Bills to grab carbon cap-and-trade revenues get first hearing

By CMTA Staff

Capitol Update, April 6, 2012 Share this on FacebookTweet thisEmail this to a friend

Three bills hoping to grab revenues from AB 32 will be heard soon in their first policy committees. AB 1532 (Speaker John Pérez, D-Los Angeles) and AB 2404 (Felipe Fuentes, D- Los Angeles) and SB 1572 (Fran Pavley, D-Santa Monica) put AB 32 and the California economy at risk by prematurely anticipating and distributing auction revenues with insufficient information about the potentially serious economic, legal and environmental impacts.

The purpose of cap-and-trade is to reduce greenhouse gas emissions, not raise billions in new revenue for state coffers. AB 32 requires CARB, among other things, to maximize cost-effectiveness, promote technological feasibility and minimize leakage in the plan to achieve 1990 emission levels by 2020.  Satisfying these AB 32 criteria is a high priority because they form the foundation of the twin goals of AB 32 – to achieve emission reductions while protecting the California economy.

These bills wrongly assume CARB has legal authority to withhold allowances and conduct the auctions, and the bill would spend revenues without a good understanding of the serious impacts of collection and expenditure on program cost-effectiveness and emissions leakage.

There is much we do not know about the program. The first auction will occur in November 2012 to offer 2015 vintage allowances to willing buyers.  There are estimates, but we don’t know how much will be raised by this auction. We don’t know the decisions that regulated industries will make regarding future capital expenditures, product pricing and hiring decisions to incorporate this new, as yet unknown, cost into their operations.  We don’t know how much leakage will occur due to competitive pressures from companies operating outside the state without the restrictions of AB 32.  CARB has no means to track, monitor or prevent leakage at this time. Finally, the litigation that may arise concerning the collection and/or use of auction revenues could upset plans to spend the revenues as anticipated by the bill.

Both Assembly bills will be heard in the Assembly Natural Resources Committee on April 16th. SB 1572 is set for the Senate Environmental Quality Committee for April 17th.

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