Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation

Good morning. I'd like to call this Budget Sub 4 meeting to order. This is first, I just want to stop and emphasize that this is a really complicated topic. Lots of history and lots of politics involved. And I think staff has given us two excellent reports from LAO and from committee staff, and I really appreciate that.

I think it helped frame the issue a lot. This is a once in a lifetime opportunity. I shouldn't say once in a lifetime. Once in a decade opportunity for us to stop and review GGRF expenditures to date. And so I really want to make sure that today we have a full exploration of all of the options that are out there.

We want to hear what are the creative ideas, what are the questions that still need to be answered as we look at the whole issue of reauthorization and look again at what we do with continuous expenditures, et cetera. So to try to make this a robust exploration of these ideas, we're going to change our normal committee format some as we go forward. First, we will have introductory comments from many of the committee members that are here. Then we will have presentations from our two panelists and the LAO's office.

When we finish that, before we start our committee dialogue, we're going to invite members of the public to come up and comment, but we don't. How many people in the audience plan on commenting today? Put them up nice and high for us, would you? Okay, great. Well, then we should be able to get through all that.

If it's 15 people that put their hand up, we should be able to handle that, because we want to hear from you before we begin our discussions, because we want to try to make sure all of the creative ideas or interesting insights that the public has are out on the table before we begin our discussion.

Then what we will do is we will go hopefully in the order of the items presented in the staff report, and that is we will call the agencies up so that they can be here. We won't have agency presentations, but the agencies will be sitting up here, and we will try to look at GGRF spending by the order that they're presented in the report, which would be high speed rail, then HCD for housing, and then the transit, et cetera. So all of that hopefully allows us to have a good, healthy exploration.

The other thing that I want to emphasize, we did it last week when we were talking about fire, but we want this to be a conversation, more of a dialogue than just we hear a presentation, then we ask a couple questions, then we hear another presentation. So we will welcome our panelists to weigh in as we're having a conversation. If our panelists wants to respond, wants to shed an insight, we invite them to do that.

We invite the committee members to have some back and forth and we'll try to stay on one topic, then move to another and move to another as we go forward. And if there is anybody in the public that has made a comment and you want to try to come back, we'll see if we can put you in by putting your hand up. It's a little bit different, but it's recognition of the importance of this exploration.

I know that Assemblymember Irwin has a big responsibility and this is an excellent opportunity for her to hear from Budget Sub 4's sort of examination of this, some additional information with regards to this. And so I hope that we can make this work. I appreciate everybody's cooperation. It may may have a few moments where we have to adjust and again, I hope everybody will cooperate with that and with that, I'm going to open it up for committee member introductory comments.

And the only other thing I can say before I start that is that with this kind of conversation, it would be better for people to talk three times with a short amount than one time for a long amount. Try to make this now that's no reference to Assemblymember Irwin's comments she's getting ready to make. But for everybody else, if we'll all try to keep our comments as brief as we can. Assemblymember.

All right. Well, good morning everybody and thank you, Assemblymember Bennett, for inviting me to this discussion. I hope that it's a robust one. I know that you have hopefully set up the structure where everybody can really have a full discussion. Our state budget is constrained and uncertainty around federal funding for clean energy and climate investment is very concerning.

As a result, GGRF will be asked to play an even more central role in California's climate strategy in the coming years. It is imperative that climate investments funded through GGRF provide a nexus of value and tangible benefits for our constituents.

This could be by providing an affordability benefit cost effectively reducing greenhouse gas emissions, providing seed funding to build energy infrastructure of the future or other uses that provide comparable results for Californians. Washington State's Cap-and-Invest program provides an instructive example of spending that has immediately produced results.

Investments in transportation projects, wildfire mitigation, and salmon conservation kept the promises that were made to voters when the Washington Legislature passed the Climate Commitment Act. Look no further than last November's election when the public soundly rejected a ballot measure to repeal Washington's Cap-and-Invest program.

In evaluating past spending, current spending plans, or ideas for innovative ways to spend future revenues, we need to focus on how this funding can produce results for our constituents and fund projects that everyday Californians can be proud of. Thank you.

Thank you very much. Seeing no other committee members, I'll make my introductory comments. And you know we have significant flexibility in terms of how we spend the GGRF funds. However, I think there's some real value in honoring the underlying principles and concepts that we used when we first adapted cap and trade.

We could easily spend all of this money on non climate change issues just because of the, I think the budget issues that we're going to have in front of us, but I think that would be a real mistake. Cap and trade allows the continued emissions of harmful greenhouse gases.

And because cap and trade allows the continued emissions, I think cap and trade should be a part of the overall effort to eventually eliminate these emissions and deal with the impacts, excuse me, our residents are experiencing by these, by these emissions. Climate change is making our fire threats, for example, much worse.

GGRF funds should have a significant funding to address these impacts. Converting our economy from a carbon based economy to a renewable energy based economy is expensive. Just got back from Norway, both of us, and we saw how expensive it is as they try to make that transition.

Cap and trade funds should help with these costs, incentivizing private investments and to help us reach our climate goal of zero net carbon by 2045. That's what the State of California has adopted is something that we will need GGRF funds to help us be able to reach that goal.

Fundamentally reducing our emissions and adapting to the impacts of climate change should be a major focus of GGRF spending. California is continuing to make substantial investments in reducing greenhouse gas emissions and that has many benefits. Final point I would like to make just from an overall concept about GGRF and California's leadership.

We can't expect others to do their share if California doesn't do its share. I know the argument's often made, hey, California could do what we want, but if everybody else doesn't do anything, we'll have a problem. Well, the opposite is also true. If California doesn't lead, we can't ask and expect others to do the same thing.

The second thing is we have tremendous technological and entrepreneurial talent in California and if we use GGRF funds to help us jumpstart and look at the new technologies involved in converting over to a renewable energy source that will help keep California in a strong competitive position both nationally and internationally.

And we've learned from our past efforts and we should be better at the next decade in terms of how to allocate GGRF funding because of what we've learned with our first decade in terms of trying to allocate those things.

And then finally, while the list can go on, I think this is the most important thing to me, and that is at some point in time, everybody in this room, including we elected leaders, are going to have to look at our children in a couple of decades and we're going to have to answer the question, did we recognize how serious this climate change crisis is, even though it is a slow moving crisis, which is hard for democracies to mobilize about, but did we recognize how serious it was and did we do our best to try to adjust and do something to help protect them from the worst impacts of that?

And I hope that we would be able to say yes. And certainly cap and trade funding and GGRF funding have to play an important role in that. So today I have a list of issues and questions about all of these program and I really look forward to having this great conversation that we could potentially have today. So with that, I'd like to call our panelists up and.

And for the benefit of our panelists, the Assembly members up here are stuck with permanent microphones that we can't. So we have to lean forward. We don't need you to lean forward, but we need you to pull those microphones right up to your mouth because if you're not speaking right into it, people in the back will not be able to hear you. So thank you. All right. Appreciate that. And if you can. And so we're going to start off with LAO.

Good morning, Chair and Assemblymember. Helen Kerstein with the Legislative Analyst Office. We prepared a handout to guide my comments this morning. It's available on your committee's website, our office's website, and I believe the sergeants also have some extra copies if anyone would like one. I'm going to give you two options, Mr. Chair.

One is I can go through the whole handout. I'll try to do it quickly because I know there's a lot that you want to cover today, or I can just skip to the end. Which would you prefer?

Why don't you briefly go through the whole thing so you're setting the initial overview right. But you're good at quickly.

Excellent. Yes, I am quite a speed talker. So I'll start on page one with just a little bit of background on the Greenhouse Gas Reduction Fund. Again, I know that Mr. Chair, you and also Assemblymember Irwin are quite familiar with this, but also, hopefully for the benefit of the audience. The Greenhouse Gas Reduction Fund is supported by the sale of cap-and-trade allowances. So CARB sells those allowances. About half of the value of the allowances go to GGRF. The other half are given away for free, roughly.

And I know you'll go in greater detail on this later on in the presentations, but just to set the context that not all of the allowances are going to GGRF. GGRF revenues vary quite a bit in recent years. They vary from about 2 to $5 billion a year. So they vary quite a bit.

And if you look at that figure on page one, you can see on a quarterly basis how much they vary. You can see that there are a couple periods of time, one that was in about 2016-2017 and another one around 2020 where revenues really fell off.

That was right before the last reauthorization and then also during COVID. So there are a lot of factors that affect these revenues, including market certainty about the program, as well as supply and demand for allowances and a whole host of factors.

But you can see, I mean, I think it's an important kind of point, just how variable they can be. If you turn to page two, we highlight that revenues could be substantially higher if prices ever got close to the price ceiling. So for the program's history, the prices of allowances have generally been at or near the floor.

The ceiling is now around $95. And you can see that for the most of the program's history it's been, you know, allowance prices have been quite a bit lower than that. Currently they're hovering around $30 an allowance, so about a third of the price ceiling.

If you turn to page three, we just highlight a few things about GGRF. One thing to keep in mind is that generating revenues is really not the primary purpose. Of course cap-and-trade is really intended to reduce GHGs through that program structure.

But of course these revenues are really helpful and the fact that the state can direct them and the Legislature specifically can direct them is a really helpful kind of side benefit of the program and it can help mitigate some of the impacts of the program. Also wanted to point out that the design choices that you make in terms of how the program is structured affect GGRF revenues.

So even if one were only to care about GGRF revenues, which I think is probably not the right approach, but even if that were the approach one would wanted to take, it would still be important to think about those design decisions because they will impact your revenues.

And then also just wanted to point out that this concept that spending revenues and cap sectors general, as long as the cap is really limiting GHG emissions, wouldn't reduce GHG emissions further, it would just change where those emissions come from.

So that's different from in the uncapped sectors, but in the cap sectors that's kind of an important, I think, kind of theoretical concept to keep in mind. If you turn to page four, we highlight some of the background on how GGRF has been used in the past.

There's a figure here, a pie chart that shows historically where GGRF spending has gone. And you can see it's gone mostly for climate related programs. It can, at least since the passage of AB 398, which extended the program, be used for any purpose because it's akin to attacks.

But in general it's been used for climate related and environmental related purposes. The biggest share has been high speed rail and I know that's going to be the first area you go into, but there's been substantial funding for affordable housing, various transportation purposes, wildfire resilience, community air protection and that's basically reducing local air pollutants, which has been another concern as well, and various other programs as well.

If you turn to page five, this kind of explains the structure of how we've allocated as a state GGRF revenues in the past that have produced that pie chart. So you can see that I think the first kind of key point is that around two thirds of the revenues have historical historically been allocated by statute.

Most of those revenues have been allocated on a continuously appropriated basis. So they're not going through the annual budget act. There's a table there that shows all of those statutory allocations. You can see the largest one is for high speed rail and it kind of goes down from there.

And you can see that some of them are done on a percentage basis and some of them are done on a set dollar basis. So the percentage ones, of course, depending on how those revenues flow, the amount that's provided to those programs is going to vary. Also wanted to note that the state uses the remainder for what is often referred to as discretionary purposes.

A lot of that money in the past has gone to the Low Carbon Transportation Program, Community Air Protection Program, and variety of other whole host of other programs that have been priorities for the Legislature. In the last couple of budget years, a lot of those discretionary funds, most of them have gone to backfill general fund commitments in the environmental space. So things that Legislature decided to fund from the general fund and then we had our budget problems, there was a switch of funding sources for many of those programs.

A lot of that money has been already programmed out over the next few years. And a lot of that's related to zero emission vehicles and clean energy programs, but not all of it. If you turn to page six, this is kind of where we provide some thoughts for you as you're making these really difficult decisions and important decisions. Because this is, I think, a critical point in terms of when you're thinking about reauthorization.

It's kind of a natural decision point for thinking about what do you want to do with this program and GGRF specifically. So we provide some, some thoughts for you as you undertake these decisions. So some of the key choices we think that you face in this area specifically around GGRF include not just the program design, because as I mentioned before, that's going to affect your revenues, but also how you want to, how you want to allocate those allowances.

All of those allowances have value, including the ones that are being given away for free. So the mix of how much should be given away for free and to what entities and how much should be used for GGRF is going to be a really important decision and it's going to affect the revenues that you have at your discretion.

