BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                            Senator Bob Wieckowski, Chair
                                2015 - 2016  Regular 

          Bill No:           SB 207           Hearing Date:    4/15/2015
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          |Author:   |Wieckowski                                            |
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          |Version:  |3/24/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Laurie Harris, Rebecca Newhouse                       |
          |:         |                                                      |
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          Subject:  California Global Warming Solutions Act of 2006:   
          Greenhouse Gas Reduction Fund

            ANALYSIS:                                                     
          
          Existing law:

          1. Under the California Global Warming Solutions Act of 2006,  
             often referred to as AB 32 (Núñez, Pavley), Chapter 488,  
             Statutes of 2006, requires the California Air Resources Board  
             (ARB) to determine the 1990 statewide greenhouse gas (GHG)  
             emissions level, to approve a statewide GHG emissions limit  
             equivalent to that level that will be achieved by 2020, and  
             to adopt GHG emissions reductions measures by regulation.   
             ARB is authorized to include the use of market-based  
             mechanisms to comply with the regulations.  (Health and  
             Safety Code §38500 et seq.)

          2. Establishes the Greenhouse Gas Reduction Fund (GGRF) as a  
             special fund in the State Treasury; requires that all moneys,  
             except for fines and penalties, collected pursuant to a  
             market-based mechanism be deposited in the fund; and requires  
             the Department of Finance, in consultation with the state  
             board and any other relevant state agency, to develop, as  
             specified, a three-year investment plan for the moneys  
             deposited in the GGRF.  (Government Code §16428.8).

          3. Requires a state agency, prior to expending any moneys  
             appropriated to it from the GGRF, to prepare a record  
             (expenditure record) consisting of a description of the  
             expenditure, how the expenditure will further the regulatory  







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             purposes of AB 32 and contribute to achieving and maintaining  
             greenhouse gas emission reductions, how the agency considered  
             the applicability and feasibility of other non-greenhouse gas  
             reduction objectives, and how the agency will document the  
             results achieved from the expenditure.  ARB is required to  
             develop guidance on reporting and quantification methods to  
             ensure the requirements of this section are met.  (GOV  
             §16428.9)

          This bill: 

          1.Requires the expenditure record, prepared by state agencies to  
            which GGRF monies have been appropriated, to be published on  
            the Internet web sites of both the administering agency and  
            the ARB prior to the agency expending any of the appropriated  
            GGRF monies.

          2.Makes technical cleanup changes to existing language for  
            clarity and consistency with current language in code.

          Background
          
          1.Cap-and-Trade.

            The cap-and-trade program is a market-based regulation that  
            sets a declining cap on total GHG emissions from sources  
            making up approximately 85% of statewide emissions.  The  
            program is a key component of the State Air Resources Board's  
            Scoping Plan, which describes the state's approach to reduce  
            GHG emissions to 1990 levels by 2020 as set forth under AB 32.  
             Proceeds from the sales and auctions of GHG emissions permits  
            (allowances) in the cap-and-trade program are deposited in the  
            GGRF and are subsequently appropriated to 12 agencies for  
            administering programs that support the goals of AB 32 to  
            reduce GHG emissions.

          2.Cap-and-Trade Auction Revenue.

            ARB has conducted ten cap-and-trade auctions to date,  
            generating $1.6 billion in total proceeds to the state.   
            Appropriations from the first two fiscal years, 2013-14 and  
            2014-15, totaled more than $900 million. Several bills in  
            2012, and one in 2014, provided legislative direction for the  
            expenditure of auction proceeds. 








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            SB 535 (de León) Chapter 830, Statutes of 2012, requires that  
            25% of auction revenue be used to benefit disadvantaged  
            communities and requires that 10% of auction revenue be  
            invested in disadvantaged communities. 

            AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, directed the  
            Department of Finance to develop and periodically update a  
            three-year investment plan. This plan identified feasible and  
            cost-effective GHG emission reduction investments to be funded  
            with cap-and-trade auction revenues, focusing on three  
            sectors, including: sustainable communities and clean  
            transportation, energy efficiency and clean energy, and  
            natural resources and waste diversion. 

            SB 1018 (Budget Committee) Chapter 39, Statutes of 2012,  
            created the GGRF, into which all auction revenue is to be  
            deposited. The legislation requires that before departments  
            can spend monies from the GGRF, they must prepare a record  
            specifying: (1) how the expenditures will be used, (2) how the  
            expenditures will further the purposes of AB 32, (3) how the  
            expenditures will achieve GHG emission reductions, (4) how the  
            department considered other non-GHG-related objectives, and  
            (5) how the department will document the results of the  
            expenditures. 

            SB 862 (Budget Committee) Chapter 36, Statutes of 2014,  
            requires the ARB to develop guidelines on maximizing benefits  
            for disadvantaged communities by agencies administering GGRF  
            funds, and guidance for administering agencies on GHG emission  
            reduction reporting and quantification methods.

          3.ARB's Expenditure Record and Fiscal Procedures Guidance.

            The ARB's 2014 "Cap-and-Trade Auction Proceeds Interim  
            Guidance to Agencies Administering Greenhouse Gas Reduction  
            Fund Monies: Expenditure Record and Fiscal Procedures"  
            document, prepared pursuant to SB 862, provides guidance to  
            assist state agencies receiving appropriations from the GGRF  
            in preparing their expenditure records. 

            The document states, "The final expenditure record and  
            memorandum [documenting concurrence between the agency and the  
            ARB] are public documents and will be posted on the ARB  








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            auction proceeds website," and "State agencies that receive  
            appropriations from the GGRF must prepare an expenditure  
            record for those fiscal year monies prior to expending any  
            monies on projects."  Though stated in ARB's guidance  
            document, neither of these points are required in statute, and  
            as of today, not all agencies that receive GGRF monies have  
            expenditure records available on the ARB Internet web site.
          
            Comments
          
          1. Purpose of Bill.  

             According to the author, "Cap-and-trade auction revenue, with  
             proceeds to the state of over $1.6 billion since the initial  
             auction, has been appropriated to more than 11 different  
             agencies to administer a variety of programs in the 2014-15  
             fiscal year. In this and future fiscal years, auction revenue  
             will most likely continue to be distributed to other entities  
             over the course of the program as revenues from the program  
             increase. Current law requires these agencies to produce a  
             record documenting how their programs will reduce greenhouse  
             gas emissions, as well as further the regulatory purposes of  
             AB 32-a requirement necessary to ensure the use of the  
             revenue is justified.  And although ARB has issued interim  
             guidance specifying the documents that these various agencies  
             create as public, this is not required by current law. SB 207  
             simply codifies this important provision in ARB's interim  
             guidelines to ensure statutorily enforceable transparency in  
             the expenditure record process so that both the public and  
             Legislature have timely and straightforward access to these  
             important records." 


            Related/Prior Legislation
          
          AB 1532 (Pérez), Chapter 807, Statutes of 2012, SB 535 (De  
          León), Chapter 830, Statutes of 2012), and SB 1018 (Budget and  
          Fiscal Review Committee), Chapter 39, Statutes of 2012, together  
          established the GGRF and provided direction for how auction  
          proceeds received by the GGRF are appropriated and expended.

          SB 862 (Committee on Budget and Fiscal Review) Chapter 36,  
          Statutes of 2014, established the requirements that ARB develop  
          guidelines for agencies administering GGRF funds. 








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          SOURCE:                    Author  

           SUPPORT:               None on file  

           OPPOSITION:    None on file  
           
                                          
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