Lawmakers weigh in on what to do with the carbon-trading windfall
Since the enactment of AB 32 in 2006, California’s greenhouse gas emissions reduction law, analysts have speculated about how to spend the money generated from the law’s cap-and-trade carbon allowance auctions, the first of which is set for this November.
On Tuesday, the State Assembly passed new legislation, AB 1532, that narrowed the options. The bill, which the California Chamber of Commerce has described as a “job killer” and an “illegal tax,” passed 47-26 and awaits action in the Senate. If ratified, it would establish a “Greenhouse Gas Reduction Account” within the state Air Pollution Control Fund and authorize spending auction proceeds on clean energy technology, low-carbon transportation, conservation and green energy research and development.
On Friday, the California Air Resources Board held a public hearing to discuss where auction funds might be spent, as a panel of speakers from across the state and country — representing a broad array of industries and interests — sounded off on where this sizable stream of new funding might be best directed.
Jim Earp, executive director of the California Alliance for Jobs, said that the funds should be spent on improvement of transit networks and infrastructure. Ellen Hanak, a fellow at the Public Policy Institute of California, suggested that a best fit is renewable energy and efficiency projects. Lester Snow, director of the California Water Foundation (and former head of Water Resources for the state), pointed to habitat restoration on the Delta and making California’s vast, energy-intensive water delivery systems more efficient.
The governor’s 2012-13 budget [PDF] also lays out a general framework for where cap-and-trade auction funds might be allocated.
- Clean and efficient energy
- Low carbon transportation
- Natural resources protection
- Sustainable infrastructure development
“These are obviously broad categories,” said air board chair Mary Nichols of the governor’s proposals in her remarks. “No one has yet suggested any precise breakdown or amounts of money to go to specific programs.”
Decisions are being made piecemeal. For instance, revenues from utilities will be returned to electricity customers, though exactly how is still being worked out.
Perhaps it’s no surprise that no one yet knows how California’s auction funds will be spent. There is still debate over whether the funds should be considered a fee or a tax — a legal determination that, under Proposition 26, could potentially limit where money is directed.
And as Climate Watch senior editor Craig Miller reported earlier this month, no one can predict with any certainty at what price carbon will trade in the California market. Most estimates put the figure at between $15 and $30 per metric ton, which means that when the market is fully up to speed in 2015 it could pull in as much as $6 billion a year. (The governor’s budget stated the program could generate as much as $1 billion in its first year.)
As for how cap-and-trade might state boost the state’s economy, Nichols pointed to a recent analysis of the Regional Greenhouse Gas Initiative cap-and-trade system, which includes ten states in the Northeast. That program has reportedly injected $1.6 billion into the regional economy through such measures as consumer bill reductions and sales of energy efficient equipment.
The period for public comment on carbon auction funds spending (click for online comment form) is open until June 22.