BILL ANALYSIS �
SB 1572
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1572 (Pavley) - As Amended: June 25, 2012
Policy Committee: Natural
ResourcesVote:6-3
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allocates up to $250 million in proceeds from auction
of AB 32 emissions allowances collected in 2012-13 to numerous
specified priority projects. Specifically, this bill:
1)Requires all revenue from cap-and-trade auction revenues to be
deposited in the Greenhouse Gas Reduction Account (GGRA),
created by this bill.
2)Makes available up to one-half of cap-and-trade auction
revenues collected in 2012-13, or $250 million, whichever is
less and excluding money the Budget Act authorizes the
Department of Finance to use for General Fund savings, to the
following broadly defined purposes, provided revenues are at
least $550 million:
---------------------------------------------------------
|SB 1572 Priority Projects Areas and Allocation Amounts |
---------------------------------------------------------
|---------+-----------+-----------------------------------|
| % of | $* |Project Types^ |
| Funds* | | |
|---------+-----------+-----------------------------------|
| 35.6 | 89 |K-12 Energy Projects |
| | million | |
|---------+-----------+-----------------------------------|
| 20.0 | 30 |Sustainable Land Use and |
| | million |Transportation |
|---------+-----------+-----------------------------------|
| 12.0 | 30 |Rapid Transition Assistance for |
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| | million |Industrial Facilities |
|---------+-----------+-----------------------------------|
| 12.0 | 30 |Clean Vehicle Rebates |
| | million | |
|---------+-----------+-----------------------------------|
| 8.0 | 20 |Public University Projects |
| | million | |
|---------+-----------+-----------------------------------|
| 4.8 | 20 |Goods Movement |
| | million | |
|---------+-----------+-----------------------------------|
| 4.0 | 10 |Residential Energy Efficiency |
| | million | |
|---------+-----------+-----------------------------------|
| 2.0 |5 |Lower-emission School Bus Program |
| | million| |
|---------+-----------+-----------------------------------|
| 1.6 |4 |Energy in Agriculture |
| | million| |
---------------------------------------------------------
---------------------------------------------------------
|* Allocation is the percentage listed, unless the dollar |
|amount is greater. |
|^ Priority project types include many specific |
|subcategories eligible for funding. |
---------------------------------------------------------
3)Assigns various state agencies to administer monies and awards
from each priority project area generally through existing
programs.
4)Establishes general criteria with which all priority projects
must comply, including that any project reduce greenhouse gas
emissions.
5)Requires the Air Resources Board (ARB) to publish on its
website information on projects funded pursuant to the
requirements of this bill.
FISCAL EFFECT
1)Cost of approximately $2 million to ARB in 2012-13 to
administer cap-and-trade auction revenue deposited in the GGRA
and publish information on its website (GGRA). (Presumably
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ARB would incur much of these costs absent this bill as a
result of the receipt and necessary administration of
cap-and-trade auction revenue in 2012-13, which may total in
the hundreds of millions of dollars.)
2)One-time costs of an unknown, but presumably significant
amount, ranging from the hundreds of thousands to low millions
of dollars, to the various agencies identified in the bill to
administer priority project programs (GGRA).
COMMENTS
1)Rationale. The author intends the priority projects created
by this bill to immediately receive an allocation of
cap-and-trade auction proceeds generated in 2012-13 to
alleviate budgetary pressure, create jobs in the near term and
utilize existing programs to reduce greenhouse gas emissions.
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. 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 upwards of $660 million in 2012-13. The
Governor's budget for 2012-13 assumes that the state will
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receive $1 billion from such auctions.
3)Not the First Call on Cap-and-Trade Auction Revenue. The
2012 Budget Act provides direction for the cap-and-trade
auction revenue sought by this bill. The main budget bill (AB
1464) authorizes the Department of Finance to use up to $500
million in cap-and-trade auction revenue to offset General
Fund expenditures for purposes consistent with AB 32. The
resources budget trailer bill (SB 1018) creates the Greenhouse
Gas Reduction Fund for the receipt of cap-and-trade auction
revenue and requires Finance to submit, by January 10, 2013, a
bill to the Legislature that details a spending plan for
moneys in the fund.
4)Higher Priority Projects May Exist But Cannot Join the List.
This bill provides a detailed list of priority projects
components that are to receive cap-and-trade revenues. The
author indicates these projects generally utilize existing
programs, which allows for quick expenditure. However, it is
not entirely clear the criteria by which the author selected,
or excluded, potential project subcomponents. It is feasible
there are projects not listed in this bill that better achieve
the goals of quickly deploying auction revenue to alleviate
budgetary pressure, create jobs in the near term and utilize
existing programs to reduce greenhouse gas emissions. The
bill, however, provides no flexible mechanism by which
projects not listed under each category of priority project
could receive 2012-13 cap-and-trade auction revenue.
5)Quick Deployment Sought, But No Appropriation. The author
intends this bill to "immediately" allocate cap-and-trade
revenues to priority projects. Yet, the bill appropriates no
money for these purposes. Presumably, further legislative
action will be needed to appropriate these monies to the
purposes to which they are allocated by this bill. This need
for additional legislative action will delay dispersion of
auction revenue to priority projects.
6)Related Legislation.
a) AB 1532 (J. Perez) establishes the Greenhouse Gas
Reduction Account (GHGRA) to receive regulatory fee revenue
from the auction of greenhouse gas emission allowances and
directs eligible uses of those revenues. The bill passed
the Assembly 49-27 and is pending before Senate
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Appropriations.
b) AB 2404 (Fuentes) would have created the Local Emission
Reduction Program to provide local assistance grants from
auction revenue to develop and implement multibenefit
greenhouse gas emission reduction projects in California's
communities. The bill was held by this committee.
7)Support. This bill is supported by the American Lung
Association, several major educational organizations and
others who support AB 32's goals and who could benefit,
directly or indirectly, from the priority projects listed in
this bill.
8)Opposition. This bill is opposed by California Taxpayers
Association and a long list of 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