The second point is I think it's really important to think about whether you want to change those historical funding choices. So again, a lot of it's been in statute and many of those statutory allocations have been in place for about 10 years. So one key question is, have any of your priorities.

Are your priorities the same as they were before? Are they different? To the extent they're different, you could reflect that in your choices of programs to fund. One thing to think about is whether you'd want to get rid of any of those allocations that you have, or you could always add more as well.

But I think one of the things to think about is whether all of those continue to represent your priorities. And another kind of question is, are those funding levels the same funding levels you want? 10 years ago, revenues didn't look quite as robust as they do now.

So especially some of those percentage allocations maybe look different from what they did when the program was originally in place. So you could, for example, consider replacing some of the percentages with dollar amounts or making a whole host of other changes to how you want to direct those important revenues.

If you turn to page seven, this is my last page, we have some factors that we think are really important to consider as you're making these decisions. Of course, the first one is just what are your top priorities? Again, highlighting that some things could have potentially changed, but some things may be the same.

The second issue to highlight is the role of GGRF in addressing affordability. We know this has been top of mind for many members, and we think GGRF can be a really important tool in thinking about how you address affordability. For example, you could certainly use some of the values.

Historically, we have not used GGRF really directly to address affordability, but that's certainly an option. You could, for example, provide rebates to folks from that funding source. And then the next point is the role of GGRF in funding GHG reductions. Again, we'd highlight that you don't necessarily need them to reduce GHGs in the cap sectors, but in the uncapped sectors it can play a really important role.

And you'd really want to think about what do we know about cost effectiveness of those programs, what do we know about the interactions of funding these allocations, the other regulations the state has, which in Many cases we have other regulations that affect emissions and also this program and of course other co benefits because many of the programs that we're talking about funding were, aren't just helpful for reducing GHGs, but they may have a whole host of other co benefits for the state.

So thinking about all those things we think will be important. And then the final point is really this trade off between flexibility and certainty for these allocations. Continuous appropriations provide a lot more certainty to the programs that get them.

They kind of, you know, it's not under discussion the same way in the budget process every year, but there's, it's sort of less flexibility and less oversight for the Legislature every year. It kind of goes on autopilot. And so thinking about which programs you're comfortable providing, that sort of continuous appropriation or statutory allocation and which ones you want to have a little bit more control over and potentially be a little more nimble on, I think will be a really important choice. So those are my prepared comments. Happy to take any questions at the appropriate time and defer to my fellow panelists.

Excellent overview and we're going to ask Dr. Meng and Dr. Cullenward to introduce yourself and your background briefly before you start your presentation. Dr. Meng.

Great. Thank you very much. I have a brief prepared statement and I'm happy to share after the hearing. So good morning and thank you for the opportunity to present about the Cap-and-Trade Program and in particular GGRF. My name is Kyle Meng.

I'm an associate professor of economics at the Bren School of Environmental Science and Management and in the Department of Economics at UC Santa Barbara. Much of my academic research has been about the effectiveness, efficiency, and equity consequences of climate policies around the world and in particular here in California.

Between August 2023 and just five days before Election Day, I served as a senior economist for Climate Energy Environment in the White House Council of Economic Advisors where I advise President Biden on a whole range of analysis in those domains across many policy areas.

My research and my time in the White House has given me a very deep appreciation for what we have here in California and in particular the Cap-and-Trade Program. I see it personally as a world leading example of what pragmatic, effective, economically sound climate policy can look like.

And in fact it became quite a bit of a habit of mine when I was in the White House when evaluating new policy proposals to ask the question, well, what would a cap-and-trade like California do in this situation and then try to reverse engineer a solution from there?

So it really in my mind is a benchmark for how we should be thinking about climate policy. The Cap-and-Trade Program has two components. It's got the carbon market and it's the revenue that comes from selling those permits.

Today's focus is on the permit revenue GGRF, but I think it's also important to highlight that it's the carbon market and the price that it puts on pollution that drives emissions reduction in a cost effective manner. Spending of that revenue is in many ways a secondary benefit that is separate from the core emissions goal of the cap.

So how should that revenue be spent? Again, about half of which goes to the GGRF. As an economist, I believe that the dollars spent should be no different than the dollars spent in the general fund according to state priorities, whether that could be improving health care, expanding public education, investing in housing, or cutting taxes.

But as an environmentalist that believes very much in the durability of the Cap-and-Trade Program, I do think it is important to consider specific spending and environmental and climate priorities like climate adaptation to address wildfire concerns or heat exposure or to address long standing environmental justice concerns.

When it comes to using GGRF to cut emissions, there is an important caveat which is that the funds should target reductions that aren't already incentivized by the carbon market. Otherwise the government risks paying for reductions.

Excuse me, could you repeat that again? I just didn't hear it.

When it comes to using GGRF to cut emissions directly, the caveat is that it should prioritize reductions that the carbon market itself would not incentivize. The issue is that otherwise the government might risk paying for reductions that would have happened anyways. And in my mind the carbon market would do so in a cheaper manner.

There are however, two clear examples in my mind where you would want to spend GGRF funding to reduce emissions directly. The first is to help promote and deploy kind of new technologies that are quite costly that we really want to bring down the cost curves for.

And that, for example, an example like that would be like direct air capture. That would not fall under the cap, traditionally under cap-and-trade, but for which we want to lower the cost for future reasons. The second is when energy prices are actually too high. Even accounting for all the damages from climate change and air pollution.

In most parts of the country, electricity prices need to rise in order to drive down decarbonization. Unfortunately, that is not the case here in California. Electricity prices here are actually too high, even accounting for all the concerns from climate change and local air pollution. And they're continuing to climb.

So importantly, this is not because of costs from cap-and-trade. The cost of generation has largely been held steady over the last few years. But largely this is because of the added costs that our utilities are paying for distribution, a lot of it for wildfire mitigation and so forth.

So this is, I believe, a market failure that needs to be corrected. Too high electricity prices are now a major headwind to California's decarbonization goals, including slowing down the adoption of EVs, heat pumps, and other electric appliances. I believe that permanent revenue can be used to lower retail electricity prices.

A forthcoming analysis by the Environmental Markets Lab, my research group at UC Santa Barbara, finds that up to 1.2 billion allocated annually through the California Climate Credit. That 1.2 billion could lower retail electricity prices by 20 to 35% for all low income households served by the three major IOUs. If you took that same amount of money and just...

Sorry, sorry, what was that percentage?

20 to 35%. If you use that same amount of money and gave it to all households for just the summer months for which electricity bills are highest because of the need for air conditioning, you could lower electricity prices for all households between 10 to 15%.

So in summary, even after a decade in, California's Cap-and-Trade Program continues to be a climate policy that rises to the challenge. It has helped meet the state's emissions targets and will become even more critical as California pursues more ambitious climate goals that demand cost effective solutions.

The program has generated a substantial revenue stream that can support a range of state priorities, including energy affordability. This rare combination of being able to drive bold climate action while advancing fiscal priorities makes a strong case for the program's reauthorization and affirms its value as a model for climate policy moving forward. Thank you.

Thank you. We very much appreciate you taking your time and bringing us your expertise in terms of this, and we'll look forward to having you be part of our conversation shortly. And we'll now go to Dr. Cullenward.

Thank you, Chair Bennett and members of the committee. Good morning. My name is Danny Cullenward. I'm a researcher with the University of Pennsylvania and I'm also the Vice Chair of the Independent Emissions Market Advisory Committee, which is a statutorily created body to advise the California Resources Board and the Legislature with respect to the performance of the Cap-and-Trade Program and other state climate policies.

You're going to need to pull that microphone closer. If you turn your head away from it. People have trouble.

Sounds good. Thank you for the reminder. I want to offer one quick disclaimer, which is that my testimony will be in my capacity as an individual researcher and not on behalf of the committee. Before I give my individual testimony, let me make two brief observations that the committee has agreed to in its consensus process in which I also endorse.

One is that the committee has recommended that the program be reauthorized. And the second, which I'll refer to during my remarks, is that in our latest annual report in chapter three of that report, we provided some significant data about the allocation and distribution of value of allowances in the program historically.

Now, turning to my individual testimony, I'm going to try and build on the remarks we've heard from the other two panelists to talk about how the evolution of revenue might change in the future. Because as we think about reauthorizing the program, we are thinking both about a program that potentially has significantly higher carbon prices, which will increase the overall amount of value in the program. We are also thinking about a program that will reduce the number of allowances over time and that will have the opposite effect.

And so what my written testimony attempts to do is to try and put some quantitative numbers to give you a sense of how the program's overall allowance value might evolve in the future. And similar to the remarks from my colleague from the Legislative Analyst Office, I want to emphasize that the distribution of that allowance value is really important. And as you've heard all of the panelists say, a little bit less than half of the allowances end up funding the Greenhouse Gas Reduction Fund.

A little bit more than 40% end up going to various benefits for utility customers, and about 14% go to large industrial emitters to help protect them against concerns related to competitiveness. The main message of my testimony to you today is that decisions about the market design of the program that will help determine what the price level is in the future and the distribution of how allowances are allocated across those three major categories to the benefit of the Greenhouse Gas Reduction Fund, to the benefit of utilities and especially their customers, and to the benefit of large industrial emitters who have competitiveness concerns.

Those distributional considerations are among the most important, and they are upstream of the choices the Assembly and Senate Budget Committees make as to how to spend the GGRF money. Because the question of how much comes into the GGRF is dictated by the market design of the program and how the allowances are split up.

So to provide some quantitative context for the range of outcomes you might expect, I've produced a couple of scenarios. If you look at the figures in the handout. The first figure is a visual depiction of the current market design in the program, which sets minimum and maximum carbon prices.

And I've developed three scenarios that take off from historical data to slightly higher price levels, which I think are probably too low to envision in a reauthorized context. I've looked at a scenario where prices approximately double from their current levels, and a scenario where they approximately triple, just to give you some sense of a range of possibilities that's allowed under the current program design.

From those scenarios, I've then tried to calculate the approximate impact of the distribution of allowances that's currently in the system, if that decision is maintained in a reauthorized context to give you a sense of how much allowance value would be in the program and to which of those three entity categories that distribution would be split up. And at a very high level, the 20 year outlook is we are looking at allowance value that is somewhere between $132 billion and $311 billion over 20 years.

I want to be very clear. That's the total value. And if you continue to have the allowance allocation split as they have been done historically, the GGRF would see about 45% of that. And in my handouts and in a companion report, I provided full tables with that. Over the next five years, I think we're looking at potentially large allowance value numbers. The scenarios would indicate between 41 and $104 billion. And this again is in my written testimony.

I think one of the most challenging things about talking about these numbers is when you annualize them, when you try and bring them back to the annual flows that are involved, we are potentially looking at scenarios where if on the low price side, we could see a reduction in greenhouse gas revenues because we are looking at lower supplies of allowances, and if prices do not rise sufficiently high enough to overcome that lower supply, you could end up with lower revenues coming into the Greenhouse Gas Reduction Fund.

For the medium and higher priced carbon scenarios analyzed in my report, you would see an increase. But I think it's important to emphasize that most of the money would come in the first decade of reauthorization. And as we look out to the future, those revenues would decline over time.

So I hope this information helps give you some context for the size of the program, the size of the greenhouse gas reduction fund moving forward. And I would again emphasize that decisions about the market design of the program are the most important to determine what that carbon price is, and decisions about how to allocate the allowances are extremely important to figuring out how much of the money goes to the Greenhouse Gas Reduction Fund versus utility benefits and so on.

Those are decisions that have traditionally been made and delegated to the Air Resources Board rather than directly informed by specific guidance from the Legislature. Thank you very much for your time.

Thank you very much. Really appreciate having this in advance so that we were able to read this. Dr. Meng, we're looking forward to I know you've emailed your comments, so we'll make sure that those are all in the record. We want people to be able to look at this hearing and get themselves up to speed if they were not able to be here, because this hearing will be archived and anybody will be able to take a look at it.

Before we open it up to public comment, I did want to mention one thing that I failed to mention, and that is that Assemblymember Irwin has had a number of hearings about reauthorization, but I thought that far and away the most effective one was the very first one where she brought representatives from the State of Washington here, and they talked to us about a program that is so supported by the residents that they they're so supported by the residents that they were willing to fight off an attempt to try to end their Cap-and-Trade Program there.

