Legislature reveals plans for $1.2B in cap-and-trade cash

Source: Anne C. Mulkern, E&E reporter • Posted: Friday, August 19, 2016

California’s Senate leaders yesterday unveiled a plan to spend $1.2 billion in revenues from the state’s cap-and-trade program for carbon emissions, money the Legislature has held onto for two years.

The Golden State’s legislative body controls 40 percent of the funds generated by the economywide program under a deal made with Gov. Jerry Brown (D), who spends the other 60 percent. Political battles over the money have kept the Legislature’s dollars unspent. Those fights included failed efforts to use the dollars to win a two-thirds majority vote for extending cap and trade past 2020, according to some familiar with negotiations on the money.

A.B. 1613, introduced yesterday, proposes parceling out funds to a number of programs, including local transit and rail, rebates for electric and other clean cars, and money to help low-income residents. Funds also would go to efforts attacking short-lived climate pollutants; to bankroll solar, insulation and other energy upgrades on homes of low-income residents; and to add green spaces to low-income neighborhoods.

“We have the opportunity to follow through on the promise of cap and trade, which is to use polluters’ dollars to clean up the air we breathe,” Senate President Pro Tem Kevin de León (D) said in a statement. “Working families in our most economically disadvantaged and polluted areas deserve to benefit from investments now so they have access to the cleanest technologies and the tools to make their communities more livable.”

The bill appeared aimed at garnering support from top lawmakers, as it would allocate money “to key priorities for members in the Assembly and Senate, as well as the Governor,” the statement from de León’s office said.

The Golden State’s carbon trading system, the only one of its kind in the country, auctions pollution allowances to businesses that have the highest greenhouse gas emissions. Those permits were $12.73 per carbon ton in the latest auction.

Sales of carbon permits have reaped nearly $4 billion for California through February, the latest time frame available. That total doesn’t include the portion that is controlled by the Public Utilities Commission and returned to utility ratepayers.

The program right now is authorized through 2020, and there’s an ongoing effort by Brown and others to extend it. The last auction for carbon allowances saw low interest among bidders, and some blamed concerns about the future stability of the program as well as legal questions. A pending lawsuit claims that the cap-and-trade program is a tax that needed to be approved by a two-thirds vote of the Legislature under state law.

Brown’s administration earlier this week worked to get the program extended through legislation, offering language in a bid to amend S.B. 32. That bill right now authorizes greenhouse gas targets, with a 2030 goal of 40 percent below 1990 emissions levels, in line with an executive order Brown signed last year. As of now, the measure does not detail a specific means of hitting that aim (ClimateWire, Aug. 16).

Republicans did not immediately comment on the proposal for spending the $1.2 billion, with some saying they had just seen the language yesterday and needed time to analyze it. State Senate Minority Leader Jean Fuller’s office pointed to a letter she had received in May from the state’s nonpartisan Office of Legislative Counsel on legal questions about cap and trade. Fuller had asked the counsel whether the Global Warming Solutions Act from 2006 authorized Brown or the Air Resources Board to extend cap and trade past 2020.

The 10-page letter gives detailed answers but says in one part that “it is our opinion that the act does not authorize the governor or ARB to establish a greenhouse gas emissions limit that is below the 1990 level and that would be applicable after 2020.”

Some interested groups said that it is important to spend the money that the cap-and-trade program has generated so far, even with the lawsuit pending, and as battles continue over extending the program.

“What we do know is that the state has $1.4 billion in the bank right now that they can use for the purposes of reducing greenhouse gases,” said Alvaro Sanchez, director of environmental equity at the Greenlining Institute, a Berkeley-based group that argues for spending more cap-and-trade funds to help disadvantaged communities. “Let’s do that.”

“Every year we go without funding … is one year that we’re punting” on work that can shrink emissions, he added.

The portion of funds the Legislature has to spend is $1.4 billion, he explained, but the Senate proposal would keep $200 million in reserves. Brown has advocated keeping $500 million in reserves, Sanchez said.

Brown has allocated $2.2B so far

Victoria Rome, California legislative director at the Natural Resources Defense Council, also advocated spending funds now.

“We are only starting to see benefits from climate investments in our communities with cleaner cars, energy efficiency, solar power, access to transit, and more,” Rome said in her blog. “With the release of its plan today, the Senate recognizes that we must get more money out the door now to help people throughout California.”

The portion of cap-and-trade funds that Brown controls goes to fixed categories, including development of a high-speed rail line connecting Los Angeles and San Francisco, affordable housing near transit, local transit and rail programs, and low-carbon transit operations.

About $2.2 billion of cap-and-trade proceeds has been designated for programs in Brown’s budgets through fiscal 2015-16.

The bill introduced yesterday in the Senate would give the biggest individual amount of money in the Legislature’s pot — $175 million — to a new program called “Transformational Climate Communities.” Neighborhood groups with plans that package housing with renewable energy, green improvements to streets and other actions could apply for the funds. Little Tokyo, for example, in Los Angeles, has been working on such a comprehensive program, said Sanchez with the Greenlining Institute.

The effort would be run by the state’s Strategic Growth Council, which already distributes the funds for sustainable housing given under the 60 percent of the proceeds that Brown controls.

Another $100 million would go to a new effort dubbed “Urban Greening.” It would put green spaces in communities where they are lacking, Sanchez said. While there is already a program funded by cap-and-trade proceeds that puts trees in neighborhoods, this one would not be limited to trees.

For example, Sanchez said “you might be able to turn alleys into green alleys,” where a company would “carve out pavement and add green space.” He conceded that could be controversial in a state with a historic drought, but said there are improvements that don’t require too much water.

Five programs totaling $120 million would target short-lived climate pollutants. The efforts include waste diversion and reducing black carbon from wood smoke, refrigerants, and methane emissions from dairy and livestock operations.

The Senate bill would give $100 million for transit and intercity rail, which already receives dollars through the 60 percent of the proceeds that Brown controls. Yesterday, the state Transportation Department announced recipients for $390 million in that category (ClimateWire, Aug. 17). Earlier this summer, $622 million for transit programs was allocated (ClimateWire, June 8).

The bill also would provide $100 million for those rebates for buying electric and other zero-emissions vehicles and $150 million for the program helping people swap out polluting cars for cleaner ones. Both efforts are run by the Air Resources Board and have been very popular, so much so that the agency has added an income-level cutoff for eligibility.

The plan proposes $100 million for energy efficiency upgrades and weatherization programs. Nonprofit Grid Alternatives and others install solar on homes in low-income areas.

The Western States Petroleum Association, or WSPA, an oil trade group, and California Independent Oil Marketers Association, a trade group for fuel distributors, did not respond to requests for comment. Both represent companies that are among those obligated to comply with cap and trade. WSPA has also been involved in talks on extending the cap-and-trade program.