BILL ANALYSIS �
AB 2593
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 2593
AUTHOR: Bradford
AMENDED: Introduced
FISCAL: Yes HEARING DATE: June 25, 2014
URGENCY: No CONSULTANT: Rebecca Newhouse
SUBJECT : GREENHOUSE GAS REDUCTION FUND: DIVERSITY REPORTING
SUMMARY :
Existing law :
1) Under the California Global Warming Solutions Act of 2006
(commonly referred to as AB 32), requires the 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 (HSC) �38500 et seq.).
2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury and requires all moneys, except for fines and
penalties, collected pursuant to a market-based mechanism be
deposited in the fund and requires the Department of
Finance, in consultation with the state board and any other
relevant state agency, to develop, as specified, a
three-year investment plan for the moneys deposited in GGRF.
(Government Code �16428.8).
3) Requires moneys from GGRF be used to facilitate the
achievement of reductions of greenhouse gas emissions in
this state consistent with the California Global Warming
Solutions Act of 2006. (HSC �39712).
This bill requires businesses with gross annual revenues
exceeding $25 million that participate in programs administered
by ARB that receive funding from the GGRF to report to ARB on
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efforts to increase procurement from women, minority, and
disabled veteran enterprises.
COMMENTS :
1)Purpose of Bill . According to the author, "In California,
women and minority-owned businesses represent the bulk of
small businesses. Since diverse business owners are more
likely to hire diverse workers, the success of women-,
minority-, and disabled veteran-owned businesses translates
into jobs for women, minorities, and disabled veterans.
However, businesses participating in programs to reduce
greenhouse gas emissions do not currently report on
procurement from women, minority, and disabled veteran
enterprises. To ensure that access to new job opportunities
are available to all Californians, this bill requires large
businesses to report on efforts to increase procurement from
women, minority, and disabled veteran enterprises."
2)Background .
Cap-and-trade auction revenue . ARB has conducted seven
auctions of GHG emission allowances so far. These auctions
have resulted in approximately $734 million in proceeds to
the state. Several bills in 2012 provided legislative
direction for the expenditure of auction proceeds including
the following:
a) SB 535 (de Le�n), Chapter 830, Statutes of 2012,
requires that 25% of auction revenue be used to benefit
disadvantaged communities and requires that 10% of auction
revenue be invested in disadvantaged communities.
b) AB 1532 (J. P�rez), Chapter 807, Statutes of 2012,
directs the Department of Finance to develop and
periodically update a three-year investment plan that
identifies feasible and cost-effective GHG emission
reduction investments to be funded with cap-and-trade
auction revenues. AB 1532 specifies that reduction of GHG
emissions through strategic planning and development of
sustainable infrastructure projects, are eligible
investments of GGRF.
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c) SB 1018 (Budget Committee), Chapter 39, Statutes of
2012, created the GGRF, into which all auction revenue is
to be deposited. The legislation requires that before
departments can spend monies from GGRF, they must prepare
a record specifying: (1) how the expenditures will be
used, (2) how the expenditures will further the purposes
of AB 32, (3) how the expenditures will achieve GHG
emission reductions, (4) how the department considered
other non-GHG-related objectives, and (5) how the
department will document the results of the expenditures.
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.
AB 32 auction revenue investment plan . The first three-year
investment plan for cap-and-trade auction proceeds, submitted
by Department of Finance, in consultation with ARB and other
state agencies in May of last year, identified sustainable
communities and clean transportation as one of the key
sectors that provide the best opportunities for achieving the
legislative goals and supporting the purposes of AB 32,
including maximizing GHG emission reductions and cobenefits
to the state. The plan recommended the aforementioned sector
receive the largest allocation of funds from the GGRF. The
other two areas recommended for auction revenue allocation in
the investment plan are energy efficiency and clean energy,
and natural resources and waste diversion.
Cap-and-trade budget expenditures . The Budget Act of 2014, SB
852, passed both houses on June 15, 2014. Expenditure
categories for $870 million of cap-and-trade funds include
transit, affordable housing and sustainable communities, high
speed rail, low carbon transportation, energy efficiency and
renewable energy, and natural resources, and waste diversion.
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3)Diversity reporting . In 1988, the Public Utilities
Commission (PUC) adopted General Order 156 (GO 156) to
establish the Women Owned and Minority Owned Business
Enterprise program to increase diversity in various utility
operations and procurement processes. Subsequent legislation
has codified and expanded the program. GO 156 requires PUC
regulated electrical, gas, water, wireless telecommunications
service provider, and telephone corporations with gross
annual revenues exceeding $25 million to submit annual
detailed and verifiable plans that include goals and
timelines for increasing procurement from minority, women,
and disabled veteran business entities. GO 156 includes
rules and regulations for the utilities' compliance with the
program, and requires participating utilities to inform,
recruit, and obtain at least 20% of their products and
services purchased within a five-year period from women- and
minority-owned businesses (15% from minority-owned businesses
and 5% from women-owned businesses) and an additional 1.5%
from disabled veteran business enterprises.
4)Which businesses are required to report ? AB 2593 requires
businesses with gross annual revenues exceeding $25 million
that participate in programs that receive cap-and-trade
funding to report to ARB. It is unclear what businesses would
be subject to this requirement. What type of financial
involvement does "participation" entail? It is unclear
whether these businesses participate by directly receiving
the funds, or whether more indirect participation, such as
automobile manufacturers in programs like the Clean Vehicle
Rebate Project that provides rebates to consumers who
purchase low or zero-emission vehicles, would be subject to
the reporting requirement.
As discussed above, a range of investments for cap-and-trade
monies was proposed in the AB 32 auction proceeds investment
plan, as well as the Governor's budget and Legislative
proposals. These potential projects exist in almost all
sectors, including natural resources, transportation, waste,
energy, and others. However, the bill only specifies that
businesses are required to report for projects funded through
cap-and-trade revenues administered by ARB. As these
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investments are being made across sectors, it is unclear why
this bill only singles out the fraction of projects that ARB
will be administering.
These projects to reduce GHGs funded through cap-and-trade
monies will undoubtedly take very different shapes, and
involve a wide range of entities and businesses, all with
varying roles and involvements in these projects. This,
coupled with the lack of clarity regarding what constitutes
"participation" makes it incredibly difficult to identify all
of the businesses that should be reporting pursuant to this
bill.
In addition, there are no guidelines for what types of
information the businesses report.
5)In what way will the information be used ? It is unclear how
the diversity information will be used and what purpose it
will serve in terms of directing cap-and-trade investment
funds. The bill does not currently specify how or if the
information will be used by ARB.
Projects funded with cap-and-trade funds are required to
facilitate the reduction of GHG emissions, and will be
carefully selected based on their ability to achieve the
maximum GHG emission reductions and other cobenefits such as
in-state job creation, improved air and water quality, and
other environmental and economic benefits.
The implication of this bill in requiring diversity reporting
from businesses involved in cap-and-trade funded projects is
that the information will be used in the future as a factor
for cap-and-trade investment project selection.
Cap-and-trade funds are intended to be invested by priority
of greatest GHG emission reduction, with consideration of
other environmental and economic benefits. Is it appropriate
to insert information from mandatory diversity reporting as
another criterion in the selection of cap-and-trade funded
projects?
SOURCE : Author
SUPPORT : None on file
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OPPOSITION : None on file