BILL ANALYSIS �
SB 1572
Page 1
Date of Hearing: August 29, 2012
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 1572 (Pavley) - As Amended: August 24, 2012
SENATE VOTE : Not relevant
SUBJECT : California Global Warming Solutions Act of 2006: AB
32 Investment Fund
SUMMARY : Specifies expenditure of funds derived from the
auction of greenhouse gas (GHG) allowances pursuant to the
cap-and-trade program adopted by the Air Resources Board (ARB)
pursuant to AB 32 (N��ez), Chapter 488, Statutes of 2006.
Specifically, this bill :
1)Appropriates any auction revenues collected in the 2012-13
fiscal year, over and above those revenues used by the
Department of Finance (DOF) to offset General Fund
expenditures pursuant to the Budget Act, to ARB as follows:
a) Requires a specified record be prepared regarding
use of the funds.
b) Requires funds benefit "disadvantaged communities,"
as defined by CalEPA, to the maximum extent feasible.
c) Requires ARB to allocate 60 percent of the funds for
GHG reduction projects undertaken by industries covered
by the cap-and-trade program. Authorizes ARB to allocate
any of these funds to the Treasurer for use in accordance
with his or her authority under the California Pollution
Control Financing Authority (CPCFA) Act and authorizes
CPCFA to provide rebates in the amount of the sales and
use tax paid on qualifying equipment.
d) Requires ARB to allocate 10 percent to the Strategic
Growth Council (SRC) to be awarded to metropolitan
planning organizations or councils of governments for
regional and local GHG reduction plans and to local
governments and non-profits for local climate innovation
projects according to specified criteria.
e) Requires the Treasurer and the SRC to report
SB 1572
Page 2
annually to the Legislature, and ARB to publish,
specified details regarding projects and activities
funded.
f) Provides that the provisions above are severable.
2)Continuously appropriates to ARB any moneys collected by ARB
from the sale of allowances to the University of California
(UC) and the California State University (CSU) for ARB to
expend on GHG reduction projects undertaken by UC or CSU.
Requires the recipient to provide a direct or in kind
investment in GHG abatement projects to match 20 percent of
the funds received.
3)Continuously appropriates to ARB any moneys collected by ARB
from the sale of allowances to a water supplier for ARB to
expend for purposes of reducing GHG emissions associated with
water suppliers. Requires the recipient to provide a direct
or in kind investment in GHG abatement projects to match 25
percent of the funds received.
4)Establishes related findings regarding ARB's cap-and-trade
program and the purposes of the bill.
EXISTING LAW :
1)Requires ARB, pursuant to AB 32, to adopt a statewide GHG
emissions limit equivalent to 1990 levels by 2020 and adopt
regulations to achieve maximum technologically feasible and
cost-effective GHG emission reductions.
2)Authorizes ARB to permit the use of market-based compliance
mechanisms to comply with GHG reduction regulations, to be
adopted by 2011 and operative by 2012, under limited
circumstances once specified conditions are met.
3)Creates the Greenhouse Gas Reduction Fund and requires all
moneys, except for fines and penalties, collected by ARB from
the auction or sale of allowances pursuant to a market-based
compliance mechanism to be deposited in the Fund and available
for appropriation by the Legislature.
4)Requires the DOF to submit proposed legislation, on or before
January 10, 2013, that provides a detailed spending plan for
moneys in the Fund, unless the Legislature passes a bill on or
SB 1572
Page 3
before August 31, 2012, that establishes a long-term spending
strategy for moneys in the Fund. Requires any state agency,
prior to expending any moneys appropriated from the Fund, to
prepare a specified record.
5)Authorizes the DOF to allocate or otherwise use an amount of
at least $500 million from moneys deposited in the Fund, and
make commensurate reductions to General Fund expenditure
authority, to support the regulatory purposes of AB 32.
Requires ARB and DOF, at least 60 days prior to allocating any
funds to submit a plan for the expenditure or use of the funds
to the chairpersons of the Senate and Assembly Appropriations
Committees and the Chairperson of the Joint Legislative Budget
Committee. Prohibits the use of funds for the purpose of
developing a high-speed rail system for at least two years.
FISCAL EFFECT : Unknown
COMMENTS :
According to ARB, a total reduction of 80 million metric tons
(MMT), or 16 percent compared to business as usual, is necessary
to reduce statewide GHG emissions to 1990 levels by 2020. ARB
intends to achieve approximately 78 percent of the reductions
through identified "regulatory" measures. ARB proposes to
achieve the balance of reductions necessary to meet the 2020
limit (approximately 18 MMT) through a cap-and-trade program.
The first auction of allowances in the cap-and-trade program
will take place on November 14, 2012, and the auctions will be
held quarterly thereafter.
The 2012-13 Budget Act (AB 1464) authorizes DOF to allocate at
least $500 million from cap-and-trade revenue, and make
commensurate reductions to General Fund expenditure authority,
to support the regulatory purposes of AB 32. The Resources
Budget Trailer Bill (SB 1018) creates the Greenhouse Gas
Reduction Fund for cap-and-trade auction revenues and requires
DOF to submit proposed legislation, on or before January 10,
2013, that provides a detailed spending plan for moneys in the
Fund, unless the Legislature passes a bill on or before August
31, 2012 that establishes a long-term spending strategy for
moneys in the Fund. AB 1532 (John A. P�rez) establishes
procedures for deposit and expenditure of cap-and-trade auction
revenues pursuant to an investment plan.
SB 1572
Page 4
This bill appropriates 100 percent of any leftover 2012-13
auction revenue not allocated by DOF, but specifies expenditure
for only 70 percent. The author intends that the Strategic
Growth Council get 20 percent of funds, rather than 10 percent,
which would bring the total up to 80 percent. AB 1186 (Skinner)
claims 20 percent of the same leftover revenue for GHG reduction
projects at schools. To avoid the two bills creating
conflicting uses for the same funds, the author and the
committee may wish to consider limiting the appropriation in
this bill to 80 percent of the leftover funds.
The bill's allocation of 60 percent of the funds for GHG
reduction projects undertaken by industries covered by the
cap-and-trade program appears to reward the most inefficient
covered entities. Those that have achieved the least emission
reductions and therefore need to purchase the most allowances
will be eligible to receive the most funds. Redistributing
allowance revenue in this fashion may reduce the incentive for
private investment in emission reductions that cap-and-trade is
intended to create.
While this bill emphasizes the urgency of spending 2012-13
revenues, it allows three years for the funds to be encumbered
and imposes no deadline on completion of funded projects. The
author and the committee may wish to consider whether shorter
deadlines are appropriate for this bill, reserving longer-term
projects to the investment plan process for future fiscal years
outlined in the 2012-13 Budget Act and AB 1532.
The set-aside and continuous appropriation for UC/CSU and water
suppliers will remove a significant amount of auction revenue
from legislative oversight and control through the budget
process. In addition, carving out a guaranteed return of
auction revenue to these entities is likely to invite other
sectors to seek similar treatment, which would further undermine
the design of the cap-and-trade program. The author and the
committee may wish to consider whether diminishing legislative
oversight through the continuous appropriation is justified and
whether the set-aside of auction revenues for UC/CSU and water
suppliers is appropriate.
REGISTERED SUPPORT / OPPOSITION :
Support
SB 1572
Page 5
American Lung Association
California Black Health Network
California Special Districts Association
Green Technical Education & Employment Board of Directors
University of California
Opposition
California Chamber of Commerce
California League of Food Processors
California Manufacturers & Technology Association
Western States Petroleum Association
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092