Cap and Trade
Cap-and-trade is a market based regulation that is designed to reduce greenhouse gases (GHGs) from multiple sources. Cap-and-trade sets a firm limit or cap on GHGs and minimize the compliance costs of achieving AB 32 goals. The cap will decline approximately 3 percent each year beginning in 2013. Trading creates incentives to reduce GHGs below allowable levels through investments in clean technologies. With a carbon market, a price on carbon is established for GHGs. Market forces spur technological innovation and investments in clean energy. Cap-and-trade is an environmentally effective and economically efficient response to climate change.
The AB 32 Scoping Plan identifies a cap-and-trade program as one of the strategies California will employ to reduce the greenhouse gas (GHG) emissions that cause climate change. This program will help put California on the path to meet its goal of reducing GHG emissions to 1990 levels by the year 2020, and ultimately achieving an 80% reduction from 1990 levels by 2050. Under cap-and-trade, an overall limit on GHG emissions from capped sectors will be established by the cap-and-trade program and facilities subject to the cap will be able to trade permits (allowances) to emit GHGs.
On August 31, 2016, Governor Edmund G. Brown Jr., Senate President pro Tempore Kevin de León and Assembly Speaker Anthony Rendon announced an agreement on an expenditure plan for unallocated cap-and-trade proceeds that will reduce greenhouse gas emissions through programs that benefit disadvantaged communities, support clean transportation, reduce short-lived climate pollutants and protect natural ecosystems. Under current law, 60 percent of annual auction proceeds are allocated on an ongoing basis to public transit, affordable housing, sustainable communities and high-speed rail. This agreement invests $900 million of the remaining unallocated funds for fiscal year 2016-17, and reserves approximately $462 million for appropriation in future years.
“California’s combatting climate change on all fronts and this plan gets us the most bang for the buck,” said Governor Brown. “It directs hundreds of millions where it’s needed most – to help disadvantaged communities, curb dangerous super pollutants and cut petroleum use – while saving some for the future.”
“This agreement is the latest example of how the legislature has been both progressive and prudent this session,” said Assembly Speaker Rendon. “With this agreement, we take an aggressive approach to investing cap-and-trade funds that provides tangible results for cleaner air and helps lower income Californians benefit from emission reduction programs. At the same time, we are also maintaining a responsible reserve to provide for the future. Communities across our state are already experiencing the harmful effects of climate change and air pollution and we have met this challenge with the urgency it deserves,” said Senate President pro Tempore De León. “Whether it’s the lingering effects of a historic drought on drinking water and our agricultural sector; ferocious wildfires that have left devastation in their wake; extreme heat and heightened ozone levels that are sending children and other vulnerable groups to the emergency room; there is no shortage in our need for funding to make our communities healthier and more resilient. That’s why it’s so imperative that we put the Greenhouse Gas Reduction Fund to work immediately. I’m pleased that we’ve reached a deal to bring relief and access to clean energy to the communities that need it most, and I look forward to getting this funding out the door as soon as possible so it can begin to make a difference.”
This agreement aligns with the state’s climate strategies to reduce emissions, petroleum consumption and short-lived climate pollutants, while bolstering renewable energy and energy efficiency programs. It also targets investment in disadvantaged communities disproportionately impacted by dirty air and carbon pollution and transportation-related programs, as transportation represents the largest source of greenhouse gas emissions.
In addition, given the uncertainty associated with recent auctions of carbon credits, the agreement prudently reserves one-third of the total amount for future allocation.
The agreement includes the following appropriations:
$368 million to the Air Resources Board, including:
- $133 million to the Clean Vehicle Rebate Program.
- $80 million to the Enhanced Fleet Modernization Program, Plus-Up Pilot Project and up to $20 million of this amount may be used for other light-duty equity pilot projects.
- $150 million for heavy-duty vehicles and off-road equipment investments.
- $5 million for black carbon wood smoke programs.
- $140 million to the Office of Planning and Research for the Strategic Growth Council to provide transformative climate communities grants.
- $135 million to the Transportation Agency for the Transit and Intercity Rail Program.
- $80 million to the Natural Resources Agency for the Urban Greening program.
- $65 million to the Department of Food and Agriculture, including:
- $50 million for the early and extra methane emissions reductions from dairy and livestock operations.
- $7.5 million for the Healthy Soils Program.
- $7.5 for the State Water Efficiency and Enhancement Program (SWEEP).
- $40 million to the Department of Forestry and Fire Protection, including:
- $25 million for the Healthy Forest Program.
- $15 million for urban forestry programs.
- $40 million to the Department of Resources Recycling and Recovery for waste diversion and greenhouse gas reduction financial assistance.
- $20 million to the Department of Community Services and Development for weatherization and renewable energy projects.
- $10 million to the Department of Transportation for the Active Transportation Program.
- $2 million to the Office of Planning and Research for the Strategic Growth Council to provide technical assistance to disadvantaged communities.
