The California Global Warming Solutions Act of 2006 establishes the State Air Resources Board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board from the auction or sale of allowances as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation by the Legislature. Existing law requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a 3-year investment plan for the moneys deposited in the Greenhouse Gas Reduction Fund. Existing law requires a state agency expending moneys from the fund to create a record, prior to the expenditure, that includes, among other things, a description of the expenditure proposed to be made and a description of how the proposed expenditure will contribute to achieving and maintaining greenhouse gas emissions reductions, as specified.

The California Global Warming Solutions Act of 2006 establishes the State Air Resources Board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board from the auction or sale of allowances as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation by the Legislature. Existing law requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a 3-year investment plan for the moneys deposited in the Greenhouse Gas Reduction Fund.

This bill would additionally require the 3-year investment plan to identify conflicting or overlapping policies, where applicable, in current state strategies to meeting the states greenhouse gas emissions reduction goals and targets by sector.

 THIRD READING  

Bill No: SB 207

Author: Wieckowski (D)

Amended: 3/24/15

Vote: 21

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 4/15/15

AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: California Global Warming Solutions Act of 2006: Greenhouse Gas Reduction Fund

SOURCE: Author

DIGEST: This bill requires the expenditure record, prepared by state agencies to which Greenhouse Gas Reduction Fund (GGRF) monies have been appropriated, to be published on the Internet web sites of both the administering agency and the California Air Resources Board (ARB) prior to the agency expending any of the appropriated GGRF monies.

ANALYSIS:

Existing law:

1. Requires, under the California Global Warming Solutions Act of 2006 (AB 32, Nunez, Chapter 488, Statutes of 2006), the ARB to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. (Health and Safety Code §38500 et seq.)

2. Establishes the GGRF as a special fund in the State Treasury; requires that all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund; and requires the Department of Finance, in consultation with the ARB and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8)

3. Requires a state agency, prior to expending any moneys appropriated to it from the GGRF, to prepare a record (expenditure record) consisting of a description of the expenditure, how the expenditure will further the regulatory purposes of AB 32 and contribute to achieving and maintaining greenhouse gas emission reductions, how the agency considered the applicability and feasibility of other non-greenhouse gas reduction objectives, and how the agency will document the results achieved from the expenditure. ARB is required to develop guidance on reporting and quantification methods to ensure the requirements of this section are met. (GOV §16428.9)

This bill:

1. Requires the expenditure record, prepared by state agencies to which GGRF monies have been appropriated, to be published on the Internet web sites of both the administering agency and the ARB prior to the agency expending any of the appropriated GGRF monies.

2. Makes technical cleanup changes to existing language for clarity and consistency with current language in code.

Background

Cap-and-Trade. The cap-and-trade program is a market-based regulation that sets a declining cap on total GHG emissions from sources making up approximately 85% of statewide emissions. The program is a key component of the State Air Resources Board’s Scoping Plan, which describes the state’s approach to reduce GHG emissions to 1990 levels by 2020 as set forth under AB 32. Proceeds from the sales and auctions of GHG emissions permits (allowances) in the cap-and-trade program are deposited in the GGRF and are subsequently appropriated to 12 agencies for administering programs that support the goals of AB 32 to reduce GHG emissions

Cap-and-Trade Auction Revenue. ARB has conducted ten cap-and-trade auctions to date, generating $1.6 billion in total proceeds to the state. Appropriations from the first two fiscal years, 2013-14 and 2014-15, totaled more than $900 million. Several bills in 2012, and one in 2014, provided legislative direction for the expenditure of auction proceeds.

SB 535 (de León, Chapter 830, Statutes of 2012) required that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities.

AB 1532 (J. Pérez, Chapter 807, Statutes of 2012) directed the Department of Finance to develop and periodically update a three-year investment plan. This plan identified feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues, focusing on three sectors, including: sustainable communities and clean transportation, energy efficiency and clean energy, and natural resources and waste diversion.

