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Key Climate Change Bills and Cap and Trade Expenditure Plan Clear Legislature in Final Days

$900 million Allocated, but Uncertainty of Cap-and-Trade Program Remains

September 2, 2016
The League tracked legislation dealing with climate change and measures to reduce California’s greenhouse gas emissions (GHG) throughout the session.
Although the League did not take formal positions on all of these bills, cities will want to be aware of their effects.

Extending State GHG Goals and Changing Air Resources Board
In the face of strong opposition from business groups, oil companies, and agricultural interests, SB 32 (Pavley) and AB 197 (E. Garcia) cleared final legislative hurdles and are currently on Gov. Jerry Brown’s desk. The Governor’s office was heavily engaged in the effort to pass these bills.
SB 32 provides the California Air Resources Board (ARB) with clear authority to limit statewide GHG emissions equivalent to at least 40 percent below 1990 levels by 2030. However, SB 32 does not explicitly extend the cap and trade program. The Governor attempted to insert last-minute amendments into SB 32 to clarify that the program shall continue beyond 2020, but was unsuccessful. 
AB 197 establishes a new Joint Legislative Committee on Climate Change Policies to provide ongoing, permanent oversight over the implementation of the state’s climate policies and the Greenhouse Gas Reduction Fund (GGRF). The Joint Legislative Committee on Climate Change Policies is comprised of at least three senators and three assembly members. AB 197 also makes substantial changes to ARB. The measure imposes six- year term limits on voting members and adds two members of the Legislature as non-voting, ex-officio members, one appointed by each house.
At a press conference announcing the passage of SB 32 and AB 197, Governor Brown was asked about the fate of the Cap-and-Trade program given the significant decline in recent auction revenues and the pending challenge to the legality of the Cap-and-Trade program in court, which argues that the program functions as a tax, and not a fee. He said that the passage of SB 32 provides leverage to lawmakers to reach a deal with opponents of the Cap-and-Trade program that would prefer such a program over more rigorous regulations to reduce pollution.
The Governor and others suggest the Cap-and-Trade program, a market based system, is not needed to reduce GHG emissions. With SB 32 providing ARB clear authority to regulate GHG emissions to achieve a 40 percent reduction below 1990 levels by 2030, ARB could force GHG emitters to take action or face penalties without a process to help offset the cost of compliance. 
At the press conference, Governor Brown warned “they’re going to plead for a market system.”
$900 Million in Remaining Cap-and-Trade Funds Allocated, New Transformative Climate Communities Program to be Launched
In addition to SB 32 and AB 197, the Legislature passed AB 2722 (Burke), a measure that establishes the programmatic framework for the new Transformative Climate Communities Program (TCCP) that received funding in the Cap-and-Trade expenditure program. The TCCP is very similar to a program that the League, the California State Association of Counties, the Local Government Commission, and other have sought the last three years. Its purpose is to provide funding to develop and implement neighborhood-level climate community plans that include multiple, coordinated GHG emissions reduction projects that provide local economic, environmental, and health benefits to disadvantaged communities.
The approved Cap-and-Trade expenditure plan  is the first meaningful discretionary spending of Cap-and-Trade auction proceeds in two years.
Specific allocations are as follows:
  • $135 million for the Transit and Intercity Rail Capitol Program to fund essential local capital projects for bus and commuter rail;
  • $10 million for the Active Transportation Program to fund bicycle and pedestrian programs;
  • $133 million for the Clean Vehicle Rebate Program to assist with the purchase of clean vehicles;
  • $150 million for the Heavy Duty and Off-Road Investments to help develop and pilot cleaner industrial vehicles;
  • $80 million for the Enhanced Vehicle Fleet Modernization program to provide low income families help replacing old vehicles with new, cleaner vehicles;
  • $140 million for the Transformative Climate Communities Program to fund a community-wide approach for disadvantage communities to implement an integrated transportation, housing, and green space development plan to reduce pollution, GHG emissions, and improve local communities;
  • $80 million for the Urban Greening Program to fund green spaces and parks in local communities;
  • $15 million for the Urban Forestry Program to assist disadvantaged communities with tree planting and care; and
  • $2 million for the Strategic Growth Council to assist disadvantage communities and local governments with developing climate. 
Next Steps
There is likely to be a great deal of activity this fall related to the Cap-and-Trade program and implementation of the newly adopted climate change legislation. In particular, the outcome of the pending court challenge to the legality of the Cap-and-Trade program should be determined in the coming weeks.
The November 2016 election will also add to the dynamics of the situation. It is possible that the Democrats in the Assembly and the Senate could win enough seats to regain a two-thirds super majority. If this happens, it is much more likely that the Legislature will resolve the uncertainty around the Cap-and-Trade program by approving it with a two-thirds vote, making it a tax, instead of a fee.
League staff will also closely monitor and update cities on developments associated with ARB’s actions as they relate to implementation of the new GHG emission reduction targets contained in SB 32.
Finally, in the next few weeks, League staff will update its website and the Cap-and-Trade Guide to reflect the 2016-17 Cap-and-Trade expenditure plan. These resource materials are meant to assist cities with accessing Cap-and-Trade funds.

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