But I thought they gave us lots of insights, and one of them was in terms of innovation being one of the important expenditures. So I just wanted to compliment you for that. So now we're at this unusual part of the program where normally we would have public comment at the very end.

Oftentimes we by then we have a lot of Assembly members that have had to move on to other committee hearings, et cetera. But we're going to try to see if we can get our public hearing in, get all the public comments in. Before we start our discussion. I do want to recognize that after public hearing, we will try to go, as we mentioned, in order Is that the problem? All right. We will try to go.

I think that has to be up. How's that? Any different? Okay. It's a politician's worst nightmare. Some people are saying they can't hear me in the back. I mean come on. Right. But I do recognize that high speed rail has a 10:30 meeting that they have to go to. So we will do high speed rail.

I think as soon as you return from that we will make that the agency that we will have conversations. But we may have moved on to other agencies while we're waiting. So with that would the people who put their hands up and said they were planning on making comments, would you please line up so we can get a rough idea of how many you are? And I hope we don't go over the 15 who put their hands up.

Could a sergeant give me a rough idea how many people are in. In line there? Right. Great. Could you? About 20. All right. I think we can get all 20. So a sergeant. If you'll block that wherever we are there. That's the last speaker for this part. And then if you'll identify. See that's what's happening.

The add ons are. All right. Okay. So one minute maximum. If you can go faster than that. Great. Right. If you support the same position, we're happy to let you come back up for the one minute. But don't repeat the exact same position. We'd rather have that those comments come after, after this and we're ready to go and look forward to hearing from you. Please, your name and you have one minute. Thank you.

Good morning. Julia Levin with the Bioenergy Association of California. We strongly support reauthorization of cap-and-trade. We urge you to prioritize the spending of GGRF based on the priorities in the climate change scoping plan. This is a science based plan that is well vetted and it lays out very clearly what our priorities need to be to meet the state's climate goals. Above all that is short lived climate pollutant reduction, the most urgent thing we can do. It is protection of natural and working lands.

It is achieving carbon negative emissions and it is protecting public health. When you do things like convert organic waste to energy, you increase energy reliability, you achieve climate mitigation and adaptation and you provide a lot of jobs and economic benefits in a circular economy. If you follow the priorities in the scoping plan, we will reach our climate goals. Thank you.

We may call you back up for some comments during the discussion. Thank you.

Good morning, Chair and members. Rico Mastrodonato with the Trust for Public Land. Want to thank the committee and staff for reflecting in the agenda our request to see a modest continuous appropriation to urban greening and the Community and Urban Forestry Program. There's no doubt or debate that global temperatures are rising.

And the byproduct of that is also not debatable. More extreme heat, more extreme storms, sea level rise. We're not prepared now for that. If there's anything that's appropriate to continuously appropriate, it's something a deadly phenomenon or byproduct of climate change that we know is going to get worse. And at least for the near future, there's nothing we can really do about it. Global temperatures are rising and so are global emissions. Thank you very much.

Good morning, Chair. I just want to highlight. Sorry, my name is Erica Parker. I'm with Californians Against Waste. I just want to highlight the critical role that calrecycles programs have played in achieving cost effective greenhouse gas reductions on a dollar per ton basis. These are among most some of the most efficient climate investments the state has made.

Historically these programs were funded through the greenhouse gas reduction Fund, but during the general fund surplus years that support shifted. Today there are the we have no other dedicated funding sources besides GGRF and that has proven to be inconsistent.

The lack of stable funding is a major concern as local governments need reliable Support to implement 1383 infrastructure programs and without the stable funding, implementing these programs could impact affordability through garbage rates. Additionally, funding for food recovery and community composting is essential.

These are high impact climate solutions with social and economic co benefits as our first panelists have discussed earlier and much of the work is led by small under resourced...

Thank you very much.

Thank you.

All right, one minute. Good morning Chair and members. Baani Behniwal with The Climate Center. We respectfully urge the Legislature to dedicate significant and continuous appropriations to nature based solutions in line with the AB 1757 targets. California cannot achieve its carbon neutrality goal and protect communities from climate change without investing in its natural, urban and working lands. Implementing these solutions identified in the targets requires sustainable and ongoing funding. But at present these solutions have only received limited discretionary support that do not match the critical role that they play.

Nature based solutions not only directly address climate change by reducing emissions and sequestering emissions, they also buffer families from the rising costs tied to extreme weather, energy, food, housing, and insurance, while also providing a suite of complementary benefits like cleaner air and water. Nature based solutions are some of the most cost effective and high impact climate strategies available, delivering billions of dollars in avoided damages while safeguarding Californians from climate disasters. Therefore...

Thank you very much.

Thank you.

Good morning, Chair Bennett, committee members. Sofia Rafikova with the Coalition for Clean Air. Just wanted to echo our support for prioritizing GGRF funding programs for programs that clean up our transportation sector. As transportation contributes to almost half of California's GHG emissions and in particular we support funding for programs that encourage the transition to zero emission vehicles and reduction in vehicle miles traveled. We would also like to see a greater focus in supporting low-income communities.

The Coalition for Clean Air helped pass AB 1515 2015 which mandated a minimum of 25% of GGRF funds to be spent in a way that provides benefits to people living in disadvantaged communities. We'd love to see the Legislature exceed this commitment this year to make sure that disadvantaged communities are protected from climate impacts. And finally, we encourage the Legislature to look at funding alternatives such as state and federal transportation budgets to backfill any clean transportation programs that GGRF is unable to cover.

Thank you for beating the clock.

Margie Lie, Samson Advisors, here on behalf of the Southern California Public Power Authority whose membership includes 12 local publicly owned utilities that serve about 2.5 million homes and businesses, all of which are committed to reducing GHGs consistent with the state's climate goals. It's important to recognize that the electric sector is the backbone of our climate goals by decarbonizing the grid and supporting electrification amongst the transportation and building sectors.

The success of this effort is predicated on keeping costs down for electric customers and it's essential to ensure families can pay their bills, businesses stay in our community and consumers have incentives to electrify. As such, we strongly encourage the Legislature to strategically prioritize the GGRF to help electric utilities like SCPPA members to invest in clean energy related infrastructure and facilitate electrification to achieve our climate goals. Thank you so much.

Good morning, Chair and members. My name is Brian Shobe and on behalf of the California Climate and Agriculture Network and 22 other food and farming organizations, we're urging your support for continuous appropriation of 15% of GGRF for agricultural climate solutions that also ensure food affordability. These solutions are some of the most cost effective solutions we have.

They save farmers and ranchers thousands of dollars per year on water, energy and other inputs and they increase our food system's resilience to climate impacts. CalCAN also supports the call to reduce free allowances and to eliminate offsets and to use the resulting GGRF revenue to more directly lower costs for low income households which includes many farmers and farmworkers. Thank you.

Good morning. Mark Stivers with the California Housing Partnership. I don't know how it didn't make the staff report, but we have a coalition of over 80 affordable housing, transit and tenant advocates who are very much seeking to maintain the continuous appropriation for the Affordable Housing and Sustainable Communities Program.

AHSC, as we call it, brings affordable housing near transit and then improves the transit and active transportation modes in the area. It has been an effective and cost effective GHG reduction strategy, reducing more than 5.7 million metric tons of GHG emissions over its lifetime and reducing VMT by 512 million miles. But its co benefits are unmatched.

We like to say it's the only program that beats all the Legislature's priorities: climate, housing, transit, affordability, equity, and jobs. We've produced more than 20,000 affordable rental homes, reducing payments for low income families by more than $10,000 a year. And we all know housing is the biggest expense in a family's budget. It's bought more than 1000 new transit vehicles, 1500 miles of bike lanes, 28,000 transit passes.

Thank you very much.

65% has gone to disadvantaged communities. Thank you.

Good morning. My name is Lauren Rebrovich and I'm with Housing California. We're part of the coalition that Mark just mentioned and we're here to also advocate for the continuous 20% appropriation of GGRF funding to the AHSC program.

The AHSC program is central to achieving our statewide climate goals through investment in affordable homes and transit infrastructure developments that do serve our low income Californians while also reducing greenhouse gas emissions. Our state has a goal of building 2.5 million new homes by 2030, and this will not happen if we don't continue to fund AHSC.

Thank you, thank you. Thank you very much. And when you're repeating, we just want to get all the major concepts out, please. So try not to repeat what somebody else has just already covered for us. Thank you. Go ahead.

Good morning, Chair Bennett and members. Megan Cleveland with the Nature Conservancy. First, we urge the Legislature to reauthorize cap-and-trade and make important adjustments to elevate the role of nature based solutions. And then secondly, we'd like to urge the Legislature to continuously appropriate 25% of GGRF to nature based solutions.

We'd like to align our comments with those of The Climate Center and regarding the multiple benefits of nature based solutions. And in addition, we'd like to highlight that nature based solutions are among the most cost effective investments. They cost approximately $96 per ton. While other sectors such as the energy sector are upwards of $170 per ton.

Thank you very much.

Thank you.

Good morning. Thank you, Chair Bennett. Mark Fenstermaker for the California Council of Land Trusts. Echo the comments of some of the previous speakers calling for dedicated continuous allocations for natural and working lands. As you've heard, the benefits and restoration enhancement of our soils in terms of sequestration.

But I also want to comment and call for continued funding through the AHSC. Part of the overall funding there goes to the Sustainable Agricultural Lands Conservation Program, which ends up funding protection of some of the key agricultural lands on the on the urban edge. And so this helps prevent urban sprawl and reduces VMT. Goes hand in hand with some of the comments you heard from some of the previous speakers calling for those funds. Thank you so much.

Thank you.

Good morning. Tasha Newman, on behalf of the California Association of Resource Conservation Districts. Resource conservation districts primarily work with private landowners to do critical natural resources and climate resilience work, including wildfire prevention, watershed health, and climate smart ag. And we'd like to echo the comments of nature based solutions and also state that we'd like to see funding go for implementation of 1757. Thank you.

Thank you.

Good morning. Jamie Pew, on behalf of NextGen California, I'd like to align my comments with comments made earlier by our colleagues at the Coalition for Clean Air and California. And I also just want to highlight a basic point that was touched on in the staff report in the panel discussion today.

Reauthorization is an opportunity to grow the pie in GGRF. For example, giving away 12% of allowances for free to industry, which at 2024 allowance prices translates to roughly $1 billion that are not going into the GGRF. That is money that can make these conversations marginally easier. So we'd like to push for the Legislature to advocate for a strong reauthorization that looks at how we can bring that money back into the program. Thank you.

Thank you.

Mr. Chair and members, Andrew Antwih on behalf of the Office of Kat Taylor. Aligning my comments with previous comments regarding natural working land, specifically a 15% set aside continuously appropriated from GGF auction proceeds for smart agricultural climate solutions, money that would be used to reduce the use of water and energy, increase stability for our food supply, assist farmers, ranchers and farm workers to deal more effectively with unpredictable weather events and climate impacts. We also support reducing free allowances and having those funds be made available to reduce energy costs for Californians. Thank you.

Thank you.

Good morning, Chair and members. Eric O'Donnell, on behalf of the Orange County Sanitation District and Valley Sanitary District advocating for small amounts of GGRF allocations for innovative biosolids management projects that have been currently uninvested in. Right now we think there's low hanging fruit in terms of reducing greenhouse gas emissions in that industry for wastewater agencies. Thank you.

Thank you for being brief.

Mr. Chair Members Brendan Twohig on behalf of the California Air Pollution Control Officers Association. For GGRF funding we should be prioritizing programs that cost effectively achieve emission reductions both for greenhouse gases and for criteria pollutants so we can get public health benefits as well. We have a couple Air District programs that do just that.

We've talked about them a lot. AB 617 Community Air Protection Program, also the Farmer Program. We should also be funding the Wood Smoke Reduction Program and the Clean Cars for All Program. And you know, I think going forward it's good that we're looking at the continuous appropriations.

We ought to be prioritizing the programs that achieve, you know, what I, what I've described. So I appreciate your time and glad you're having this thoughtful discussion and really looking at doing this.

Thank you.

Thank you.

