Governor's Budget Move on Cap-and-Trade Angers Environmentalists

Governor Jerry Brown has spent a lot of energy focusing on the dangers of climate change lately. Speaking to a group of scientists Thursday, he warned, “it's over" in five years, unless the world steps up efforts to reduce the carbon dioxide emissions that are warming the atmosphere.

But while Brown is preaching action on climate change, his proposal to shift revenue from California’s cap-and-trade auctions has environmental groups seeing red.

California is the first state to try and limit greenhouse gas emissions through a cap-and-trade system. The state Air Resources Board has held three carbon allowance auctions so far, generating nearly $260 million in state revenue. By law, that money is supposed to go toward programs aimed at reducing greenhouse gases  and improving the air.  A portion of the revenue is also supposed to be funneled to poorer, heavily-polluted communities.

But the Brown Administration says the state needs more time to design and develop these efforts, so the governor’s revised budget proposes taking all the revenue and loaning it to the general fund, which pays for broader government spending. That would essentially delay any spending on the emission-lowering programs for at least another year.

Mari Rose Taruc, the state organizing director for the Asian Pacific Environmental Network, said she was, “shocked and upset” when she got the news. "[The programs are] ready. AB 32 has been on the books for seven years now. Of course there are programs that are ready.”

Taruc’s group is one of several that has been meeting with the state to put together a plan on how to spend the cap-and-trade revenue. The Greenlining Institute, another environmental justice group, was also in those meetings. Legal council Ryan Young said the suggestions include, “low-income solar programs, increased access to transit, affordable transit-oriented development,  as well as community greening, like urban forestry."

Those suggestions are all listed in the state’s new cap-and-trade investment plan. But Air Resources Board spokesman Dave Clegern said the blueprint needs improvement.  “We have a variety of options for spending money. It’s a pot of money, so there are a lot of people who want a piece of it,” he said, adding, “we want to make sure that money goes where it will have the biggest impact on the programs and the goals of AB 32, which is greenhouse gas emission reduction.”

Technically, by loaning the cap-and-trade money to the general fund, the state would still be complying with the requirements on how to spend it, since the money would eventually go toward those efforts when it’s repaid.

The state loans money from one fund to another all the time. But usually, the government is borrowing from special funds that are running a surplus so the loan doesn’t interfere with the fund’s main goal. Jason Sisney of the Legislative Analysts’ Office called the cap-and-trade proposal “unusual.”

‘The cap-and-trade auction revenues are a new source,” he explained. “ And the governor’s plan, as I understand it, is to borrow all of those monies, for at least the next year.” In fact, the $500 million Brown wants to borrow is about twice as much money as the auctions have raised so far.

Meanwhile, the LAO warns that delaying the environmental spending may interfere with the goal of reducing greenhouse gases to 1990 levels by 2020. But Clegern insisted that won’t be a problem. “The goal here is to reduce greenhouse gas emissions,” he said. “We will do that. The proceeds give us an extra tool with which to further that effort.”

Under California’s plan, the cap-and-trade system only accounts for about 20 percent of those emissions reductions. The rest are supposed to come from energy efficiency projects, better fuel standards, and more renewable energy.

The ground has shifted since Brown announced his budget last week. The LAO says the governor’s tax estimates are too low, and predicts the state will take in about $3 billion more than the administration is estimating. Environmental groups argue that extra revenue takes away the governor’s justification for delaying the cap-and-trade spending.