CSAC Bulletin Article

Housing, Land Use and Transportation 03/02/2012

Climate Change

Legislative Hearing on Cap & Trade Auction Revenues 

The Assembly Budget Subcommittee #3 on Resources & Transportation convened on February 29 to hear from the Legislative Analyst’s Office, the Department of Finance, the California Air Resources Board, and the Public Utilities Commission on issues related to the pending Cap & Trade auction and expenditure of anticipated revenues. The background materials identify a number of issues for the Legislature to consider in the coming months including setting the parameters for spending Cap & Trade revenues, such as funding activities and programs that meet the Sinclair nexus test, and outlining a process for developing an expenditure plan for those revenues, which the LAO points out, likely requires a better understanding of how much Cap & Trade will generate in the upcoming fiscal year. 

Governor Brown, in his January Budget Proposal for FY 2012-13, provides for $1 billion in budgetary authority to spend Cap & Trade revenues. However, there are differences in opinion between the Administration and LAO on exactly how much Cap & Trade will generate (a range between $650 million and $3 billion). Also, the Governor’s Budget does not include a detailed expenditure plan. Brown argues that a plan should come only after the first GHG emissions allowances auction in August 2012 so that DOF has a better idea of revenues available. However, the Governor has indicated that High Speed Rail is an appropriate use of the funds, as well as backfilling the General Fund for current GHG emission reduction expenditures.

Aside from the Governor’s plan, Speaker John Perez has also introduced legislation, AB 1532, which is anticipated to become a vehicle for specific parameters the Legislature will set related to the kinds of activities and programs can be funded with Cap & Trade revenues. 

Because over 40 percent of the GHG emissions in California come from the transportation sector, many stakeholders are interested in this revenue stream as a potential funding source to meet SB 375 goals. Many stakeholders are voicing suggestions for expenditure of these funds, but resolution is not likely for months to come. CSAC staff remains actively engaged on this issue and will report back as new information becomes available.

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