Alan Abbes with the Bay Area Air Quality Management District. One, echoing all the comments from my counterpart from CAPCOA and then just additionally calling out the need for continuous appropriation for AB 617 funding and also for the Clean Cars for All Program, both of which have been very effective programs in the Bay Area.

You want to tell everybody what 617 is? Real quick to get it on ready.

AB 617 Community Air Protection Program which was created with cap-and-trade.

Thank you.

Good afternoon or morning I guess. Jamie Fanous with the Community Alliance with Family Farmers. Just echoing the comments that were made by our colleagues at CalPN for a 15% GGRF continuous appropriation for sustainable agriculture programs to support farmland access as well as emergency relief for small scale farmers. Thank you.

Thank you.

Good morning. Alex Leumer on behalf of Pacific Forest Trust, Defenders of Wildlife, California Native Plant Society, and California Trout, adding on to the previous comments about the Natural Working Lands. 1757 targets have created useful nature based climate solutions that can help fight climate change while also helping prepare for the fight ahead.

Actions like forest and watershed restoration as well as protection of riparian areas, mountain meadows, and wetlands provide cost effective GHG reductions while also providing multiple benefits for public health, access to nature, biodiversity, and protecting our water sources and preparing for more wildfire. These investments also help support a restoration economy, echoing support for the 25% allocation for natural working lands. Thank you.

Thank you.

Mr. Chairman and members. Michael Boccadoro on behalf of the Ag Energy Consumers Association. You're going to hear a lot of statistics. Let me give you the statistics for the Dairy Digester Program, which others can be measured against. One ton of reduction for every $9 invested by the state.

It makes it one of the most cost effective. 1.5% of the cumulative funds to date. The program's providing 20% of all the reductions of all the combined programs. Heck of a bang for the buck. It's getting a three to one match, which is also one of the best in the state.

It was a top priority during the last reauthorization. It needs to be a top priority with this reauthorization as well. It has proven itself and there's tremendous air quality benefits that also accrue. And finally, it's all methane, so it's a short lived climate pollutant, which means we're getting the benefits today. Thank you.

Thank you.

Good morning, Mr. Chair and members. Graciela Castillo-Krings here on behalf of All Home and Enterprise Community Partners, nonprofit organizations that support affordable housing. The Affordable Housing and Sustainable Communities Program helps fund projects that are combining both housing and transportation.

Over the course of the program, AHSC has helped reduce 5.7 million metric tons of greenhouse gas emissions, funded over 20,000 units of affordable housing, and provided over 28,000 transit passes for residents. It has also saved a lot of the tenants about $10,000 in rent annually.

And all of this with the GHG emission calculator only accounting for 30 for 30 years of benefit. Whereas these projects are sustainable and affordable for 55 years, sometimes permanently. We really believe that it is a great investment for the 20% allocation. Thank you.

Thank you very much.

Thank you, Mr. Chair. Matt Robinson on behalf of the California Transit Association. Let me just begin by saying we are immensely grateful for the state's investments in public transit systems. For the last decade plus, we have been the beneficiaries of approximately 15% of continuously appropriated cap-and-trade funds.

I thought the staff analysis did a great job sort of calling out how that has benefited California writ large. As we move forward, I think we all know the story about the transportation sector's impacts on greenhouse gas emissions in the state. We have a real need to maintain that level of funding.

We also, of course, I think like everybody else in line, would like to see some discussions about potentially growing our pot of funding. Because what's important to note is these provide inexpensive mobility options that help reduce vehicle miles traveled and therefore clean the air in the state.

The other thing I will note is these are investments that are going to be around for decades in the future. These are long term investment that the state is making and the reliability of those funds is very critical. We can't plan construction projects for rail, for bus, et cetera if we don't have certainty that the funding will be there. Thank you.

Thank you very much.

Good morning, Chair and members. Doug Houston representing the Sierra Business Council and Sierra Consortium. We just wanted to reinforce the importance of a dedicated continuous appropriation for nature based solutions for natural working lands and want to sort of shoot in a pitch also under the nature based solutions side of things for urban nature based solutions, urban green, urban forestry. We think those are important investments moving forward. Thanks, Mr. Chair.

Great. Thank you. Down to the last two. Was that it? Oh, that was our cutoff. Thank you. All right, good. What's that? Well, no, I'm not going to. Right. Particularly since staff has already worked hard. All right. For the benefit of those members who weren't here when we sort of announced sort of the rules of engagement here, I just want to try to repeat that. And that is that we want this to be as much of a dialogue as possible so that we can hopefully have some robust conversation.

And so we're inviting the panelists to offer insights as we have our discussion. We even invited the audience to put their hand up if they have something really important to say and we would try to work them in. That's no guarantee in terms of that.

But we do, particularly the panelists that have spent a lot of time on this particular issue. But we want to go back and forth. The other thing is we're going to try to break this into segments and we will have. We're going to go in the order that we've listed of.

We'll say, okay, we're going to bring up the people from high speed rail. They will be here so that we can ask questions of them. They won't be doing a presentation. We'll do the same thing for housing, we'll do the same thing for transit, et cetera.

So the first part of this program are questions that we have for any of our three panelists based on the presentations that they made. So I'll let anybody who has questions for the three panelists. Assemblymember Irwin.

I think I've heard the parts of this presentation about three times already, and I pick up something new every time. So that's why I wanted to be here right at the beginning to make sure I could listen to it. But one of the numbers that I have, or the numbers that I have never really heard is, is sector by sector, what contributes the most to the pot of money? So the ones that are under cap-and-trade, what are they contributing to this pot that's going to the. Is it manufacturing? Is it oil? Is it, I mean, there's a very large amount of money being generated. Who is it being generated by?

And perhaps other panelists also have thoughts. I think a lot of the costs that are being born, a lot of the sort of those who are paying for these allowances come from the transportation energy sector. And the reason for that is that that's an area where there's a lot of partly a lot of emissions, and it's also an area that doesn't get the free allowances to offset the consumer costs associated with those emissions.

So I'm not sure if that's the question you're getting at. I don't have the exact percentage that they pay, but I think the bulk of sort of the consumer impacts at least are on that side. I don't know if my fellow panelists have any.

Yeah. Just to add on to that, I think this gets into what you mean by how the money flows, because there's money that comes into the Greenhouse Gas Reduction Fund. I like to think of the sectors in the following way. Transportation fuels pay full board. So that money comes into the Greenhouse Gas Reduction Fund.

Large industrial emitters are partially subsidized, so they end up paying part of the bill. The utility sector pays, but because we allocate the allowances to them and through a variety of mechanisms transfer those benefits to their customers, we really are kind of net transferring money into the utility sector, which for the reasons Dr. Meng described, I think is a good thing. When you're looking at how money comes into the Greenhouse Gas Reduction Fund, I would encourage you to think of that as transportation fuels as the largest source.

So I mean, do we have an idea of like, how large is that number?

I haven't run those numbers and those numbers are not publicly available. That could be. Somebody could run those numbers for you. And I think that's important to do to get a sense of your question, but I'm not aware of there being existing analysis on that.

Okay. And then the amount of free allowances going to that sector.

So the. Just to repeat the numbers. So historically about 14% of the total allowances.

I meant just to the specific sector that's generating, you're saying, the largest revenue source.

Right. So the transportation fuels subsector does not receive any free allowances. And therefore, I use the metaphor, they pay full bore basically. About 14% of allowances go to large industrial emitters, and about two thirds of that 14% goes to the oil and gas industry. So when you're thinking about this, the industrial allocations are mostly oil and gas, a little bit of cement, and everything else is less than a third of that overall allocation to industry.

Okay, and then thank you. And as we're looking forward to, you know, what we would like to see GGRF look like, we want to see how efficiently money has been spent and we have a lot of subcommittees that are looking at that.

I know the LAO has done a report, but I think part of it is how fast is money going out? So has that money. Where do you see that money going out in a reasonable amount of time? And where is it that money hasn't been spent to benefit Californians?

So I think that's a really important and also a surprisingly difficult question to answer. So we don't typically get like expenditures. We don't typically get data from departments on exactly how much of their appropriations have been spent on an annual basis.

And so we don't have reporting that shows us exactly how much of the appropriations that all of these different entities have received over time have actually been spent, I think. So I can't answer that specifically. The one that I do that there is relatively good data on is actually the High Speed Rail Authority because they, as part of their board agendas, they have a Finance and Audit Committee that does list out their cash balances, including for GGRF.

I don't have it right here, but I think it's perhaps in a range of about $3 billion of cash. Now they do have a lot of unfunded work, so that's not necessarily. There are calls on those funds. And I'm sure they could speak more in detail on that. But there is quite a bit of cash there.

But just as a whole, it would be wonderful to have that look. That's something perhaps the administration or specific departments may have more insights when they come up. That's perhaps a good question to ask them if there are monies that have not been fully spent, but we don't have that data readily available, unfortunately.

We could certainly make that a requirement going forward because if you're holding onto the money for years, then potentially it could be better spent with an organization that spends it in a reasonable amount of time.

Absolutely. And actually, just one more point on this. I think in particular, this is particularly challenging with the continuous appropriations, because with the ones that aren't continuously appropriated, the discretionary ones, in general, those departments are coming before you on an annual basis and they're asking for money. They're saying, hey, we've spent all of our money thus far.

This is what we've gotten. We would like some more money. And they have to justify that. They have to justify that to finance. They have to justify that to our office and then ultimately to you in these, as part of this committee process, the continuous appropriations. That doesn't happen generally.

Generally those really do kind of go on autopilot. And honestly, I mean, I think it's harder, at least from my perspective and my role to in most of those cases to oversee and get a good sense of how that money's flowing. So I think in terms of areas in general that I think are probably more important questions there, probably the continuous appropriations are an area where I would focus because those are ones where there's sort of less natural oversight as part of the budget process.

Okay, and then for Dr. Meng, you talk, Meng. I'm sorry, my pronunciation is always off. You talked about potentially some GGRF spending going to technology. Could you give an example of what you're talking about?

Yeah. So I do think that the key principle here is to think about technologies that are promising, they're probably too expensive right now and are not essentially incentivized under the cap-and-trade program, basically outside the sectors that are capped.

And so there are some possibly in what we broadly call the kind of nature based solutions area, but one that for me is first top of mind is in general just direct air capture and carbon dioxide removal, which we know we need 10-15 years down the line when we're starting to talk about having more emissions sinks to meet our net neutrality goals, for which right now it's probably too expensive.

And, you know, the concern, of course, is that, you know, federal subsidies for those technologies might be going away. And so that, in my mind is an area technology that, you know, would not be directly incentivized under the cap-and-trade, but for which you can imagine, you know, doing what California does best, which is, you know, investing in new technologies and driving that cost down to be, you know, to be deployed here in the state.

Okay, thank you. And all I know other people might have questions, but I would like some of the specific audience members, maybe just a couple of questions from them, but I think everybody else should have a chance.

We will go to audience members and ask if for audience member that's, that'll be part of our segment that we're going to go to. All right, so but we do have CARB who is, who would like to respond to that specific question that was raised by Assemblymember Irwin. Right?

Good morning, can you hear me? Okay. Good morning. Mario Cruz, I'm chief of the Climate Investments Branch at the California Air Resources Board. And I just wanted to clarify. We do make all of the expenditures for all of the investments from California Climate Investments available on the website.

So you can go on there and you can see where these investments have been, what they're doing. And that's true for all 100 and something programs administered by the 27 different state agencies. You can see at the project level in the annual report they get submitted to the Legislature. Also in there you can see where how much funding has been implemented or awarded and expended. So there's a, you are able to see all of that information in the report. So it's all publicly available.

So how much has GGRF raised and how much has been spent? How about that?

Yeah. Like if you were to say roughly today it's been over 33 billion that has been generated through the auction proceeds and how much we've collected to date of data is around a little over 11-12 billion.

So the rest hasn't been spent?

It's in along of the process somewhere. Right. It could be, some of it could be committed through contracts. They're just not on the ground yet. Some can be in the works.

But still that's one third of the, one third of the money raised over the last 10 years.

Yeah. A lot of it has been in the last couple years. Right. And these things take time. In the first couple years that each year was about a billion or so that was generated annually. And over this last couple of years it ramped up to 4, around 4 billion a year, in some cases 5. So while you know it is only a third, a lot of it has been from the last few years. And these projects just take time. Right.

