Cap-and-trade auction revenue bill moves to Senate floor

By CMTA Staff

Capitol Update, Aug. 27, 2010 Share this on FacebookTweet thisEmail this to a friend

A bill buried in the paperwork from last year has been dusted off and will be put up for a vote in this last week of session. AB 1405 (Kevin De Leon, D-Los Angeles) would siphon 10% of revenue raised by the California Air Resources Board (CARB) in a cap-and-trade program for use in low income, environmentally-impacted communities.

AB 1405 is premature since a cap and trade regulation is still in development at CARB. It is unknown what, if any, auction will be included in the program. CARB must balance cost effectiveness, co-pollutant impacts, and technological feasibility as they develop the regulation. AB 1405 allows CARB to ignore these criteria, and there is no economic or environmental analysis to justify the bill. An arbitrary amount of funding for broad unrelated purposes with unknown economic and environmental impacts is the bill’s shaky foundation. The legislature would retain appropriations authority, but not enough to provide oversight for this new and potentially massive program. For example, 10% of total revenues from a 100% auction at $35 per ton would equal $1.28 billion in 2020.

Numerous advisory committees, workshops and individual meetings working on regulations for cap and trade have included the health impacts of climate change. Final regulations are expected to be adopted before January 1, 2011. A large auction in a cap and trade program will increase costs and cause leakage - a shift in economic activity and emissions to other locations. Revenues raised must first be used to minimize this disastrous environmental and economic impact.  Diverting funds to other purposes will result in lost jobs and will increase emissions out of state.

Finally, it is likely that using revenue from the cap and trade program for the purposes in this bill is an illegal tax rather than a legal fee. Litigation on this issue will confuse markets, create uncertainty and undermine effective implementation of AB 32.

AB 1405 has four working days to be voted on by the Senate and return to the Assembly floor for a vote on concurrence with Senate amendments.

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