BILL ANALYSIS Ó AB 1288 Page 1 Date of Hearing: May 27, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1288 (Atkins) - As Introduced February 27, 2015 ----------------------------------------------------------------- |Policy | Natural Resources |Vote:| 6-3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allows AB 32 market-based regulations adopted by the Air Resources Board (ARB) to remain operable beyond December 31, 2020. AB 1288 Page 2 FISCAL EFFECT: Minor, absorbable costs for ARB to continue its cap-and trade program beyond 2020. COMMENTS: 1)Rationale. According to the author, through the AB 32 cap-and-trade program, an overall limit is placed on carbon emissions (the cap) and, in turn, regulated entities can acquire allowances through a variety of mechanisms including participating in carbon auctions to purchase allowances. Entities can use allowances to help meet their GHG reduction requirements or trade allowances to others if they are able to cost-effectively lower their own emissions (the trade). The cap is reduced each year and only a specific amount of allowances are available for purchase. Funding generated from the sale of allowances is invested into programs that reduce GHG emissions. Currently, the cap and trade program developed by ARB only includes emissions reduction requirements through 2020. This bill recognizes and clarifies the importance of continuing ambitious GHG emissions reductions beyond 2020 and the important on-going role of market-based mechanisms in that effort. 2)Background. The California Global Warming Solutions Act of 2006 (AB 32) requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations, AB 1288 Page 3 including market-based compliance mechanisms, to achieve maximum technologically feasible and cost-effective GHG emission reductions. As part of the implementation of AB 32 market-based compliance measures, ARB adopted a cap-and-trade program that caps the allowable statewide emissions and provides for the auctioning of emission credits, the proceeds of which are quarterly deposited into the GGRF available for appropriation by the Legislature. 3)Cap-and-Trade Revenues. The 2014-15 Budget Act allocates cap-and-trade revenues for the 2014-15 fiscal year and establishes a long-term plan for the allocation of cap-and-trade revenues beginning in fiscal year 2015-16. The Budget continuously appropriates 35% of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Twenty-five percent of the revenues are continuously appropriated to continue the construction of high-speed rail. The remaining 40% will be appropriated annually by the Legislature for investments in programs that include low-carbon transportation, energy efficiency and renewable energy, and natural resources and waste diversion. The Governor's 2015-16 budget assumes the receipt of $650 million in state revenue from cap-and-trade auctions in 2014-15 and $1 billion in 2015-16. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) AB 1288 Page 4 319-2081