CLFP Supports Strong Oversight on Auction Fund Expenditures

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The Governor's 2014 Budget proposes to invest $850 million of cap-and-trade auction proceeds to support existing and pilot programs that will "promote GHG reductions and meet SB 535 goals." This amount includes the repayment of $100 million that was loaned to the General Fund in 2013-2014. 

To date, CARB has conducted six auctions since November 2012 of GHG emission allowances as part of the market-based compliance mechanism. These auctions resulted in approximately $663 million in proceeds to the state.

California’s cap–and–trade program is expected to raise billions of dollars in auction revenues from 2012 through 2020. The actual amount of revenue that will be raised is difficult to predict, particularly because of the uncertainty about future allowance prices and the number of allowances that may be sold. Using CARB’s floor and ceiling prices for allowances, and assuming that CARB provides 60 percent of all allowance for free, the total cap–and–trade revenues from all auctions through 2020 could range from $12 billion to $45 billion. According to the Legislative Analyst's Office (LAO), several economists who have evaluated California’s cap–and–trade program have estimated that, over the life of the program, average allowance price may be in the $15 to $20 range. If this were to occur, total revenue for the program through 2020 could be roughly $15 billion.

CLFP has joined with other industry groups in discussing with State legislative staff the importance of investing cap-and-trade auction revenues so that they maximize greenhouse gas emission reductions in the industry sectors that bear the compliance obligation.  CLFP supports the development of criteria that would prioritize the availability of auction funds to favor projects proposed by industry facilities over projects proposed by non-obligated entities.  Additionally, CLFP is urging the development of criteria that proposed projects must meet in order to be eligible for funding.  Finally, CLFP supports active oversight of all projects funded with auction dollars to ensure that the money is not misused or funneled into other non-AB32 activities.  Currently, the Governor’s proposed budget lays out his vision for use of the funds in his Cap-and-Trade Expenditure Plan however, none of the proposals call for any funding criteria or cites the need for oversight in the use of the funds.
 
According to legislative staff, cap-and-trade revenues will likely be allocated into three categories: high-speed rail, transit, and implementation of SB 375 (the Sustainable Communities and Climate Protection Act of 2008) through some form of a competitive grant-making process.  The amounts and details of the allocations will be discussed at future budget hearings.
 
CLFP will monitor this legislation as it progresses and continue to communicate the view that investments of cap-and-trade auction proceeds should be prioritized to ensure that industry is first on the list to receive funding for GHG/Energy Efficiency projects that result in immediate emissions reductions in compliance with AB 32 restrictions.  And that any other investments will have a strong nexus to activities directly tied to the reduction of greenhouse gas emissions.

Article written by John Larrea, Government Affairs Director, California League of Food Processors

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