The New Cap & Trade Battlefront: How to Spend the Revenues

Lawmakers weigh in on what to do with the carbon-trading windfall

Craig Miller

AB 32 requires California's largest emitters to meet carbon reduction targets. If a firm's emissions are below state-mandated targets, it may auction off its remaining "allowances" to firms that exceeded their emissions targets.

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.

  • Ronald Stein

    CARB’s Fuels Policies are
    Throwing California’s Economy Under the Bus

     

    In the last 20 years, Southern
    California’s population has doubled, but the air quality has gotten BETTER, not
    worse.  New rules by government bureaucrats, however, are coming into play
    that will increase the costs of electricity, gasoline, roads, homes, services,
    you name it, for literally no significant betterment of air quality.

     

    Californians already pay among
    already the steepest prices in the nation for gasoline.  A good deal of
    this is due to the state’s mandatory unique gasoline formula and combined taxes
    at the pump which are the country’s second highest. 

     

    Cap and Trade, a cornerstone of
    AB 32, the California Global Warming Solutions Act.  Projections place the
    cost of cap and trade at anywhere from 50 cents to one dollar per gallon added
    to the retail price of gasoline here just for the 37 million in CA, for a
    go-it-alone State that contributes less than 1% of the GHG’s being emitted into
    the worlds atmosphere, and billions in increased general energy costs.

     

    Under cover of AB 32, CARB is
    forcing billions of dollars in higher costs on our struggling economy to reduce
    greenhouse gas emissions associated with global warming.

     

    The problem is that California
    and its 37 million citizens contribute less than 1% of the world’s greenhouse
    gases. Solving a world GHG problem is not the responsibility of the few that
    live in California.  Maybe China and India with 2.4 BILLION contributors
    may be, but not California’s 37 million.

     

    CARB touts California’s
    “leadership” in the war on climate change. The “leadership” premise is similar
    to crossing the street within the confines of the crosswalk and getting hit by
    a bus – you’re right, but “DEAD RIGHT!”

     

    Those who feel that spending
    billions to reduce greenhouse gases in a State that contributes less than 1% of
    the world’s GHG’s may be right,  but they are dead right as it accelerates
    the exodus of businesses and jobs from California, and an unemployment rate
    that consistently remains among the highest in the country.

     

    With California transportation
    fuels already among the country’s most expensive and our gas taxes the second
    highest in the USA, it’s impossible to justify the imposition of billions in
    higher fuel costs just to retain the title of “leader” in greenhouse gas
    reductions.

     

    CARB would do well to get out of
    the crosswalk and stop throwing California’s economy further under the bus.

  • http://www.facebook.com/people/Don-Wood/1319856454 Don Wood

    The legislature should make sure that some mimimum percentage of these funds are used to help California energy customers use gas and electricity more efficently, helping them save money on their increased energy bills

  • http://twitter.com/GabrielRoybal Gabriel Roybal

    is any of this on the June 5th Election Ballot?