BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1405 (De Leon)
Hearing Date: 08/17/2009 Amended: 07/23/2009
Consultant: Brendan McCarthy Policy Vote: EU&C 6-5, EQ 5-2
AB 1405 (De Leon)
Page 2
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BILL SUMMARY: This bill requires 30 percent of any revenues
generated under AB 32 to be deposited in a new special fund.
Revenues would be available for projects in the most impacted
and disadvantaged communities of the state to reduce greenhouse
gas emissions while achieving other benefits, such as reductions
of other air pollutants.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Program implementation $500 $900 $900 Special
*
GHG emission reduction $8,500 $17,100 $17,100 Special
*
projects
* New special fund, revenues transferred from the Air Pollution
Control Fund. Expenditures could be significantly larger
depending on fees adopted by the Air Resources Board under AB
32.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense file.
Under current law (AB 32, Nunez, 2006), the Air Resources Board
is required to reduce greenhouse gas emissions to 1990 levels by
2020. AB 32 authorizes the Air Resources Board to impose fees on
greenhouse gas emitters to carryout the provisions of AB 32. The
Air Resources Board is scheduled to consider the adoption of a
fee schedule in the fall of this year. The current proposal
would impose fees on greenhouse gas emitters that would generate
revenues sufficient to pay for the administrative costs of
implementing AB 32. The current fee proposal would not raise
revenues to pay for greenhouse gas emission reduction or climate
change-related mitigation activities.
Under AB 32, the Air Resources Board is authorized to adopt
market-based compliance measures, such as a cap and trade
program, to achieve the state's goals. Under a cap and trade
program, the total amount of allowed emissions would be capped
by the Air Resources Board. Emitters of greenhouse gasses would
AB 1405 (De Leon)
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either be given permits to emit, permits would be auctioned off,
or some combination of the two. Emitters could then trade
emission permits between themselves in order to meet the overall
emission reduction target at least cost. The Air Resources Board
is developing a cap and trade program, which will be implemented
by 2012. The Air Resources Board is considering an auction
system to allocate emission permits, but final regulations have
not been adopted. At this point, the Air Resources Board does
not have an estimate of the revenues that would be generated
from an emission permit auction.
This bill creates the Community Benefits Fund (Fund) and
requires that at least 30 percent of any revenues generated
under AB 32 shall be deposited in the Fund. The current proposal
for AB 32 fees under consideration by the Air Resources Board
would generate about $54 million (this includes loan repayments
to other special funds) per year through 2012-13 and about $39
million per year thereafter. If the Air Resources Board adopts
fees substantially similar to the current proposal, the bill
will direct about $18 million per year into the fund through
2012-13 and about $13 million per year thereafter. These revenue
estimates are based only on the current proposal to implement
fees based on administrative costs for AB 32. If the Air
Resources Board adopts measure to generate additional revenues
(such as a cap and trade program) additional revenue would be
deposited in the fund. The amount of any such additional revenue
is unknown, but could be in the tens or hundreds of millions of
dollars per year.
The bill directs the Air Resources Board, in coordination with
the Energy Commission and the Department of Public Health, to
expend monies in the Fund for projects to accelerate greenhouse
gas emission reductions or mitigate the direct health impacts of
climate change in the most impacted and disadvantaged
communities in the state. Allowable uses of the Fund include
projects that reduce greenhouse gas emissions while at the same
time reducing other pollutants, minimizing health impacts of
climate change, assisting small businesses in reducing
greenhouse gas emissions, improving mass transit, emergency
preparedness for extreme weather events, or other projects.
The bill requires the Air Resources Board, by June 2010, to
adopt a methodology to identify the most impacted and
disadvantaged communities in the state. The Air Resources Board
is required to identify communities based on the highest air
pollution impacts based on exposure to air pollution and
socioeconomic factors, subject to peer review and public
participation. The bill requires the Air Resources Board, the
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Energy Commission, and the Department of Public Health to
jointly develop and adopt biennial plans for the use of the
Fund. The bill requires that the Environmental Justice
Committee, created under AB 32, be consulted on the development
and adoption of the expenditure plans.
The bill directs the Air Resources Board to ensure that
expenditures of money from the Fund be consistent with Article
XIIIA of the State Constitution and applicable case law. Under
the Constitution and related case law, the Air Resources Board
must generally expend revenues collected pursuant to AB 32 such
that there is a reasonable nexus between the fee payer and the
activities funded with fee revenues.
Because the exact fee schedule has not been adopted yet by the
Air Resources Board and there is no case law on the allowed uses
of greenhouse gas-related fees, it is impossible to know whether
or to what extent the Air Resources Board will be able to expend
funds under the bill for projects in disadvantaged communities
while meeting constitutional requirements.
AB 31 (Pavley) specifies certain allowable uses of revenues
generated under AB 32. That bill failed passage on the Senate
floor.
AB 231 (Huffman) requires the Air Resources Board to adopt fees
under AB 32. The fees will be designed, in part, to reduce
greenhouse gas emissions and to reduce disproportionate impacts
on disadvantaged communities. That bill is in the Senate
Environmental Quality Committee.