Carbon Pollution Funds Poised to Deliver on Advancing Clean Energy in California

Governor Brown’s administration made public yesterday details of the first expenditure plan for revenues generated from the sale of carbon pollution allowances under California’s cap-and-trade program. The plan, set to be released as part of the Governor’s budget on Friday, proposes to spend $850 million in carbon pollution funds next fiscal year to expand clean energy solutions across the state’s economy and target benefits in California communities hardest hit by air pollution.

While conversations in the capitol will continue on the best way to maximize the benefits associated with spending cap-and-trade proceeds (and ensure each expenditure comports with legal requirements), the Governor deserves praise for putting forth a budget plan that recognizes the importance of investing cap-and-trade proceeds as a key strategy to keep California on pace toward achieving its long-term climate and clean energy goals.

Sustainable Transportation to Receive Lion’s Share

Like the Cap-and-Trade Auction Proceeds Investment Plan developed by the Air Resources Board and Department of Finance last year, the Governor’s expenditure plan focuses on three categories:

  1. Sustainable Communities and Clean Transportation ($600 million): As the largest contributor of both carbon and criteria air pollution in California, the transportation sector receives the largest allocation, with investments in three primary strategies:
  • Implementing regional Sustainable Community Strategies ($100 million): including funding for public transit and integrating land use and transportation planning to develop walkable, mixed-use communities.  These investments will cut greenhouse gas emissions in accordance with SB 375, California’s historic Sustainable Communities and Climate Protection Act;
  • Low carbon transportation ($200 million): including incentives for clean freight equipment and rebates for heavy and light-duty zero emission vehicles; and
  • Rail modernization ($300 million): with $250 million earmarked for funding to begin construction of High Speed Rail in California, with an additional $50 million set aside to meet rising demand for rail service throughout the state.
  1. Energy Efficiency and Clean Energy ($140 million): The expenditure plan focuses on capturing energy efficiency opportunities in residential and public buildings, agricultural and industrial operations, and water system and use efficiency. Two-thirds of the funding in this category will go toward expanding weatherization programs for low-income households.
  2. Natural Resources and Waste Diversion ($110 million): The final piece of the plan invests in strategies to reduce and sequester emissions from effective natural resource management, including forest health, composting and recycling.

Targeting Clean Energy Benefits Where They Are Needed Most

Importantly, the plan commits to achieving the goals of Senate Bill 535 (de León) by ensuring at least 25 percent of the proceeds benefit the state’s most disadvantaged communities (and ten percent of the proceeds fund projects located within those communities). Details of the plan’s approach to fulfilling the requirements of SB 535 remain outstanding, but prioritizing low carbon freight and heavy duty transportation strategies, supporting public transit and expanding low-income weatherization services are primed to deliver the range of co-benefits envisioned by the law.

From Plan to Action

After loaning the first $500 million collected from carbon polluters to the General Fund, Governor Brown’s FY14-15 cap-and-trade expenditure plan offers a promising start for promoting clean energy in this year’s budget process. While the plan includes a partial payback of last year’s loan ($100 million), we call on the administration to commit to a clear timetable to repay the loan in full.

As the budget process unfolds, we look forward to working with legislators and all parties to ensure the Governor’s promising plan materializes into the type of climate leadership California has so often exemplified.