You appropriate a program, they have to go through a public process that could take a year or two and then they have their call for projects that could take another six months and then for the projects to actually come into fruition another year or so.

So, you know, I read the book Abundance and maybe everybody at CARB or could read it. I mean there should be ways to. No, I'm saying you're talking about a very long timeline and there is certainly urgency and we are only here 12 years or less and we like to know that things are working.

And so I wonder if that process could be sped up a little because again, in 10 years, a third of the revenue being spent is not showing California. Is not showing the benefit to Californians. So that would just be my two cents there.

So it says of the 28 billion that they received, they've implemented 11 billion. Less than half.

No, it's a third. That's what. No, but I'm just. No, no, but the number was 30.

It's happened. It's happened.

So I'm not. I'm just expressing a little frustration that how do we show Californians that this is working with, oh, we have this project and it takes a year to improve and then it takes another year to implement, and then it's another six months. That's just. I just enjoyed Ezra Klein's commentary on how we need to be more efficient as government. And so I wonder what we could do to get there.

I know we have two other members and the reason that we had CARB come up here is because we're going to go with the continuous appropriations agencies and CARB is not a continuous appropriation agency. So that's why we had them join right now. But that for, so two more members have come up.

But you guys have indicated you were interested in responding. But I need to keep this efficient because we have to go on. So do you gentlemen have anything else in response to Assemblymember Irwin? Assemblymember, Irwin. Anything else? Anything else on this? Assemblymember Petrie-Norris. Thank you, gentlemen. You're. Thank you very much. Yeah. All right.

Well, good morning, everyone. Thank you so much for being here. I guess just before I jump into a couple questions, I'll just take a moment to sort of share a little bit about the way that I'm thinking about cap-and-trade and this reauthorization.

I think that it's both critical that we get the biggest bang for our climate buck for the people of California. I also think that this is a hugely important opportunity for us to take a step back and think about what climate leadership actually looks like.

I would argue that climate leadership is not just California setting some goals and having a press conference about it. Climate leadership is absolutely contingent on others following us. So if we're just like shouting from a mountaintop and listening to our own echo, we will have failed. I think that our success relies on really two things.

Number one, establishing kind of a framework and a model that balances sustainability, affordability so that other states and other countries look at us and say, oh, that's something we could do. That's something we want to do. I think it's also incredibly important that we are picking up on. Is it Dr. Meng?

On some of your points, we have a huge opportunity here to be the birthplace for the breakthroughs and innovations that are going to enable not just California to deliver on our climate goals, but enable on the rest of the world to deliver on our climate goals.

And I kind of feel like if that doesn't happen here in California, I'm not sure where it's going to happen. And I think that's also really exciting opportunity. But I think when you look at the amount of dollars that we've invested in making that a reality, it's very, very few.

So I'm grateful that you're emphasizing the importance of our utilizing these dollars to invest in potential innovations and potential breakthroughs. So that is definitely something that I will be also advocating for as we move through this process.

Back to getting sort of the biggest bang for our climate buck., there's a ton here, and I'm super grateful for the work of the committee in pulling this together. I guess just to help, you know, me get a few things straight in my mind when we look at our GGR expenditures.

And I think I asked this question of a different panel last week, but can you each tell me and tell us one thing that you would keep doing, one thing that you would do more of, and one thing that you would stop doing?

So I think one thing that, in general, I'm not going to choose a specific program, but I think one thing that our office traditionally has had concerns about is a lot of continuous appropriations. And I will tell you the reason for that is because historically, I think we've felt like that reduces legislative oversight.

And again, it sort of puts things on autopilot. And so I think we would encourage the Legislature to be very judicious about using those. I think every entity is going to want to have continuous appropriations because it provides their, you know, it sort of provides more certainty to them, and that makes sense from their perspective.

But also there's a lot that could change with the program and a lot that could change with legislative priorities in the future. And so it makes it perhaps also those appropriations a little bit less nimble.

So I think that's one of the areas where I think, again, I think we would sort of suggest being very judicious about when you do continuous appropriations and only using them in really very limited situations and in general, trying to use the funds in ways that meet your priorities in sort of a flexible way that gives you the most control.

And so I think that's.

That's probably. That's the stock doing. And then in the spirit of the chair's desire for us to be efficient, let's do sort of the lightning round of keep doing, stock doing, do more of.

I think one thing to think about doing more is to think about, again, what your priorities are. And I've heard, I don't want to, I, I don't want to pretend to know what the legislative priorities are. I know there are many. But one of the things I've heard a lot about is affordability.

And so I do want to highlight that if that is a priority, and perhaps there are some reasons for it to be a particular priority because this program will likely impose additional costs. I think Mr. Kleinward referred to that as the cap gets more intense. So I think thinking about, do you want to use this for affordability?

We haven't done that yet. We haven't used GGRF for that purpose. We've used the free allowances, but not GGRF. But you could use some of GGRF for that. Okay. Yeah, excellent.

Keep doing. I'm a big fan of climate credit, California climate credit. Senator, woman Erwin talked about how slow some of the spending goes out. That is immediate now, maybe not immediate enough. This is every six months, but it is going out to households. What should we change?

I think we should change that lump sum credit to using directly to reduce electricity prices which are too high in the state. So prorate it in a way that lowers it.

As I said earlier, we have some analysis at UC Santa Barbara to suggest that if you just dedicated that low income households for the big three IOUS, you could lower electricity prices by 20 or 30%. So we think that's meaningful. That's going to be a monthly reminder of what that funding is doing to help affordability.

And I think that's something that could be, could be introduced.

And I'll go quick on the keep side, I would keep a mix of climate investments and utility benefits within climate investments. I would keep a mix of things that are really about climate and things that are primarily about other things besides climate. Start doing new things.

I would start distinguishing between the appropriations that are made that are directed primarily at deploying immediate climate action, those that are targeted towards innovation like Dr. Meng mentioned, and those that are primarily justified by their non climate benefits. We're lumping them all together and we need to look at them differently.

And the stop is we need to stop using bad metrics to report cost effectiveness of the GGRF investments which for the. Say that again. The climate investment reports report flawed cost effectiveness metrics that make some activities look cheap because they are primarily funded by other programs and therefore they look cheap in terms of the number of GGRF dollars that are required to implement them because they're being funded 80 or 90% by other programs. We need to stop doing that.

All right, thank you. And if you don't mind, Assembly Member Rogers had to step out but asked me to ask a question of this panel.

Go ahead.

All right, Assembly Member Rogers, Dr. Meng, you talked about the need to invest in areas where the market will not. We'd love to know everyone's thoughts on carbon avoidance or investments that don't necessarily reduce ghg. Prevent loss of species and habitats like redwood trees that are high yield carbon sequesters should identify.

Should we identify critical feedback loops we need to avoid and invest there? Not my question, but.

Again, I mean my general principle here is if we were to take GGRF funding to invest in these other areas to reduce emissions, this should be in areas that are not covering the cap.

So AG and forestry would be those, but in a way that we think it's cost effective and in a way that would essentially solve some other market failure, which in this case would be the need for new technologies and so forth. Maybe that's in the case of forestry though.

I think, you know, I think the argument might be stronger for, you know, leading technologies like direct air capture, for which we really don't have much, you know, many operating examples of or at least not ones that are cost effective.

All right, thank you.

Great. Before we go on to Assembly Member, I just want to let you know that I'm going to ask you to write up some examples of the answer you just gave us about the flaw to credit accounting so that we can see those after this hearing. Assembly Member.

Thank you, Mr. Chair. And I want to express my gratitude for you having me here today for this hearing. It's really helpful and interesting. I think that some of the folks who commented saw my head exploding every time every single one of them came up and said continuous appropriation.

I will say, speaking for myself, but I imagine my colleagues, you are asking us to take legislative authority away. So that's not taken kindly. So I think I am not supportive of the continuous appropriations.

I think the numbers we just heard of, how little has actually been spent is all you need to know about the failure of continuous appropriations.

I think that we need to make sure that those dollars are going out the door and they are effective in this idea that we write a check and walk away is not achieving that.

And so the question sort of coming out of that is I agree with you that in some ways continuous appropriation could be effective in creating certainty in long term projects. Right. You don't necessarily pay for a transit project overnight.

And so the idea that I know that I'm going to get this over the next few years is absolutely makes it possible to even get lending for the project, et cetera. So I understand in other ways in the budget we've done three year out allocations, so other long term investments that aren't continuous.

So I'm wondering what our options are to give the benefits of those long term investments without the continuous appropriations, which as far as I'm concerned to the advocates, it's failing you. If $20 billion is sitting in the bank, you're not getting the dollars either.

And so you coming up and asking for continuous appropriations, frankly, is confusing to me.

That's a great question. So I think there's sort of a range of things you can do. So first there's in terms of how you allocate it, you can allocate it statutorily either on a continuously appropriated basis or it can just be something that you have in statute that's actually not technically continuously appropriated.

So I mean that's sort of a technical difference, but I think one of the things to think about is also like, do you want a cutoff date for those, for whatever statutory allocation, whether it's continuous or not, do you want a cutoff date for that? And there is, there are cut-off dates for some of the programs currently.

For example, Forest health, which I know is a priority for a number of Members. That's one that does have a cutoff date. So the 200 million, that's in statute, but that's only through, I Think2829 if I'm not mistaken. So after that, at least according to current statute, that wouldn't continue.

So I think one of the things to think about is you could, and another option is you could just have a funding plan that plans out funding in future years. It's not in statute, but it's your plan. And that's actually the discretionary allocations.

What has been done over the last couple of years is there's been an out year plan that's been for the next five years or so, but it hasn't been set specifically in statute. So still there's a lot of momentum because I think once it's the plan, there's a lot of interest in continuing that.

But it's not technically, you know, a statutory allocation that's been codified.

And I'll remind Lao that we're trying to do lightning rounds. Sorry.

Anyway, so there's a range of things you can do depending on how much flexibility you want.

Great. And then, I mean, I think it's, you know, there's the question that some Member Irwin asked, which is how effectively are we getting the dollar out the door? The fact that we're not even doing that.

I won't say all the things I'm thinking because my mom taught me, if you have nothing nice to say, don't say anything at all, which clearly I fail at every day on the dais. But, you know, then the dollars are going out the door. I think the second question is how effectively are they being utilized?

You know, I mean, I will say that I've been charged with the miscellaneous category of spending, which includes the housing piece. Senator Wicks doesn't like that we call it miscellaneous. But you know, what I heard today was actually that that money is going in a lot of different directions. And query is 20,000 units.

Although for those 20,000 people, it is life changing. Is that efficient? Like how much have we spent to get those 20,000 units? So I think, I don't think we have an answer to that quite yet. But I think that's a question we need to grapple with. And then the last question I will make one additional comment on.

You know, I appreciate what was said of some folks about the offsets, which is we have a choice there. They do drive down costs. There are other ways to drive down costs. I think by providing offsets in lieu of GGRF allocations, we are sort of allowing this shadow market to decide how that is spent.

And it's my position that I think there are much more beneficial ways and direct allocations that could benefit the native people who benefited from offsets and not leave those people in the dark, but ensure we're getting the bang for our buck on those dollars. So I appreciated hearing that from some folks.

And then the last question I'll have is you mentioned the dollars back to ratepayers and you said low income households. I will say that it is not just low income households that are hurting in California.

Our middle income households and even others with the six rate increases we saw in the PG and E territory last year are hurting with bills that have just raised astronomically. And so I appreciate that you said if we just do low income, we can reduce rates by 20 to 30%.

I don't think that's going to really affect Californians the way we need because that's the reality of living in California. And so the question really is, what is the best way to achieve that?

And one of the things that after my many years on the utility Committee and I know the chair has worked on is what are the ways we drive down costs so we can give them direct dollars or we can make those rates actually go down?

And looking at the way the wildfire costs and the investments in infrastructure with a guaranteed rate of return has driven costs so significantly. I guess I asked do we want to give those dollars to the utilities and then pay them back for it, or do we want to drive those costs down with actual direct investment?

And I give you an opportunity to answer that.

Yeah, no, this is a really good question. I think of it in kind of three parts. The first part is, let's just say we were only working with the 1.2 billion community in the climate credit. You know, 1.2 is not that much money for, you know, a State of this size.

