BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 1464
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|Author: |De León |
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|Version: |4/11/2016 |Hearing |4/20/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: California Global Warming Solutions Act of 2006:
greenhouse gas emissions reduction
ANALYSIS:
Existing law:
1) Under the California Global Warming Solutions Act of 2006
(also known as AB 32), requires the California Air Resources
Board (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, and to adopt GHG emissions reductions measures by
regulation. ARB is authorized to include the use of
market-based mechanisms to comply with these regulations.
(Health and Safety Code §38500 et seq.)
2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury, requires all moneys, except for fines and
penalties, collected pursuant to a market-based mechanism be
deposited in the fund. (Government Code §16428.8)
3) Requires the Department of Finance, in consultation with the
state board and any other relevant state agency, to develop a
three-year investment plan for the moneys deposited in the
GGRF that does all of the following (HSC §39716):
a) Identifies the state's near-term and long-term GHG
emissions reduction goals and targets by sector.
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b) Analyzes gaps in state strategies to meeting the
state's GHG emissions reduction goals and targets by
sector.
c) Identifies priority programmatic investments of moneys
that facilitate the achievement of feasible and
cost-effective GHG emissions reductions toward achievement
of GHG emission reduction goals and targets by sector.
This bill requires the Investment Plan recommend metrics that
would measure progress and benefits from the proposed
programmatic investments, and, in identifying priority
programmatic investments, requires the Investment Plan to do
both of the following:
a) Assess how proposed investments interact with current
state regulations, policies, and programs.
b) Evaluate if and how proposed investments could be
incorporated into existing programs.
Background
1) Cap-and-trade auction revenue. Since November 2012, ARB has
conducted 14 cap-and-trade auctions, generating over $4
billion in proceeds to the state.
State law specifies that the auction revenues must be used to
facilitate the achievement of GHG emissions reductions and
outlines various categories of allowable expenditures.
Statute further requires the Department of Finance, in
consultation with ARB and any other relevant state agency, to
develop a three-year investment plan for the auction
proceeds, which are deposited in the GGRF.
Disadvantaged communities. SB 535 (de León, Chapter 830,
Statutes of 2012) requires the Department of Finance, in the
investment plan, to allocate at least 25% of available moneys
in the GGRF to projects that provide benefits to
disadvantaged communities, and at least 10% to projects
located within disadvantaged communities.
To meet the SB 535 mandate, the Office of Environmental
Health Hazard Assessment, under CalEPA's guidance, developed
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a tool (termed CalEnviroScreen) to assess and rank census
tracts across the state that are disproportionately affected
by multiple types of pollution and areas with vulnerable
populations. CalEPA has designated 25% of census tracts in
California as disadvantaged communities for the purpose of
investing cap-and-trade proceeds.
Additionally, SB 862 (Committee on Budget and Fiscal Review,
Chapter 36, Statutes of 2014) requires ARB to develop
guidelines on maximizing benefits for disadvantaged
communities by agencies administering GGRF funds.
Legal consideration of cap-and-trade auction revenues. The
2012-13 Budget analysis of cap-and-trade auction revenue by
the Legislative Analyst's Office noted that, based on an
opinion from the Office of Legislative Counsel, the auction
revenues should be considered mitigation fee revenues, and
their use requires that a clear nexus exist between an
activity for which a mitigation fee is used and the adverse
effects related to the activity on which that fee is levied.
Therefore, in order for their use to be valid as mitigation
fees, revenues from the cap-and-trade auction must be used to
mitigate GHG emissions or the harms caused by GHG emissions.
In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
constitute illegal tax revenue. In November 2013, the
superior court ruling declined to hold the auction a tax,
concluding that it is more akin to a regulatory fee. In
February of 2014, the plaintiffs filed an appeal with the 3rd
District Court of Appeal in Sacramento. That case is
currently pending.
Budget allocations. SB 862 (Committee on Budget and Fiscal
Review, Chapter 36, Statutes of 2014) established a long-term
cap-and-trade expenditure plan by continuously appropriating
portions of the funds for designated programs or purposes.
The legislation appropriates 25% for the state's high-speed
rail project, 20% for affordable housing and sustainable
communities grants, 10% to the Transit and Intercity Rail
Capital Program, and 5% for low-carbon transit operations.
The remaining 40% is available for annual appropriation by
the Legislature.
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The Governor's 2016-17 proposed budget appropriates over $3
billion to a variety of programs and projects in the
transportation, energy, natural resources, and waste
diversion sectors.
Since 2013, GGRF moneys have been appropriated to 12
different agencies to administer 22 different programs.
2) Investment plan. Pursuant to AB 1532 (Pérez, Chapter 807,
Statutes of 2012), the first three-year Investment Plan for
cap-and-trade auction proceeds, developed by Department of
Finance in consultation with ARB and other state agencies and
covering 2013-2015, was submitted to the Legislature in May
2013. The plan identified 1) sustainable communities and
clean transportation, 2) energy efficiency and clean energy,
and 3) natural resources and waste diversion as the three
broad categories that provide the best opportunities, in that
order, for achieving the legislative goals of AB 32 via
auction proceeds. In addition, SB 535 directs that threshold
levels of investment be made to benefit disadvantaged
communities. Within those categories, the plan identified a
range of programs and measures to reduce GHG emissions,
benefit disadvantaged communities, and provide other
cobenefits, such as reduced air pollution, diversification of
energy and fuels, and spurring relevant technological
innovation.
The Second Plan was released in January 2016, and like the
First Investment Plan, proposes diverse strategies under the
same three major investment categories, identifies gaps in
the current investment portfolio, and suggests approaches
that would help address these gaps.
3) LAO findings. According to the Legislative Analyst's Office
February 2016 report on the Governor's proposed resources and
environmental protection budget expenditures, the Investment
Plan lacks the necessary analysis needed to develop a
framework for spending. They also state that the Investment
Plan does not explicitly address how new programs might
interact with existing regulations or programs, and that
proposals from the administration lack reliable estimates of
benefits, which make it difficult to evaluate which set of
programs are likely to best achieve state priorities and
provide the greatest overall benefits, compared to
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alternative strategies.
Comments
1) Purpose of Bill. According to the author, "Cap-and-trade
auction revenue, with proceeds to the state of over $4
billion since the initial auction, has been appropriated to
more than 12 different agencies to administer a variety of
programs to reduce GHG emissions and provide cobenefits,
including benefits to disadvantaged communities. In 2012,
the Legislature directed the Department of Finance to prepare
an investment plan every three years to help guide
Legislative appropriation of the proceeds. The Investment
Plan is required to assess gaps in the state's strategies to
meet climate goals, and identify priority investments.
However, as the Legislative Analyst's Office has noted in
their recent budget report, the Investment Plan does not
provide a robust analysis with which to evaluate proposals
for GGRF spending, including how proposed investments
interact with the current state programs. Additionally, the
LAO reports the lack of specificity of benefits assigned to
administration budget proposals, and the difficulty this
poses in evaluating these proposals for funding. On top of
this, the GGRF fund keeps growing, with the potential to fund
a variety of new programs. SB 1464 requires the Investment
Plan to consider how proposed investments interact with
current state programs, and if those investments and programs
can be incorporated into current state programs. SB 1464
also requires the investment plan recommend metrics that
would measure progress and benefits from the proposed
programmatic investments. In this way, the Investment Plan
will better serve its original statutory intent-to guide the
Legislature in funding an optimized strategy of complementary
investments to maximize GHG emissions reductions and
cobenefits from the GGRF, especially in those communities
disproportionately burdened by pollution."
SOURCE: Author
SUPPORT:
None received
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OPPOSITION:
None received
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