A Disappointing Cap-and-Trade Funding Proposal

Jessyca SheehanJessyca Sheehan, director, is a member of APCO’s global energy and clean tech practice.

As reported in an earlier post, with two auctions already behind it, California must now determine how best to spend cap-and-trade revenues. Many proposals have been floated from environmental, transportation, clean tech and other industry advocates, ranging from supporting existing climate mitigation programs to establishing a Green Bank to incubate new emissions reducing technologies. Unfortunately for these advocates, Governor Jerry Brown’s May budget revision instead proposes shifting $500M in cap-and-trade revenue to the General Fund to help balance the budget.

State law requires California to spend cap-and-trade funds on efforts that reduce carbon emissions, in line with California’s landmark global warming law, Assembly Bill 32. As such, any shift to the General Fund would need to be temporary – a “loan,” if you will. Given the first two auctions have only brought in around $140M, the Governor’s proposal anticipates more allowances to be sold at auction in the coming fiscal year, all of which would go to the General Fund. He has not put forth a repayment schedule, although he has said it would be paid back with interest.

CalEPA Secretary Matt Rodriguez has publicly supported the Governor’s proposal, calling it “prudent” and positioning it as giving the state more time to figure out how much money can realistically be expected from future auctions and which programs should be top of the list for funding. The Legislature still has to approve the revised budget, and must also decide how to deal with several bills introduced earlier this session proposing alternate cap-and-trade funding schemes.

Yes, California is strapped for cash and, yes, there are important budget gaps that cap-and-trade revenues can help relieve, at least in the short-term. However, as the first state to establish an economy-wide carbon trading program – and with the rest of the country and world watching – we have a real opportunity to show how market-based systems can have a real impact on advancing climate mitigation projects and technologies, thereby creating jobs and improving the economy along with the environment. California can and should do better.


Posted on May 17, 2013 By Jessyca Sheehan
Categories  California Politics, Energy & Clean Tech and tagged , , , , , , ,
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