And so you just did it for low income households. Yes, 20 or 30%. But you say did it for all households for just the summer months for which electricity bills are highest across the state. And you get about 10 to 15% on average. So it's about how you want to allocate that money.

Now, of course, if you want to say, no, actually we want to do this for all households for all months, then you need to think about other revenue sources.

And then the debate is, well, maybe we move beyond the balance of the 1.2 billion from the climate credit and think about other sources of funding, perhaps that's coming in from the cabin trade system.

I do think that if you want to think about getting the most bang for your buck, it's arguable that that's coming in less from just lowering electricity prices directly and saying finding a way to lower wildfire liabilities to the IOUS. How effective that is is quite unclear right now because we just don't know.

But I imagine that you could probably get more for that. The last thing I'll say very quickly about the spending slowly issue is that some of it might have to do with just economic circumstances. So there's a lot of money that's been allocated to subsidies for solar panels for low income houses have been underutilized.

But that's, I think largely because of economic circumstances like electricity prices might be just so high that those subsidies are just not enough. Right. Or the fact that we have put in enormous tariffs on solar panels such that they're still too expensive.

And so having the ability to take into account changing economic circumstances on an annual basis might actually allow you to be more responsive to effectiveness of that spending.

Thank you. And I just want to close by saying I really appreciate this conversation.

I want to echo the comments of my colleague from Irwin who we have an opportunity here to lead the world and we need to make sure that we achieve the climate goals that all of us share, but also bring the public along with us.

This funding is such a critical way of ensuring public support for what is one of the most effective climate programs out there.

And so ensuring that these dollars are both going out the door and going to places that our constituents can see the benefit of these dollars they're paying, that they see a return on their investment when they go pay a little bit more for whatever it is that is this is driving cost in I think is so critically important.

And so we have to be responsible in the choices we make in the coming months about the GGRF spending. And so I appreciate the chair's leadership on that.

Great. Thank you very much. And that sort of. We did introductory comments by those of us that were here at the beginning. So, no. So both of you have just got. I haven't gotten to get those in so I appreciate that. I'm going to try to go briefly, but I do have a number of questions.

Again, I really appreciate, I think we have a great panel here and I appreciate staff in terms of helping us recruit you folks.

And I would like to say this, and that is I hope everybody in the room, including the panelists, will now feel like you have some ownership in terms of where California is going forward, because we need you as resources as we go forward. And we hope we can turn to you besides this hearing to ask questions.

But my, my first question is you. We've been talking here about your point about rates being too high in terms of electricity rates. My question is, do you have insights in terms of how to intelligently lower rates?

And one of the big questions is do we pay for capital projects so that the utility doesn't have to pay for those and we don't have to pay that 10% on top of that, or do we directly lower rates?

And what I'm really interested in is it seems that the biggest argument that I have, besides the fact that of the, of the psychological impact that it has on people, is that if we want everybody to electrify, we don't want them to be afraid of electrifying because electricity rates are too high.

Are there things that we can do that incentivize electrifying? And with regards to rates, perhaps like if you electrify, you get a lower rate because you've, you've actually converted more over that way, etc. So any creative ideas you have for us there. Lightning rounds again, right?

Yeah. I mean, I agree with you that the root causes, I understand it, of why we have high electricity prices right now is actually largely because of wildfire liability. Liability. And so really, if you want to get at it, you get at that problem.

Of course, there are design issues about how do you ensure that you give that subsidy or encourage IOU's to do that, that they will actually do so and so forth. So I think more careful thought should be put in that domain, though I don't have more precise answers for that on the electrify issue very quickly.

I think we have long had the notion that if we are willing to pay up the upfront cost of a solar panel, of EV, of heat pump, that we will save money in the long term. I don't think that's the case in many settings anymore in California because of how high electricity prices are.

So I'm not actually convinced that more subsidies on capital investments is the way to go. I actually think if you just lower electricity prices meaningfully, you could actually accelerate decarbonization. I think that's the main area right now.

Thank you very much. And I want to get to the second point here, which is, and I hope my colleagues will really be with me in terms of this and that is that you've emphasized that the, probably the number one thing we can do for electricity rates is decrease the liability that utilities are exposed to. Right.

And it strikes me that the number one way to decrease liability is to have more homes hardened so that when fire reaches a community, fewer homes burn. And that's the. And if we could do that, then there's much less liability because it's the amount of damage that comes from the fire that is causing the problem.

But there may be fires going forward. Is that something you agree with? I agree with. And it also then helps address your home insurance issue. Exactly. So you get a twofer. You get lower home insurance and you get lower electricity rates. Right.

But to get that twofer, you can't isolate home hardening in terms of isolated this house. You really need to do community home hardening. You need the whole community to be able to harden. Great, thank you very much. And then we all have an interest.

Seminary Member Irwin and Petrie-Norris and I've all expressed this at different times and that is we would like to have more investments in the technologies that could accelerate this whole conversion. Any insights in terms of creative investments in ways to get those investments in those most appropriate technologies?

Yeah, I do think that in the near term, I mean I talked about how in the out years, maybe you want to think about direct capture. I think in the near term, the key piece of technology that we need and we need to develop here and subsidize is battery technology.

So we talk a lot about how electricity is the backbone of our decarbonization strategy. We worried a few years ago that we had this curve because of intermittent electricity. That curve is flattening out because we've, the state has done so much to expand grid scale. So grid scale batteries.

But the concern of course is that with the tariffs that are being introduced, most of that batteries are going to become much more expensive, much more expensive in the coming years. And that I think on the supply side is going to put real headwinds to decarbonization in this state.

So any way to subsidize or accelerate manufacturing of grid scale batteries here in California would make a difference.

Difference because right now we're importing virtually all of our batteries. Great. Great. Thank you. And then one final point for, for you. And you talked about the value of carbon, going up in price in California because of cap and trade. How do we maximize that value, and are we maximizing that value right now?

And if not, how do we do that?

I think this conversation about how to spend a GGRF money is precisely on point, and, and it's maximizing it based on whatever the problems are of the day. And I think dealing with affordability is in my mind first and foremost. But a lot of the other concerns brought up in the public comments are as well.

Thank you. I'm going to follow up with that. Dr. Colin. And you identified three scenarios for us. Which one's the most likely in your mind to unwrap, to roll out for California?

I want to be very clear. It is very difficult to give an answer to that question.

Oh, we're going to. You're going to be guaranteed, locked in, whatever you give us. No. Part of what I want, part of.

What I want to make sure that this Committee hears is that revenue has been very uncertain in the past. And if you want to make that more certain, you may need to consider changes to the market design. The only difference I would express with respect to Dr.

Meng is that the program in the past has had a massive surplus of allowances and offsets. So it's had high supply and relatively low demand. We've had low prices. If the program is reauthorized, I think there will be substantial upward pressure, and I am not in a position to tell you how high the prices would move.

I think we ought to design a program with price limits that reflect an outcome that is reasonable and use that to predict our revenue streams and build a consensus around the appropriate way to allocate money through that.

So are we having trouble predicting our revenue stream and our pricing because we have such a surplus in terms of credits, and would you be generally an advocate of decreasing that surplus?

Yes. And that is more or less the reason that the LAO figures in the report show the volatility in revenue. We've had way too many supplies, and we are talking about an extension that will reverse those conditions.

So we should have an extension and direction to CARB to make sure that we have a greater market equilibrium in terms of supply and demand for credits.

I would put it a different way. If you look at Figure 1 in my report that shows the span of those carbon price scenarios, there's a wide range of possibilities, and nobody can look you in the eye and tell you what's going to happen.

The narrower that range, the less uncertainty in the cost impacts, the less uncertainty in the revenues, the more predictable and easier this discussion is to have.

Great. Thank you. Dr. Meng.

I just want to quickly add, if you look at the LIO figure 1, periods when there's been drop in revenue, it's actually been periods of uncertainty about the future of the program. So when it was last, last 10 years ago, and it was a conversation about reauthorization. Good. And then the last two quarters.

So I do think more certainty about a program for multiple decades will actually ensure a more steady price path and revenue source.

And I want to thank Dr. Ming for putting his hand up and jumping into the dialogue. That's exactly what we're looking for, is that additional dialogue. Same thing with CARB for asking to come up and then I asked you to do the write up in terms of the flawed thing. Okay. Any other questions for our panelists?

Yes, RBK, exactly. That's what we're looking for.

So one of the things that I think has been interesting to me is the idea that we would take the $30 mark or whatever we know won't affect consumers significantly. And that's what we allocate to the funds that would drive climate emissions down.

And then above that, we sort of reserve that as a way to give money directly back to consumers, knowing that now we're in the range of where we would start to affect their cost of living. And so, you know, we have a clear set of amount that is directed to the programs we've been discussing today.

But then above that, we can do things like pay people's, you know, renewal at the DMV, direct dollars back to consumers when it starts to get to the point where we know it's hitting them. What is your thought about that?

So I would start with the observation, and this is really important to understand. We have been talking about money moving here. Sometimes we're referring to dollars coming from the greenhouse gas reduction fund. Sometimes we're referring to dollars that are mobilized through the utility rebates.

So the answer to your question right now is that CARB has largely determined the structure of the flows through its regulatory decisions. I very much support the direction that you articulated. That is not how the structure works today.

Today, the program regulations determine the slices of the pie rather than a holistic discussion about how value moves in the system. The last thing I would add about this with respect to Mr. Bennett's question, Chair Bennett's question. We move a lot of our utility dollars through the natural gas utilities.

And so if you want to encourage the the same kinds of consumer benefits while prioritizing electrification, you might consider doing that through the electric utilities exclusively or primarily.

We want you to be available as a resource as we continue to unravel these things. Any other questions for this panel, Assembly Member, Connolly.

And apologies for coming late. So hopefully you're the right panel for this. Just kind of delving a little bit more into a couple of the expenditure categories. One is that GGRF has committed $200 million annually to various wildfire prevention and forest health programs. Obviously, that's a top priority for the state right now.

Given the increase of wildfires throughout the state. How effective has this investment ban in increasing California's wildfire resilience?

You want me to take a step?

Sure, take a step.

I'll take a stab. And you may just you may cover this in more detail later.

But so, I mean, I don't think we have a full like, cost effectiveness analysis, but I will say I think this is an area where there is a tremendous amount of work that probably needs to be done to make our forests and landscapes healthy.

We as a state have put a lot of increases in ongoing funding on the response side in wildfire and on the resilience side, there hasn't been much. This has been the main ongoing funding stream. And again, it expires in, I think it's 28 29 and it's relatively modest compared probably to the scope of the work that's outstanding.

This is the type of work that has to happen regularly. You do a forest treatment and it's not just like a one and done and you can leave it and you've done the capital investment and you're fine. It's something you have to come back in many cases every five or seven years to redo.

And so I think this is an area that probably deserves some significant attention. And the Legislature could think about whether this is an area that wants to invest more on an ongoing basis. From that perspective, of course, it's a matter of priorities. But this is, I think, an area where, as Mr.

Chair mentioned, I mean, we're dealing with it has implications for all sorts of stuff, too. If we don't have you were talking about the home hardening and that's essential.

But also if we have unhealthy forests and landscapes and, you know, we have catastrophic wildfires, there are real implications for the state in a lot of other ways, too, both on affordability as well as other ways. So, yeah, I'll leave it at that.

We had a very robust conversation last week about this whole issue of what amount of funding for forest resilience versus what amount of funding for things like home hardening and I really appreciated that.

I'm not trying to cut you off I just would add that in terms of the two for impact that we get from home hardening particularly community wise home hardening I think we have to carefully consider at least making sure that the percentage right now the percentage has been very heavily weighted $2 billion for forest resilience and $70 million for home hardening.

That percentage I think is not appropriate.

I think that we have to we have to modify these percentages or at least if we're going to keep the forest resilience increase the home hardening so that you get that because you get that double benefit you get lower home insurance rates and you also get this lower electricity liability rate and I see somebody who wants to make a comment on that you get 30 seconds Julie.

Speaker former Deputy Secretary at the California.

There is an answer to your question. Cost effectiveness is measured in two ways. The California Air Resources Board puts out an annual report on the cost per ton of carbon reduction for each climate investment, and forest health investments are very. Cost-effective in terms of carbon reductions. In terms of wildfire mitigation or prevention, they are also extremely cost-effective.

