
at achieving AB 32 goals. Average emissions data in the Scoping
SBX1 2 (Huff) Page 2 of ?
Plan broken down by sector reveal that transportation accounts
for almost 40% of statewide GHG emissions. The industrial
sector, including refineries, oil and gas production, cement
plants, and food processors, was shown to contribute 20% of the
state's total GHG emissions.
Background on Cap-and-Trade
Beginning on January 1, 2013, the cap-and-trade regulations set
a firm, declining cap on total GHG emissions from sources that
make up approximately 85% of all statewide GHG emissions. The
cap is enforced by requiring each source, known as covered
entities, to surrender one "compliance instrument" for every
metric ton of carbon dioxide equivalent that it emits at the end
of a compliance period. Over time, the cap declines, resulting
in GHG emissions reductions.
In the first compliance period, the capped sector includes the
electricity and industrial sectors. In the second compliance
period, beginning in 2015, distributors of transportation fuels,
natural gas, and other fuels also come under the cap. Once
under the cap, a covered entity must periodically submit to ARB
allowances sufficient to match its GHG emissions during the
period. Transportation fuels account for more than half of the
allowances sold.
Cap-and-Trade Auction Revenues
The 2014-15 budget agreement allocated $832 million in
cap-and-trade revenues to a variety of GHG emission-reduction
programs. Beginning in 2015-16, the budget agreement
appropriates 25% of GGRF revenues to the state's high-speed rail
project, 20% to affordable housing and sustainable communities
grants, 10% to intercity rail capital projects, and 5% to
low-carbon transit projects. The remaining 40% of GGRF revenues
is available for annual appropriation by the Legislature.
This bill appropriates GGRF monies generated from transportation
fuels to transportation infrastructure, excluding high-speed
rail.
COMMENTS:
SBX1 2 (Huff) Page 3 of ?
1)Purpose. The author states that although California's roads
are in disrepair, the taxes that drivers pay on fuel are not
funding transportation improvements. The state currently
ranks 47th in overall highway performance and 46th in urban
congestion. Highway system repair and maintenance is
underfunded by $5 billion annually, while local street repair
is underfunded by $1.8 billion per year. The state faces $59
billion in deferred road maintenance. The author states that
this bill ensures that the "cap-and-trade taxes imposed on
gasoline" are dedicated to transportation infrastructure, and
prevents these funds from being spent on high-speed rail
because it is a "contributor to greenhouse gases."
2)Impact of placing transportation fuels under the cap. As
transportation fuels are responsible for about 40% of the
state's GHG emissions, as well as about 80% of the emissions
of ozone-forming gases and over 95% of diesel particulate
matter, inclusion of this sector was a critical piece in the
design of the program to achieve the directives of AB 32. The
inclusion of transportation fuels in the cap-and-trade program
in 2015 more than doubled the size of the program, with
respect to GHG emissions and the number of allowances. Some
critics argue that including fuels under the cap will lead to
a significant increase in gasoline prices, disproportionately
hurting consumers who are dependent on car travel and least
able to absorb gasoline price hikes. However, it is difficult
to estimate any potential price impact from including
transportation fuels under the cap. This value depends on the
demand for allowances, the extent of investment by
transportation fuel providers in alternative fuels, how much
of their compliance obligation is met through offsets or
allowances on secondary markets, and other factors. In
general, gas prices are dependent on a myriad of factors that
have created a volatile gasoline market that currently
manifests in rapid and large price shifts at the pump.
3)Creating a hole in the high-speed rail budget. In 2008,
California voters approved Proposition 1A, the Safe, Reliable
High-Speed Passenger Train Bond Act for the 21st Century
(Prop. 1A), which authorized $9 billion in general obligation
bonds for the high-speed rail project. In 2009, the federal
government augmented the Prop. 1A bond funding with roughly
$3.3 billion; the High-Speed Rail Authority (HSRA) committed
to match these federal funds with approximately $2.3 billion
in state funding. Of the $8.8 billion appropriated thus far
SBX1 2 (Huff) Page 4 of ?
for high-speed rail, HSRA spent $950 million through 2013-14
and an estimated $917 million in 2014-15. For 2015-16, HSRA
plans to spend $3.0 billion: $1.4 billion in Prop. 1A bond
funds, $1.2 billion in federal funds, and $500 million in GGRF
revenues. By removing GGRF monies from the mix, this bill
would create a large hole in high-speed rail funding; it is
unclear what other funds could fill that hole.
4)Nexus issues? Statute provides that GGRF investments must
facilitate the achievement of GHG emissions reductions.
Because the term "transportation infrastructure" is quite
broad, eligible projects could include projects known to
achieve GHG reductions, such as active transportation and
public transit (which are already being funded); projects with
unclear, even possibly negative GHG impacts, such as
congestion relief projects that increase capacity, signal
synchronization, grade separations, and road maintenance; and
projects that do not appear to achieve any GHG reductions,
such as bridge repair and stormwater culvert replacement. If
GGRF revenues are used to fund such projects, the state could
leave itself open to litigation if critics perceive a lack of
nexus between a project and GHG reductions.
5)A question of priorities. There are currently a variety of
bills before the Legislature relating to GGRF revenues. It is
difficult to determine what suite of measures best meets the
requirements of the GGRF, uses resources most efficiently, and
maximizes policy objectives, when bills are scattered across
various committees and even in different sessions. Budget
discussions on a cap-and-trade investment strategy provide an
opportunity for a comprehensive look at the universe of GGRF
proposals. The committee may wish to consider whether the
subject of this bill is more appropriate to the budget
discussion than the transportation special session.
Related Legislation:
SBX1 3 (Vidak) - would have redirected Prop. 1A bond proceeds to
state highways and freeways, and local streets and roads, upon
voter approval. SBX1 3 failed passage in this committee on
August 19, 2015.
SBX1 6 (Runner) - would prohibit expenditure of GGRF funds on
the high-speed rail project and appropriate the majority of GGRF
monies to the California Transportation Commission for
SBX1 2 (Huff) Page 5 of ?
allocation to high-priority transportation projects, as
specified. SBX1 6 is also being heard by this committee today.
SBX1 8 (Hill) - would increase the percentage of GGRF funds from
10% to 20% for the Transit and Intercity Rail Capital Program
and from 5% to 10% for the Low-Carbon Transit Operations
Program. SBX1 8 is also being heard by this committee today.
SB 5 (Vidak) - would have exempted fuel suppliers from ARB's
cap-and-trade program. SB 5 failed passage in the Senate
Environmental Quality Committee on April 15, 2015.
ABX1 7 (Nazarian) - is identical to SBX1 8 (Hill). ABX1 7 is
pending assignment in the Assembly Rules Committee.
AB 23 (Nielsen) - was almost identical to SB 5 (Vidak). AB 23
failed passage in the Assembly Natural Resources Committee on
March 23, 2015.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Thursday, August 27, 2015.)
SUPPORT:
None received
OPPOSITION:
None received
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