SB 1018 (Budget and Fiscal Review Committee, Chapter 39, Statutes of 2012) created the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend monies from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32, (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures.

SB 862 (Budget and Fiscal Review Committee, Chapter 36, Statutes of 2014) required the ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emission reduction reporting and quantification methods.

ARB’s Expenditure Record and Fiscal Procedures Guidance. The ARB’s 2014 “Cap-and-Trade Auction Proceeds Interim Guidance to Agencies Administering Greenhouse Gas Reduction Fund Monies: Expenditure Record and Fiscal Procedures” document, prepared pursuant to SB 862, provides guidance to assist state agencies receiving appropriations from the GGRF in preparing their expenditure records.

The document states, “The final expenditure record and memorandum [documenting concurrence between the agency and the ARB] are public documents and will be posted on the ARB auction proceeds website,” and “State agencies that receive appropriations from the GGRF must prepare an expenditure record for those fiscal year monies prior to expending any monies on projects.” Though stated in ARB’s guidance document, neither of these points are required in statute, and as of today, not all agencies that receive GGRF monies have expenditure records available on the ARB Internet web site.

Comments

Purpose of Bill. According to the author, “Cap-and-trade auction revenue, with proceeds to the state of over $1.6 billion since the initial auction, has been appropriated to more than 11 different agencies to administer a variety of programs in the 2014-15 fiscal year. In this and future fiscal years, auction revenue will most likely continue to be distributed to other entities over the course of the program as revenues from the program increase. Current law requires these agencies to produce a record documenting how their programs will reduce greenhouse gas emissions, as well as further the regulatory purposes of AB 32—a requirement necessary to ensure the use of the revenue is justified. And although ARB has issued interim guidance specifying the documents that these various agencies create as public, this is not required by current law. SB 207 simply codifies this important provision in ARB’s interim guidelines to ensure statutorily enforceable transparency in the expenditure record process so that both the public and Legislature have timely and straightforward access to these important records.”

Related/Prior Legislation

AB 1532 (Pérez, Chapter 807, Statutes of 2012), SB 535 (De León, Chapter 830, Statutes of 2012), and SB 1018 (Budget and Fiscal Review Committee, Chapter 39, Statutes of 2012), together established the GGRF and provided direction for how auction proceeds received by the GGRF are appropriated and expended.

SB 862 (Budget and Fiscal Review Committee, Chapter 36, Statutes of 2014) established the requirements that ARB develop guidelines for agencies administering GGRF funds.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 4/27/15)

None received

OPPOSITION: (Verified 4/27/15)

None received

Prepared by: Rebecca Newhouse / E.Q. / (916) 651-4108, Laurie Harris / E.Q. / (916) 651-4108

4/29/15 16:07:25

**** END ****

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Bob Wieckowski, Chair

2015 - 2016 Regular

Bill No: SB 207 Hearing Date: 4/15/2015

Subject: California Global Warming Solutions Act of 2006: Greenhouse Gas Reduction Fund

ANALYSIS:

Existing law:

1. Under the California Global Warming Solutions Act of 2006, often referred to as AB 32 (Núñez, Pavley), Chapter 488, Statutes of 2006, requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. (Health and Safety Code §38500 et seq.)

2. Establishes the Greenhouse Gas Reduction Fund (GGRF) as a special fund in the State Treasury; requires that all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund; and requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8).

3. Requires a state agency, prior to expending any moneys appropriated to it from the GGRF, to prepare a record (expenditure record) consisting of a description of the expenditure, how the expenditure will further the regulatory purposes of AB 32 and contribute to achieving and maintaining greenhouse gas emission reductions, how the agency considered the applicability and feasibility of other non-greenhouse gas reduction objectives, and how the agency will document the results achieved from the expenditure. ARB is required to develop guidance on reporting and quantification methods to ensure the requirements of this section are met. (GOV §16428.9)
   
   

This bill:

1. Requires the expenditure record, prepared by state agencies to which GGRF monies have been appropriated, to be published on the Internet web sites of both the administering agency and the ARB prior to the agency expending any of the appropriated GGRF monies.

