BILL ANALYSIS �
AB 2404
Page 1
Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2404 (Fuentes) - As Amended: May 1, 2012
Policy Committee: Natural
ResourcesVote:5-3
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill creates the Local Emission Reduction Program to
provide local assistance grants to develop and implement
multibenefit greenhouse gas emission reduction projects in
California's communities. Specifically, this bill:
1)Directs the Air Resources Board (ARB), in coordination with
the Strategic Growth Council and other state agencies, as
needed, to establish a program of local assistance grants to
develop and implement multibenefit greenhouse gas (GHG)
emission reduction projects in California.
2)Charges the Strategic Growth Council with implementing the
local assistance grant program by awarding grants on a
competitive basis, according to potential GHG reduction and
other locally beneficial criteria.
3)Makes eligible to receive local assistance grants any county,
or combination of counties, that adopts a local GHG emission
reduction plan certified by the state board, and that enters
into a memorandum of understanding with cities in its
jurisdiction as well as any state conservancies, metropolitan
planning organizations, regional climate protection
authorities, special districts, air pollution control and air
quality management districts, or joint powers authorities that
many choose to participate.
4)Makes available to fund the Local Emission Reduction Program
revenue from the auction of AB 32 GHG emission allowances.
5)Allows ARB to certify a local GHG emission reduction plan only
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after it has determined the projects identified in the plan
are consistent with the requirements for the use of moneys
derived from valid regulatory fees, as established by the
California Supreme Court in Sinclair Paint Co. v. State Bd. of
Equalization.
FISCAL EFFECT
The costs to administer this program will depend upon its scope,
and the scope will depend upon appropriation to the program of
proceeds from the auction of AB 32 GHG emission allowances,
which ARB estimates to be in the billions annually, and upon the
extent local governments adopt local GHG emission reduction
plans. This bill does not appropriate auction revenue to the
Local Emission Reduction Program and local rates of
participation are unknown; therefore, costs to implement the
program are unknown. The cost estimates below are intended to
illustrate costs that typically could be expected to result from
any program similar to the Local Emission Reduction Program;
however, actual program costs may vary considerably.
1)Annual costs to ARB as follows: $450,000 in 2012-13 to
develop standards and guidelines and $150,000 thereafter to
revise them; $580,000 annually to certify locally adopted GHG
emission reduction plans; $150,000 to oversee program
expenditures; and $100,000 to provide general administrative
support (special fund.)
2)Costs to Strategic Growth Council in the hundreds of thousands
of dollars annually to award local grants (special fund).
3)Cost pressure of an unknown amount, but potentially in the
millions of dollars annually, to fund the Local Emission
Reduction Program (special fund).
COMMENTS
1)Rationale . The author contends it appropriate to ensure
California's communities participate in, and benefit from, the
state's efforts to reduce GHG emissions. The author notes
that, among its many requirements, the California Global
Warming Solutions Act (aka AB 32) requires the state's GHG
emission reduction efforts to maximize the total benefits to
California. The author further contends the Local Emission
Reduction Program will encourage California's local
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governments, along with their community partners, to use their
unique local knowledge to identify GHG emission reduction
opportunities that realize vital community benefits, such as
expansion of low-carbon and public transportation, protection
of natural resources, promotion of sustainable infrastructure
development, creation of local jobs, and many other local and
statewide priorities.
The author, reacting to concerns expressed by representatives
of cities and other local agencies, has expressed an interest
in amending the bill to allow entities other than counties to
be eligible for Local Emission Reduction Program grants.
2)Background . AB 32 (N��ez, Chapter 455, Statutes of 2006)
requires California to limit its emissions of GHGs so that, by
2020, those emissions are equal to what they were in 1990. To
that end, AB 32 requires ARB to quantify the state's 1990 GHG
emissions and to adopt, by January 1, 2009, a "scoping plan"
that describes the board's plan for achieving the maximum
technologically feasible and cost-effective reductions of GHG
emissions reductions by 2020. In keeping with AB 32, ARB
adopted its AB 32 scoping plan in December of 2008.
Consistent with AB 32, the scoping plan includes both direct
regulatory measures and market-based compliance mechanisms.
Direct regulatory requirements of the type that have typified
California's regulation of environmental quality, such as
efficiency and emissions standards, account for over
three-quarters of the plan's GHG emissions reductions. The
remainder of the plan's GHG emissions reductions-about
20%-result from a cap-and-trade market in which regulated
emissions sources-mainly large industrial sources and
electricity generators--buy and sell emissions allowances that
give the holder the right to emit a quantity of GHGs.
ARB will issue emissions allowances through quarterly auctions
at which time a portion of these allowances will be made
available for purchase. For 2012-13, ARB's auctions are
estimated to generate roughly $660 million to upwards of $3
billion. The governor's budget for 2012-13 assumes that the
state will receive $1 billion from such auctions.
3)Sinclair May Not be the Right Legal Framework. As described
above, the bill allows ARB to certify a local GHG emissions
reduction plan only after it has determined projects included
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in the plan are consistent with the Sinclair Paint decision.
Informal conversations with attorneys in the Department of
Justice seem to indicate that reference in the bill to the
Sinclair decision may limit the state's ability to defend this
bill, should it become law and be subject to legal challenge,
by binding the state's defense to the Sinclair decision and
its legal implications. The Sinclair Paint decision primarily
concerns the authority of the state to levy a fee on a
particular party, not on the ability of the state to expend
fee revenues in particular ways. Therefore, the author would
be better served by deleting from the bill reference to
Sinclair altogether.
4)Support . This bill is supported by the Sonoma County Water
Agency (sponsor) and a number of local governments and
nonprofit community organizations who conclude this bill will
help achieve the state's GHG emission reduction goals while
encouraging locals to identify and undertake local GHG
emissions reduction projects that maximize benefits to
California communities.
5)Opposition . This bill is opposed by the California Chamber of
Commerce and other industry groups who contest the legal
authority of ARB to raise and distribute revenue through the
use of an auction mechanism. These opponents contend it is
premature for the Legislature to allocate cap-and-trade
revenue when questions about the legality of the auction
program remain.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081