Legislators see cap-and-trade as funding resource

By CMTA Staff

Capitol Update, April 25, 2013 Share this on FacebookTweet thisEmail this to a friend

Several bills hoping to grab revenues from the AB 32 carbon credit auction are working through their first policy committees. Of significance are:

  • AB 574 (Bonnie Lowenthal, D-Long Beach) requires CARB to set standards for the use of cap and trade revenue of sustainable communities projects;
  • AB 1051 (Raul Bocanegra, D-Los Angeles) wants to use cap-and-trade revenue for grants and loans for new housing near transit in “Sustainable Communities for All” program;
  • AB 1375 (Ed Chau, D-Monterey Park) creates a Clean Technology Investment Fund using cap-and-trade revenues and matching private funds; and
  • SB 798 (Kevin de Leon, D-Los Angeles) creates the California Green Infrastructure Bank Act and specifies that it is eligible for cap-and-trade revenue and declares the intent to appropriate a specified amount for carrying out the act.

CMTA opposes these bills.

For the cap and trade program the California Air Resources Board (CARB) created a limited number of allowances that represent the volume of greenhouse gas emissions that may be emitted in the state over the three compliance periods between now and 2020. The projected revenues stem from the withholding and then sale, rather than distribution, of these allowances to regulated entities. Litigation filed by the California Chamber of Commerce is underway to determine whether the sale of allowances is authorized by AB 32. It would be unwise to appropriate money until the legal questions have been fully resolved and we have a clear understanding of how any legally raised revenues may be spent. If we do not wait for this determination, any expenditure not in compliance could subject the state general fund to liability for repayment to injured parties. 

Also, the revenue anticipated in the cap and trade program derives from 100 percent withholding for transportation fuels emissions and 25 to 70 percent withholding for large industry emissions. At this time there is great uncertainty about the amount of revenue that will be raised by the program, the impact of allowance withholding on regulated entities and the level of emissions leakage this policy may promote. It is unknown what the sale price for allowances will be over time. CARB is undertaking a multi-year analysis of the potential leakage impact of these higher costs on the economy – adjustments in the amount of withholding may be required to minimize leakage as required by AB 32.

Finally, AB 1532 (John Perez, D-Los Angeles) and SB 535 (de Leon), passed in 2012, established the process and criteria for creating an investment plan for the use of revenues raised by the cap and trade program. That work is now underway. In addition, in 2013 CARB will be updating the AB 32 scoping plan completed in 2008. The updated plan should include a full assessment of progress toward reaching the 2020 goal, recommend new strategies and perhaps recommend adjustments for existing policies. When this work is complete, the priorities can be revisited to determine if revenues are needed to achieve the environmental goals or if the program focus should be on protecting against emissions and economic leakage.

All of these bills jump out ahead of the information needed to make wise policy choices.

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