Cap-and-trade utilizes three funding programs, which are broken into three categories: (1) transportation, (2) energy, and (3) resource and waste. While complete information on these programs, including legislation, guidelines, and additional resource documents, can be found on ARB’s website at: http://www.arb.ca.gov/cc/capandtrade/auctionproceeds/auctionproceeds.htm, below is a brief overview of the transportation programs:
Affordable Housing and Sustainable Communities (AHSC) Program: This program is administered by the Strategic Growth Council (SGC), and implemented by both the Department of Housing and Community Development (HCD) and Natural Resources Agency’s, with a funding allocation of $130 million. The program aims to fund land-use, housing, transportation, and land preservation projects to support infill and compact development that reduce GHG emissions, while significantly benefiting disadvantaged communities and providing affordable housing. Program activities are intended to yield in projects that include transit-oriented development, intermodal affordable housing, transit capital projects, active transportation and complete streets.
At their regular meeting on June 30, 2015, the SGC formally approved the 28 projects recommended by staff, totaling $121,955,460. Among these was one project in the City of Fresno (Hotel Fresno), which was awarded $4,800,000. The complete list and description of projects approved can be found at: http://sgc.ca.gov/s_ahscprogram.php.
The SGC recently held workshops titled “Lessons Learned: Round One”, in an effort to determine potential adjustments for Round Two activities, including adjustments to the program funding guidelines. It is anticipated that a draft of such guidelines will be available in the late summer or early Fall 2015. Fresno COG officially submitted comments to the SGC regarding the improving of rural agency competitiveness, geographic equity, MPO inclusion throughout the process, CalEEMod improvements, transparency throughout the scoring process, and increasing transit project applications.
Sustainable Agricultural Land Conservation (SALC) Program: This program is administered by the California Department of Conservation, as directed by the SGC, with a funding allocation of $1 million (as part of the $130 million allocated to the SGC as part of the AHSC Program). Activities associated with this program include the formulation/placement of Sustainable Agricultural Land Strategy Plans.
At their regular meeting on June 30, 2015, the SGC formally approved the 5 projects recommended by staff, totaling $492,495. No projects from the San Joaquin Valley were included in these approvals. The complete list and description of projects approved is attached, for reference. Additional information on the program can be found at: http://sgc.ca.gov/s_salcprogram.php.
High Speed Rail Program: This program is administered by the High Speed Rail Authority, with a funding allocation of $250 million. Activities within the program consist of the planning, design, and right-of-way acquisition, and construction of the initial operating segment. Additional information can be found at: http://hsr.ca.gov/
Transit and Intercity Rail Capital Program (TIRCP): This program is administered by the California State Transportation Agency, with a funding allocation of $25 million. Activities within this program consist of capital improvements and operational investments that will modernize California’s transit systems and intercity, commuter, and urban rail systems to reduce GHG emissions, expand and improve rail service and increase ridership, integrate the rail service of the state’s various rail operations, including integration with the high-speed rail system, and improve safety.
On June 30, 2015, CalSTA announced the awardees for the program, totaling $718,000,021 in funding for 14 projects. One of the awards was in the San Joaquin Valley (San Joaquin RTD). The complete list of awardees can be found at: http://www.dot.ca.gov/hq/MassTrans/tircp.html.
Low Carbon Transit Operations Program (LCTOP): This program is administered through the Department of Transportation (Caltrans), with a funding allocation of $25 million. Activities within this program are designed to provide operating and capital assistance for transit agencies to reduce GHG emissions and improve mobility, with a priority on serving disadvantaged communities. Approved projects in LCTOP will support new or expanded bus or rail services, expand intermodal transit facilities, and may include equipment acquisition, fueling, maintenance and other costs to operate those services or facilities, with each project reducing greenhouse gas emissions. For agencies whose service area includes disadvantaged communities, at least 50 percent of the total funds received shall be expended on projects that will benefit disadvantaged communities.
On June 30, 2015, the State Controller’s Office released information on the approved amounts of funds. Among the 86 projects detailed are three within Fresno County (FAX/City of Fresno, $249,311; City of Clovis, $36,902; and FCRTA, $69,760). The complete list of awardees can be found at: http://www.dot.ca.gov/hq/MassTrans/Docs-Pdfs/Cap&Trade/lctop.14-15.early.bird.projects.pdf
In August, Caltrans will hold four public workshops designed to provide participants with an up-to-date program operations overview, LCTOP Guidelines status update, and timeline and project eligibility discussion. A link to the workshop flyer can be found at: http://www.dot.ca.gov/hq/MassTrans/Docs-Pdfs/LCTOP/LCTOPWorkshop_Flyer_August2015.pdf. Additional information on the overall program can be found at: http://www.dot.ca.gov/hq/MassTrans/lctop.html.
Low Carbon Transportation Program: This program is administered by the California Air Resources Board (ARB), with a funding allocation of $230 million. Within this program, Cap and Trade auction proceeds provide an additional funding source for ARB’s advanced technology, clean transportation incentive programs, thus expanding the types of projects ARB has funded through the Air Quality Improvement Program (AQIP). Activities within the program include zero and near-zero emission passenger vehicle rebates, heavy duty hybrid/ZEV trucks and buses, freight demonstration projects, and pilot programs (car sharing, financing, etc.) in disadvantaged communities. Additional details for the various program activities, as well as a continually updated schedule of upcoming activities/workshops can be found at: http://www.arb.ca.gov/msprog/aqip/aqip.htm.