Transportation tops governor’s plan to spend $1 billion in GHG revenue

California Gov. Jerry Brown (D) is proposing in his fiscal year 2015-16 budget to spend $650 million out of $1 billion expected to be collected through the state’s greenhouse gas (GHG) allowance auctions on low-carbon transportation initiatives, including $250 million on high-speed rail, $200 million on subsidies for zero-emission cars and low-emission heavy-duty vehicles, and $200 million on transit and intercity rail projects.

In addition, the governor wants to spend another $200 million on affordable housing and sustainable communities programs, which aim to reduce California residents’ vehicle miles traveled (VMT) primarily through land-use changes, according to a summary of the administration’s proposed budget released Jan. 9.

However, the state’s Legislative Analyst’s Office (LAO) estimates in a budget overview report released this week that the state could actually generate about $2.3 billion from the cap-and-trade auctions, more than twice what the administration is projecting. Relevant documents are available on

The LAO’s upward revision in revenue estimates is bolstering calls by environmental justice groups for the state to spend even more of the revenue in poor and minority communities.

In other budget highlights, the administration is proposing $1.6 million and 16 new staff positions for the Department of Toxic Substances Control, to help improve several programs that have been under attack by environmentalists over the past two years, including hazardous waste permitting and enforcement.

The budget proposal comes on the heels of Brown’s Jan. 5 inaugural address, in which he laid out three new GHG-related goals for 2030: ensuring that 50 percent of the state’s supply of electricity is generated from renewable resources; reducing petroleum use in cars and trucks by up to 50 percent; and doubling the efficiency of existing buildings while making heating fuels cleaner (Inside Cal/EPA, Jan. 9).

“Continued and even steeper reductions in carbon pollutants are necessary to address the ongoing threat posed by climate change,” the budget summary states. “The overwhelming scientific consensus is that reducing GHG emissions by 80 percent below 1990 levels by 2050 is necessary to avoid ‘dangerous’ climate change–meaning some of the worst and most disruptive climate impacts.”

As previously disclosed by California officials, the Brown administration will also “work with the Legislature and stakeholders to develop a midterm [GHG] reduction target for 2030 that is consistent with this 2050 objective for stabilizing climate change, and to develop an integrated, economy-wide plan for meeting this target,” the summary adds.

Other priorities in the governor’s spending plan for the GHG revenue include: $75 million for residential structure energy efficiency upgrades; $20 million for energy efficiency improvements in public buildings; and $15 million for agricultural energy and operational efficiency.

State law requires that 25 percent of total GHG expenditures benefit “disadvantaged” communities and that 10 percent of total funding be spent within such communities.

Cal/EPA Secretary Matthew Rodriquez said during a Jan. 9 press conference call on the budget that the agency’s overall proposed spending plan is $3.8 billion, an increase of $200 million compared with the current fiscal year.

With regard to the $1 billion in GHG revenue, Rodriquez noted the requirement that a quarter of the funds must be spent to benefit disadvantaged communities, and that additional co-benefits will come from the allocations, such as reductions in other pollutants, job creation and more transportation options.

Not all environmental organizations were satisfied with the budget proposal in this regard. In a joint Jan. 9 press release, the Asian Pacific Environmental Network, Coalition for Clean Air, Greenlining Institute and Public Advocates urged the Legislature to work with the Brown administration to “pass a budget with higher levels of investment in our neediest communities,” said Bill Magavern, director of the Coalition for Clean Air.

While the budget proposes to spend just over $1 billion from the GHG auction revenue, the groups claim that experts anticipate more than twice that much money will actually be generated by the auctions during the upcoming fiscal year, mostly because transportation fuels were brought under the program effective Jan. 1. That means oil companies and other fuel providers will have to purchase GHG allowances equal to the pollution created by the amount of gasoline and diesel they sell.

“We’ve already seen California climate policies start to bring investments, good jobs and cleaner air to communities hit first and worst by pollution and a weak economy, but it’s just a start,” added Alvaro Sanchez, Greenlining’s program manager for environmental equity, in the press release. “We can use these funds generated by charging our worst polluters to help struggling neighborhoods not just survive but thrive.”

The groups’ comments on total revenue from the allowance auctions is supported by the report released Jan. 13 by the LAO that estimates the state could bring in about $2.3 billion, more than twice what Brown estimates. “If all of the allowances that are estimated to be auctioned in 2015-16 sell for the minimum price set by the state (between $12 and $13), state revenue would exceed $2.3 billion,” the LAO budget overview report says. “Based on our preliminary analysis of different factors (such as the outcomes of prior auctions), it is likely that the state will sell most or all of the allowances offered for sale in 2015-16. Therefore, state auction revenue will likely be significantly higher than what is assumed in the budget.”

To the extent revenues exceed the amount assumed in the budget, “those programs that are continuously appropriated specified percentages of auction revenue would receive significantly more funding in 2015-16 than is identified in the governor’s budget,” the LAO report adds. “The rest of the additional revenue would be available to be allocated by the Legislature in the budget or future years based on its priorities.”

Regarding the $200 million earmarked for affordable housing and sustainable communities programs, Rodriquez noted that the Strategic Growth Council — which disburses the money for various projects and programs aimed mainly at reducing VMT — was expected to release a guidance document providing more details on the program and how entities can pursue grants.

Meanwhile, DTSC’s budget includes an increase of $1.6 million from the Hazardous Waste Control Account and 16 positions to “improve the effectiveness and timeliness of the department’s permitting process and reduce the backlog of permit applications,” according to the summary.

An additional $840,000 from the Toxic Substances Control Account and six positions are also proposed to support “pilot projects that address hazardous wastes generated in significant quantities, posing the most significant public risks, and that disproportionately affect disadvantaged communities.”

The Water Resources Control Board and regional boards will receive $135 million in bond funding from Proposition 1, which was approved by voters last year and will be used to make loans and grants to smaller water systems to clean up contaminated supplies, Rodriquez said.