Climate Change: Legislative Analyst Discusses Using Carbon Auction Proceeds for General Fund

By Published On: February 17, 2012

In a report evaluating the California Air Resources Board’s carbon cap-and-trade program under AB 32--the state’s climate protection law--the Legislative Analyst’s Office outlines new options for how to use the billions of dollars of proceeds the state expects to receive from auctioning greenhouse gas emissions rights, also known as allowances, to industries. By a two-thirds vote, the office notes, lawmakers could devote all or a portion of the money to making direct payments to Californians to use as they please, a strategy sometimes called cap-and-dividend. It also could devote the proceeds to the state’s general fund to close the budget gap and enhance a variety of state services. In the coming year, while the Air Board plans to give 150 million free allowances to the electric utility industry, it also plans to auction off 20 million allowances. This is expected to bring the state $1 billion in revenue, which would be split between programs that cut greenhouse gases and an offset for programs funded by the state’s general fund. Looking further ahead, as the Air Board ratchets down free allowances and cranks up the number auctioned, revenues to the state from the sale of emissions rights are expected to grow. The report estimates they could total as much as $41 billion between now and 2020. Another alternative the report suggests is that the Legislature could require the Air Board to auction all the emissions rights, which would produce revenue over the remainder of the decade of up to $140 billion. Using the money for the general fund could prevent cuts that would slow the economy, the office concludes. * * * * * From the annals of history, a 2008 California Energy Commission report warns that when one of California’s nuclear power plants goes down, greenhouse gas emissions rise. The Energy Commission calculated that a year-long outage would increase state greenhouse gases from generating power by up to 7 million tons. California Air Resources Board data peg total state emissions at 477 million tons/year, so that would be about a 1.4 percent increase. The increase is expected because the replacement power likely would come from fossil-fueled plants. That study preceded the state’s 33 percent renewables portfolio standard law. CEC did the analysis to find out what would happen if one of the state’s two major nuclear plants went down for an extended time. Earlier this month, one of the reactors at the San Onofre Nuclear Generating Station shutdown after a leak developed in its steam generator unit. Meanwhile, the other reactor at the two-unit plant remains down for refueling and maintenance. * * * * * A California Public Utilities Commission administrative law judge Feb. 8 ruled that despite the state’s low carbon fuel standard remaining hung up in a court battle, the commission would go ahead in deciding how utilities should use the proceeds they get from selling low carbon fuel standard credits to oil companies. Under the California Air Resources Board’s low carbon fuel standard, utilities are set to receive credit for supplying electricity to motorists that drive electric vehicles, which they can in turn sell to oil companies that need to offset the carbon emissions that come from their transportation fuels. The standard broadly requires utilities to use the money for programs that advance electric transportation, but the CPUC is trying to figure out specifically how to meet that goal in its proceeding. A draft decision is due in October.

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