CAL FIRE has a lot of data. On what forest fuel removal, how much. It reduces wildfire risks and impacts.

Thank you, Julie.

Yeah, so I just wanted to plant that seed that I will be interested. In that particular allocation and kind of all of the implications of it. Kind of a more broad question, but ties into it out of the projects that are currently funded with GGRF revenues, which categories have been the most effective in reducing GHG emissions?

So that's fairly broad. We heard a number of audience members talk about nature-based solutions. My sense is that has been cost-effective, but would love your thoughts. I will put in a quick plug for my bill AB491, which would codify nature-based solutions targets that the state has established.

But more on that later. But if you can kind of talk about that, you know, cost effectiveness.

Any of our three panelists feel prepared to?

Maybe I'll just start with some overarching comments. So, certainly CARB has that report.

I think as I think a fellow panelist referenced previously, I think one of the concerns is that our office has at least brought up in the past when we've looked at that report we've often found challenges with sort of the meaningfulness of those numbers and there are a variety of reasons I think was pointed out before.

One of them is that it doesn't that those numbers don't take into account they just take into account the number of dollars of GGRF that are spent versus the benefits, overall benefits, not the. And then also there are some issues with accounting.

So I think those reports do highlight some what are potentially relatively cost-effective programs. But I would caution to be very careful in interpretation of those because they are not always apples to apples and they're not always really.

And that's what's made it hard for us to do any kind of analysis.

Look at that number and say the top one, let's put all of our money there and have that be successful.

Just very briefly on Mr. Connolly's question, I agree I do not put much confidence on those numbers and I'm very skeptical of many of them.

I also want to separately add I think there's a reason to be optimistic that we can be efficient with our nature-based interventions, especially when we're thinking about doing it in the state and doing it at a programmatic level.

Thank you. Great, appreciate it.

I wouldn't say useless, but I would say they're a starting point. But I wouldn't just rely on, I wouldn't just take those numbers at face value and believe that necessarily they're going to be the perfect guide. They're in some cases.

If I may ask, just to follow up. So it sounds like there's some consensus that the numbers we currently have are sort of useless. If I, in terms of evaluating cost effectiveness, is that accurate?

So I guess then I have two questions. So one is, is there an alternative source of data or analysis that's been done by academics or economists that you would recommend we refer to?

And second, what do we need to do to make these numbers and metrics more useful for us going forward as we continue to want to evaluate the cost-effectiveness of various programs?

So maybe let me come in on this real quick because we have not invested in the capacity to do basic oversight of a very large program that is now moving close to $10 billion per year and could be moving a lot more in the future.

Go ahead, both sides.

And I say that not to say that the way we're spending money is wrong or bad, but the analytics really are not very reliable. We're not doing that right now, so we need to be a little bit better at that. There is good information that's out there, but the climate benefit numbers are self-reported.

And to put a finer point, this is the methodological issue that Mr. Bennett asked me to follow up on. When the programs in the climate investment reports rely primarily on other programs for funding outside of the GGRF, I would consider those numbers useless.

I just add very quickly that getting accurate numbers on cost, on marginal abatement costs, is extremely difficult. And in fact, that difficulty is actually why economists in the 70s suggested cap and trade.

It's because in a world where the cost of cutting pollution is so varied, so hard to figure out, that the way you deal with that is you introduce a market where people privately might know how much it is and then trade on that information such that the economy delivers emissions reductions at the lowest cost overall.

And so, fundamentals are some of the origins of why we even have cap and trade is because it is so hard to get those numbers. But yet we know that we still want to use market forces to be able to deliver the cheapest cost reductions.

And I guess just one final point, if I may. So I think that's another reason to think about. I know historically this program is really focused on funding climate programs, and in many cases, reducing GHGs. And part of that was because of some legal uncertainty about the legality of using these funds for other purposes.

But now that that has been cleared away, at least is currently under law, and there's, I think, pretty strong evidence we can use this for kind of whatever purpose.

I think really thinking about, given the uncertainty about some of those numbers and also given sort of this theoretical perspective that spending under the cap sector might not get you much or if, if any incremental savings in terms of GHGs, really thinking about how much do you want to focus on GHG reductions versus your other priorities, I think will be critical.

And if you want to focus on GHG reductions, doing it in that careful way, maybe perhaps more in the uncapped sector, perhaps more for these, these other areas where there are market failures that you're trying to correct and where the program structure won't serve that purpose.

I'd like to throw my two cents worth in, which is, I think, that that approach is what makes more common sense. I think we could chase our tail forever and have comments about, no, that's not the right way to do that.

We would be forever trying to calculate what the real greenhouse gas reductions are for all of these various programs. There's so many assumptions that have to be made. You can challenge all of those assumptions. And that's exactly why the value of the market and market pricing, you let market pricing solve all that.

You can try to regulate this by, well, this one gave us more greenhouse gas emissions. Now, just let the market, you know, set the price of carbon.

I think one thing that we do know is that the cap and trade program overall is actually the most cost-effective way for us to lower emissions. So that is good.

And I do think this whole conversation is an incredibly important part of the reauthorization itself because I think we need to very clearly articulate that framework as part of the work that we're doing moving forward

There quickly, and then this, and then we've got to move on to the next.

Yeah, sorry. And I would just say that, you know, as we're having this conversation, the state has invested in research centers, the Gun Violence Prevention Center at Davis, and others that focus on our priorities. And to me, I would say the research and the data here is critical.

And if we're going to lead the world, as Assemblymember Petrie-Norris said, I think providing that roadmap is something that we should be. Personally, I would think about adding to our investment list because I do think the data. Being told the data is useless feels sad to me. And I do think you make great points.

And I want to echo just one comment that Petrie-Norris made earlier, which is I think that, you know, the R and D tax credits and the investments California has made in the future of technology over the years not only has changed the world, it has changed the state and the economy of the state.

And I do think that I appreciate, you know, us thinking more broadly about how we can invest in things like that to create the innovations that will change our climate future.

I would, I would offer that I agree with you on the second half of your comments about the R and D investments, etc. I think we know what those things are. I'm not sure that spending money to, you know, on research institutes, to still try to make these assumptions and have them be questions.

I see the nodding of the head there. I think again, it would not be the best investment because we just won't be able to pin these down. There's just too many assumptions to make. What's the assumption in terms of the capital cost for this project?

And on and on. But appreciate this. Very quickly.

Just want to add one point about Assemblywoman Petrie-Norris's comment about cap and trade. In some sense, the most important moment for cap and trade is when climate ambition is high and costs are high.

That's actually when, unless you're going to abandon your climate ambitions, this is the approach to deliver your climate goals at the cheapest cost possible. And I think that's an important argument.

Great, thank you. I'll tell you what we're going to switch over to, but I'm going to make this comment first. We're going to switch over now to high-speed rail. So we're going to ask the high-speed rail people, we want you to stay. Okay, high-speed rail people, three of you can come up. Right.

But I have a high-speed rail comment that I'd like to make that deals with exactly what we're talking about, because as the members we're questioning how much greenhouse gas emissions we're getting.

I think that the high-speed rail, greenhouse gas emissions argument that has been made is not the one that is going to win the case for high-speed rail financing, because it's so far down the road that we're going to get that.

So if high-speed rail, to the extent that high speed rail wants to make the argument when people come to me and say, well, it's going to reduce greenhouse gas emissions, that to the extent that's going to happen is so far down the road that that's not going to be a driver for I think many of us.

But if there are other reasons why we do high-speed rail, that's what we would want to hear. But with this, we have high-speed rail up. They are not going to make a presentation, but they're here for us in case we want to ask questions of or, just for us to work our way through these programs.

Do any members have any comments that they want to make about high-speed rail? Right. Assemblymember.

I think that I believe that in our hearing two weeks ago or three weeks ago, the high-speed rail folks were here. To be honest, I'm having, I'm not sure what questions we can ask.

I think the point we made at that hearing is that there's a sort of comprehensive review or assessment that's underway right now of the project. Unfortunately, that is not due to be completed until I believe July or August, which I think I made this point 3 weeks ago.

That makes it really hard for you, in my mind, to make an argument that we should continue to appropriate, whatever it is, 30% of the Greenhouse Gas Reduction Fund. The timing for you doing that review is really incompatible with the timing where we are making decisions about this program. It's also what I said three weeks ago.

Like I would urge you to figure out a way to give us an interim update before July, because you shouldn't just assume that you're getting 30% of the GGRF dollars going forward.

Mr. Chair, may I respond?

Okay, hold on. Go ahead. Yeah.

And Mark Tollefson, chief of staff with the High Speed Rail Authority, with me, I have Jamey Matalka, our chief financial officer. And yes, three weeks ago we did hear you loud and clear. We have been able to do that optimization, that analysis of the full alignment. We are doing that segment by segment.

So as we mentioned last meeting, in the next couple weeks we will be able to talk in more detail about at least the Merced to Bakersfield segment, that 171-mile segment, as we continue to build towards Gilroy to Palmdale to assess the overall system. So we did commit to getting you interim numbers, we will deliver interim numbers.

Assemblymember.

Yeah, thank you. I mean, I think this one is fascinating to me. I think personally it is one of the largest examples of where continuous appropriation has failed the people of California. And so, you know, my constituents, I think, overwhelmingly believe that the spending here has been irresponsible. I'm just going to be frank with you.

And you know, I represent a part of the state that is just over the hill from the Central Valley, you know, just over the hill from Stockton. I represent the Altamont Pass, and you know, my constituents interact with the Central Valley every day. Workers come across the pass.

They believe deeply and have been working for a decade now to build transit from my district into the Central Valley. And so it is not as if they don't believe in the ultimate goals. They're also largely environmentalists of what was originally proposed as high-speed rail.

But I think they no longer believe that what is being produced lives up to the promises of high-speed rail. And so I will say that speaking for myself, I'm going to need to see some sort of vision that is different than the one that is being proposed today in order to support, frankly, anything on this.

And so that means ensuring that we see a train that moves people to these urban centers for jobs, that we bring the economic development to those communities in the Central Valley, that connecting them by transit will do. The current vision doesn't do any of that. And so, I need more.

I wasn't here when this was done, but I personally think that it has not lived up to the promise that my constituents want. And 25% is a lot of money.

And as far as I can tell, to date, it has gone to consultants and other things and not to building an actual terrain that will move people places, which sounds like a very simple thing, but is what we need to achieve.

And I appreciate those comments, and you know, definitely I think we would up here acknowledge some of those challenges in the past. We do have a new CEO that's come on board.

You know, he has done, you know, or tasked our team with doing that deep analysis of the full alignment, looking for changes in scope, design, sequencing, some of those things to really help stabilize the program, help optimize our delivery methodology.

As far as you know, the project itself, I think, funding has been one of the major challenges, quite frankly. And part of that is, you know, with a mega project like this, we do need that stable funding commitment. That's something that we are looking towards.

Some of the stop and go approach that we've had has created some of those inefficiencies. Again, don't want to continue to dwell on the past, but we are looking at ways to work faster, smarter, more efficiently as we, as we move forward.

I think when you talk about having a stable funding source, that does open up a lot of opportunity. The reason that our CEO has come up with a vision to get to Gilroy and Palmdale, part of that is what we've heard from the private market.

Basically as you get into those population centers, as you can connect into Gilroy with the Caltrain Corridor, as you can get into Palmdale with the High Desert Corridor, actually connecting out into Brightline, connecting it to Southern California, there's a lot of interest there from the private market that also stable funding source.

Also, whether or not you go a P3 option, it does also open up opportunities for other financing mechanisms such as bonding. I know we, you know, are having challenges right now with our federal partners, but also RRIF and TIFIA loans at the federal level that could also help bring in additional resources to help support the program.

Well, I'll say that 25% of the Greenhouse Gas Reduction Fund over the last, I guess I don't know how many years, but a lot of years since 20. So, over a decade feels like a stable source of funding,g and we failed to achieve it.

So I guess I'm at a loss of what will actually get us what we need. But I do think that one of the things we heard about why the transition happened to the just the Central Valley line was that was what our federal partners wanted.

So I guess part of what I want to drive is the state sort of being loud, that we also want it in the ends. And that has not been a priority as far as I can tell. So I appreciate hearing that there's a shift.

