Lawmakers reach deal on cap-trade spending
SACRAMENTO — In the closing hours of the legislative year, lawmakers approved a last-minute deal Wednesday on how to spend money generated by the state’s cap-and-trade auctions, breaking through a two-year budget impasse during which a significant portion of the funds sat unspent.
Under the agreement, the state will spend $900 million on programs to reduce greenhouse gas emissions — nearly two-thirds of the $1.4 billion that has been raised but not allocated. The money will go toward subsidies for electric cars, new park space and affordable housing with pedestrian-friendly development plans. California’s 4-year-old cap-andtrade program raises money from businesses that purchase permits to pollute.
The deal was announced on the Legislature’s final day and was hailed by the governor and legislative leaders. It comes not long after they inked an ambitious plan to combat climate change by extending and expanding California’s targets to reduce greenhouse gas emissions.
“California’s [combating] climate change on all fronts and this plan gets us the most bang for the buck,” Gov. Jerry Brown said in a statement. “It directs hundreds of millions where it’s needed most — to help disadvantaged communities, curb dangerous super pollutants and cut petroleum use — while saving some for the future.”
The deal is expected to land on Brown’s desk as early as Thursday morning.
The spending proposal is tilted toward urban areas and low-income communities, marking a win for lawmakers who argued that
their poorer constituents were being left out of the largesse generated by the cap-and-trade program. The final deal included money for energy efficiency upgrades for aging buildings and urban parks, but no money for conservation projects such as wetlands restorations.
Such spending priorities are typically haggled over during the budget process, but for two years the funds were trapped in political limbo, being held as leverage while politically fraught climate bills were being debated in the Legislature. Sixty percent of the auction revenues are not subject to the annual budget process; instead, they are automatically directed each year toward certain projects, including the bullet train and affordable housing.
This new agreement would allocate $135 million for transit projects such as intercity and commuter rail systems.
It would spend $133 million for the state’s main subsidy program for low- and zero-emission vehicles, and $80 million for a second subsidy for low-income Californians living in poorer parts of Los Angeles and the San Joaquin Valley.
Thousands of consumers were pushed to wait lists while the cap-and-trade funds were held in limbo. Once the budget is finalized, rebates will go out to those already on the waiting list, with priority going to lowincome buyers.
It includes $80 million for urban parks and other green spaces. Such projects will be chosen by state and local agencies during a grant process over the next several years.
“The reality is we have many communities … especially in Los Angeles, that are urban asphalt and concrete wastelands,” said Senate leader Kevin de León (D-Los Angeles).
Multiple bills pending in the Legislature add new restrictions on how the money is spent. About half of those who had received subsidies to purchase low- or zeroemission vehicles were earning more than $200,000 a year, according to a state survey. A new bill would limit the subsidy to those making less than $150,000.
Similarly, the spending package includes $50 million to reduce methane emissions from dairy and livestock, dependent on a separate bill that would require sharp cuts in these emissions by 2030.
And a third bill creates a new program that encourages disadvantaged communities to develop their own efforts to combat climate change, such as city planning that includes affordable housing and pedestrian walkways. The legislation includes $140 million to fund this effort statewide.
The spending plan is not as expansive as the one proposed by De León earlier this month, which sought to spend $1.2 billion. Assembly Speaker Anthony Rendon (D-Paramount) had expressed reservations about using nearly all the available cash in light of dwindling proceeds from recent capand-trade auctions.
Facing legal uncertainty due to a pending lawsuit, cap-and-trade auction revenue has sharply declined. The most recent auction, held in August, generated about $8 million. Lawmakers said they hoped the recent extension of the state’s emissions targets — which demonstrated a political will to shore up the program — would restore faith from the markets.
“With this agreement, we take an aggressive approach to investing cap-and-trade funds that provides tangible results for cleaner air and helps lower-income Californians benefit from emission reduction programs,” Rendon said in a statement. “At the same time, we are also maintaining a responsible reserve to provide for the future.”
Brown, who has championed setting aside money in the case of economic downturn, appeared even less inclined to dip into cap-andtrade dollars.
Asked last week if he backed spending those funds, the governor said he was “committed to spending a little of that money,” placing emphasis on the word “little.”