2. Makes technical cleanup changes to existing language for clarity and consistency with current language in code.

Background

1. Cap-and-Trade.

The cap-and-trade program is a market-based regulation that sets a declining cap on total GHG emissions from sources making up approximately 85% of statewide emissions. The program is a key component of the State Air Resources Board’s Scoping Plan, which describes the state’s approach to reduce GHG emissions to 1990 levels by 2020 as set forth under AB 32. Proceeds from the sales and auctions of GHG emissions permits (allowances) in the cap-and-trade program are deposited in the GGRF and are subsequently appropriated to 12 agencies for administering programs that support the goals of AB 32 to reduce GHG emissions.

2. Cap-and-Trade Auction Revenue.

ARB has conducted ten cap-and-trade auctions to date, generating $1.6 billion in total proceeds to the state. Appropriations from the first two fiscal years, 2013-14 and 2014-15, totaled more than $900 million. Several bills in 2012, and one in 2014, provided legislative direction for the expenditure of auction proceeds.

SB 535 (de León) Chapter 830, Statutes of 2012, requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities.

AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, directed the Department of Finance to develop and periodically update a three-year investment plan. This plan identified feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues, focusing on three sectors, including: sustainable communities and clean transportation, energy efficiency and clean energy, and natural resources and waste diversion.

SB 1018 (Budget Committee) Chapter 39, Statutes of 2012, created the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend monies from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32, (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures.

SB 862 (Budget Committee) Chapter 36, Statutes of 2014, requires the ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emission reduction reporting and quantification methods.

3. ARB’s Expenditure Record and Fiscal Procedures Guidance.

The ARB’s 2014 “Cap-and-Trade Auction Proceeds Interim Guidance to Agencies Administering Greenhouse Gas Reduction Fund Monies: Expenditure Record and Fiscal Procedures” document, prepared pursuant to SB 862, provides guidance to assist state agencies receiving appropriations from the GGRF in preparing their expenditure records.

The document states, “The final expenditure record and memorandum [documenting concurrence between the agency and the ARB] are public documents and will be posted on the ARB auction proceeds website,” and “State agencies that receive appropriations from the GGRF must prepare an expenditure record for those fiscal year monies prior to expending any monies on projects.” Though stated in ARB’s guidance document, neither of these points are required in statute, and as of today, not all agencies that receive GGRF monies have expenditure records available on the ARB Internet web site.

Comments

1. Purpose of Bill.

According to the author, “Cap-and-trade auction revenue, with proceeds to the state of over $1.6 billion since the initial auction, has been appropriated to more than 11 different agencies to administer a variety of programs in the 2014-15 fiscal year. In this and future fiscal years, auction revenue will most likely continue to be distributed to other entities over the course of the program as revenues from the program increase. Current law requires these agencies to produce a record documenting how their programs will reduce greenhouse gas emissions, as well as further the regulatory purposes of AB 32—a requirement necessary to ensure the use of the revenue is justified. And although ARB has issued interim guidance specifying the documents that these various agencies create as public, this is not required by current law. SB 207 simply codifies this important provision in ARB’s interim guidelines to ensure statutorily enforceable transparency in the expenditure record process so that both the public and Legislature have timely and straightforward access to these important records.”

Related/Prior Legislation

AB 1532 (Pérez), Chapter 807, Statutes of 2012, SB 535 (De León), Chapter 830, Statutes of 2012), and SB 1018 (Budget and Fiscal Review Committee), Chapter 39, Statutes of 2012, together established the GGRF and provided direction for how auction proceeds received by the GGRF are appropriated and expended.

SB 862 (Committee on Budget and Fiscal Review) Chapter 36, Statutes of 2014, established the requirements that ARB develop guidelines for agencies administering GGRF funds.

SOURCE:

Author

SUPPORT:

None on file

OPPOSITION:

None on file

-- END --