And if I may, just one thing that I think would be maybe helpful in the discussion of cap and trade, specifically related to high-speed rail, is the issue of securitization, as was brought up by the authority, because they do have near-term needs for additional funding.

One of the challenges is GGRF is not well suited to securitization. As you saw on my chart, it goes up, up and down. There are some quarters where revenue has been really low.

And so it's not a source of funding that the bond market is likely to look at and say, yes, absolutely, there are likely a number of things that would have to happen to make it securitizable, including potentially adding a backstop, so, another secondary source of funding that may be necessary. And so I think really thinking about, but then what would that be?

Right. I think really understanding what the project's needs are will be really critical, and how GGRF fits in with that, both in terms of the amount and the ability to potentially securitize.

So I think that's kind of a really important conversation, perhaps beyond the scope of today, because you could potentially have a whole hearing on it. But I think it's something that will be important to consider going forward.

Assemblymember Irwin, any comments?

I think you've heard all the criticism from the legislature over many, many years. But I think what I would really like to see in this plan is milestones that you are going to make. I think everybody is out of patience. There has been very little built. And I know there have been a lot of legal issues acquiring property, but we would like to see how this is going to get done, and a commitment to really making the milestones along the way.

Yes, and as you've heard many times, the Central Valley area doesn't benefit these two big population centers.

And I would have always said 10 years ago if it would have been built from Burbank out to Palmdale, I think you would have had a lot more support. But our communities are not seeing any benefit. So, not Central Valley communities are. I'm talking about the ones of people that are sitting up here.

Yes, I appreciate that. Sorry, Mr. Chair.

I didn't hear a question there. If you want to respond, go ahead.

Thank you. Yeah, I was just going to comment in terms of our supplemental project update report that will kind of map out, you know, the milestones and delivery options that we'll present to you all. One of the things that, you know, I will say is that, you know, the project, you know, again, hasn't been without its challenges.

We are beyond a lot of that right now. We are really, you know, kind of working towards getting into procurements for track next year, laying track as soon as the end of next year.

So I think a lot of the challenges, again, we'll start moving and actually getting into that next phase of the project, really getting into construction. We did announce the groundbreaking for our railhead, for example, back in January. That's going to be completed this fall. So we are making a lot of progress beyond just the civil works.

But I completely hear you on some of that vision of how do we get beyond just the Valley?

And then you had mentioned public private partnership. Look back at the 10 Freeway when it came down during the Northridge earthquake, and there were a lot of incentives to get it rebuilt, and it was record time. So do we need public-private partnerships? Do we need incentives? How do we speed this along?

Yeah, and I think, I mean, when you bring in a private partner, you do naturally have that transfer of risk.

So some of that does really help, not only with the financing aspect of it, but helping to drive kind of the efficiencies in project delivery because ultimately those entities will not get paid until they have a product at the end of the day, really tracking towards those milestones.

So I think that's one of the things that is attractive about those partnerships beyond just the financing aspect of it. So those are all things that we're weighing right now. I'm having conversations.

When we had our industry day back in the end of January, we heard from the seven largest financiers, you know, in the world who do mega projects like this. There's been a lot of interest and continued conversation. So we are hoping to, you know, be able to present that in our supplemental project update report with some options.

Go ahead.

I'll just say, I mean, I just heard something interesting in response to what Assemblymember Irwin said, which is what will move you faster is not getting paid until you deliver. So I think that maybe that's what you're talking about with milestones.

Anything else, Assemblymember? So I'd like to wrap up the high-speed rail conversation with these comments. And that is that we don't have a federal partner any longer, and yet we have a project that was driven by the priorities of the federal government.

And so we built a project where there is not a significant population that's going to support the operation and maintenance of that particular segment. So if we run the segment, you know, Merced to Bakersfield, that's not going to be a profitable segment, and it's not going to attract any private investment. Right.

I don't think that even if you, and so now I hear this well, we're going to go to Palmdale, and we're going to go to Gilroy. Right. I don't think that turns into a profitable segment at all. I don't think that you're going to find massive numbers of people.

The goal, the dream, the thing that people voted for in California was high speed. From the Los Angeles population center to the Bay Area population center.

I don't think you're going to get anybody to get on the train in Burbank or downtown LA, ride to Palmdale, transfer to the high-speed rail, ride to Gilroy, transfer to the Caltrain, and get to the Bay Area. Not going to happen, number one.

Number two, what's not going to happen is in the other countries that have done high-speed rail, they have banned air travel between the cities that the high-speed rail serves. So you can't get on a plane and fly. Right. They literally ban that travel. We will never do that in California. My point is this.

We have a dream about what we want for high-speed rail, but we don't have a plan for that dream. And I want that dream to happen, but I actually think we don't have, we actually hurt the dream if we keep dribbling, dribbling.

And more and more people start to lose support for high speed rail because they go, I mean, at some point in time, people say, you've been at this 20 years, 30 years, 40 years, and we still aren't getting there. So the point I would offer is that high-speed rail needs a credible plan for long-term success, overall, long-term success.

We don't have a federal partner any longer, and we have not been able and we're not close to attracting private funding that we need. So what does that suggest? I think that you heard Assemblymember say she needs to hear more, we need to hear more creativity, we need to hear better thinking.

And I give you a thought, I was sharing this with Chris Hannon from Building Trades: maybe we should build something that will be profitable in a high-population area.

High-speed rail that could get you across Los Angeles from one side to the other would probably have a whole lot of people that would be pretty interested in that. High-speed rail, perhaps San Diego to Los Angeles, high-speed rail from the Bay Area out, you know, to Sacramento, or high-speed.

But so I'm, I'm just suggesting that if we have another interim plan that is still not, doesn't have any viable, credible long-term success written into it. I think high-speed rail, that's the challenge for high-speed rail. And I say that from the standpoint of by trying to identify what high-speed rail needs to do.

I wish your CEO was here today, your new CEO, because I think this was an important hearing and it would have been good for us to hear what your new CEO he or she? I don't know, is it a she or he?

So Ian Chowdhury is our CEO.

I wish they'd be here because I think this was one of the rare moments where the legislature actually is expressing some of their thoughts about high-speed rail. People are reluctant to have conversations about high-speed rail for a variety of reasons. Right.

And you know, one is because it's, it hasn't been performing in terms of people being associated with etc. We need to get it into a completely different frame of mind. So that's, there's not anything the two of you can do with that right now except take that back.

But that's, that's the point that I think if we, if we don't want high speed rail to die a slow death, we need a different kind of high speed rail overall funding plan going out there. So with that, I think we're done with the high-speed rail side of it.

I hope that you guys can come up with that for us in terms of that and be open to thinking through all the creative things that we need to do.

Without private financing, without federal funding, we will not be able to come up with the funds we need to do high-speed rail, just as the State of California. I think that's, that's how I see it. I'd love to be convinced differently if that's the case.

And so we're going to go to housing and ask HCD to come up and Assemblymembers now, we're going to try to go faster. The agencies will come up, and we'll go through each one of these. If you have thoughts about housing, we want to hear them.

You don't have to ask any questions of HCD, but we want them to be here in case you do have questions. So I'll tell you what, just to kick it off while you're thinking about your questions, I'll just say this on the affordable housing, I'm not seeing much value from the connection of affordable housing with transit.

Not because, theoretically, that isn't good, but I just don't see the transit being robust enough to saying if we build the housing near the transit, that we're getting a lot of change in sort of transit ridership or anything else.

To the extent that we do fund housing with this, I say drive it all for a truly affordable housing and target that affordable housing for the people that live in that particular community.

So you can go in and you can say we got these people moved into affordable housing that currently live in this community, rather than building what some people call affordable housing. That gets snapped up by people from around the world who want to live in beautiful places in California.

You know, you can build affordable housing at the beach and have it all be purchased by people in Sydney, Australia, and London, and everybody else. That's the challenge.

That's if we're going to do greenhouse gas funding for housing, I would decrease the transit connection aspect of it and focus it all on affordable housing for the people that live there. Any other comments on housing or questions one and then two.

Thank you. I appreciate those comments. Often, when I have the opportunity to talk about this, there was an affordable housing project that happened in my district. We were really excited. It was townhomes, they were going to be for purchase, teachers were going to get to buy in our community, and they were $1.4 million each.

We should be clear, I don't think that's affordable housing. So I have a couple questions. One is I've been perplexed in my own community. I live somewhere where there is one bus a day, one bus in the morning, and one bus at night. And when I looked at what was considered transit-rich, my house was transit-rich.

And I was so confused by that because clearly, I actually don't have public transit options for my house now. I live a five-minute drive from a BART station, but down windy roads that are actually not safe to bike or walk on.

So I was like, maybe because I'm this close to a BART station, but we have a downtown that I think is transit-rich, but then it extends out to way out into my community, where you can't get anyone on public transit. So I'm a little bit confused by the transit connection, how real it is.

So if you have a, if you want to talk about how we've defined transit-rich, I think that would be helpful. The second question is, we heard that this affordable housing piece has built 20,000 units.

I would be curious what the per-unit cost is of those units, if you have that, so that we actually know how much we're doing. And then the third question, since we're doing rapid, I'll give them all to you at once, was, what are the other expenditures? Maybe you don't know this because you're the housing folks.

It seems from what I gathered from the comments, the housing money is going to things beyond housing. What else is that money going to?

Whoever wants.

All right. Hi, good morning. My name is Amara Azucena Cid. I'm with the Strategic Growth Council, that administers the affordable housing and sustainable communities. And I have my partners from Housing and Community Development here. I think from your last question, what is AHSC funding? This program does fund affordable housing and sustainable transportation with a multitude of programs.

We also have a compatible program that's built into the funding mechanism that is for Sustainable Agricultural Lands Conservation Program. So, when you have continuous appropriations of 20% that go to the AHSC program. Of that 20%, 10% goes to the Sustainable Agricultural Lands Conservation Program. So it is a compatible sister program. We're thinking about infill development.

We're also thinking about conservation of our agricultural lands with the AHSC-specific program, some of those components that we have, or 50% goes to affordable housing. The rest goes to transportation, mobility, and programming that support some of the services at the housing location.

Does anyone know the per-unit cost of those 20,000 units? Avergar, obviously, they would not be the same.

Well, if you're looking for the total investment of AHSC. Right. So we have over four rounds of funding or eight rounds of funding. Apologies. Eight rounds of funding that we've administered to date, that's totaled about $4 billion. Right. 67% of that has gone towards housing.

So it's about 2.6 to housing, and we've gotten 22,000 units. So when you do the math on that.

Who's got a calculator? 2.6 billion shy. 2.6 billion by 20,000.

It's a relatively low number.

I don't think it's the only funding source for these projects.

Right. And then these projects also.

Okay, I'm. I'm here for 130,000 for housing.

I think that they do get other funding, though.

Back to Danny's point. Right. Do you have a sense of how much that share is?

We would have to go back and look at those numbers. But, but in terms of the AHSC investment. Yes. It's a relatively low number per housing unit.

I like that. Yes. Where is all the other money coming from?

And those are state and local, and federal sources, right? It's a mixture, yeah.

And then lastly, the question about the transit connection, it seems weak. Do you have thoughts on that?

I'll let my colleague answer.

Hello, Assemblymember. My name is Marc Caswell. I'm an advisor to the Community Investments and Planning Program and have been involved in the HSC program for more than three years. The way that the HSC program determines transit relationship is within a half-mile walking distance of a transit stop.

And the transit stop has to leave at least two times during peak hours in the morning and two times during peak hour in the evening. So what you described would not fall in this category of that infill transit-rich area that would meet the definition of the Affordable Housing Sustainable Communities Program.

Fascinating. Well, and then we had the housing project I mentioned where it was 1.4 million by the way, was 0.6 miles from the BART station. So our best transit, but just like this much. And so they couldn't get a lot of this funding, and that was what drove the cost up.

So I do think it is worth having a conversation around. If we don't just entirely get rid of the nexus as suggested by Assemblymember Bennett, how do we do it more thoughtfully? Because obviously being close to BART in the Bay Area is the best transit opportunity, one of the best transit opportunities you can have.

And so being 0.6 miles from that was better than being twice in the morning, twice in the afternoon in one of our further out communities, I think.