At the state capitol, it’s the final stretch for the making, breaking, or overhauling bills. Two significant pieces of legislation are near the Aug. 31 finish line. While related, they take divergent energy paths. One establishes a state bank to fund energy projects and the other exempts the oil and natural gas industries from the state’s carbon emissions market. They are inextricably interwoven because they impact the state’s carbon cap-and-trade auction. The most important bill is SB 1121 by Sen. Kevin de León (D-Los Angeles). It may direct hundreds of millions of dollars annually to a new California “Green Bank” to invest in low-carbon electricity and transportation technologies for government, industry and households. The new bank is to be funded by a chunk of the state’s carbon cap-and-trade auction revenue. The amount is expected to more than triple with the inclusion of oil and natural gas fuels next year. The inclusion may add more than $2 billion/year to the current $872 million reaped the last year. If the carbon market expands, the potential public revenue stream is still a drop in the bucket as far as what’s needed for California to transition to a low-carbon economy, de León says. But, the bank is a big deal because of its potential to attract private financing to supplement public infusions. “Green” banks in other states have attracted on average $9 of private investment for every public dollar. SB 1121 seeks to establish such a fund within the California Treasurer’s Office to expand and lower the cost of financing alternative energy, energy efficiency, demand-response, carbon sequestration, and low-carbon vehicles. The bank is to reap returns on its low-interest loans, with the revolving funds plowed into financing more next generation energy projects. The level of funding would be determined during the annual state budget process. It would also be closely related to the level of revenue the state gets from quarterly carbon emissions rights auctions under the cap-and-trade program. Under a new budget law, SB 862, 40 percent of the $872 million of carbon market revenue is directed to the Legislature for annual allocations—part of which would be directed to the green bank. In addition, a portion of the other 60 percent of carbon market money—set to be continuously appropriated to sustainable communities, low-carbon transition, and cleaner transit—also could flow into California’s alternative energy bank coffers. Under SB 1121, which was in the Assembly Appropriations Committee Aug. 6, the proposed funding would be modelled after other state green banks. If de León’s bill is approved on the Senate floor, a warm reception in the governor’s office is not expected. In the past, Gov. Jerry Brown has vetoed creating such a bank—but Brown is unpredictable. The state chief had asserted there are a sufficient number of publicly-funded green energy pots. De León insisted that better optimizing limited public dollars “would seem consistent with the governor’s philosophy.” Another hurdle for the prospective bank is that its funding level also would hinge on a pending Assembly bill, which seeks to keep gasoline and diesel fuels out of the state’s carbon cap-and-trade program. AB 69 by Assemblymember Henry Perea (D-Fresno) would exempt transportation fuels from coming under cap-and-trade through 2017. That disturbs a program that two consecutive governors from both parties have bragged about on the world stage and has made California a climate protection leader. Under current law, fuel producers and marketers are to begin buying emissions allowances in the cap-and-trade program’s regular allowance auctions in 2015, significantly increasing the auction revenue. It’s widely acknowledged the producers and marketers will pass on the cost of purchasing the allowances at the pump, potentially raising the price of fuel by at least 10 cents/gallon beginning Jan. 1, 2015. Perea says his bill would give the California Air Resources Board time to develop alternative ways to cut greenhouse gas emissions from cars, trucks, buses, and other vehicles, that won’t impose higher gasoline prices on people and businesses that have no alternative to driving. He believes state motorists and businesses—especially those that have to do a lot of driving—can’t afford a gas price increase, particularly as the state’s economic recovery remains fragile. Perea’s attempt to impede the state’s effort to cut greenhouse gases faces more of an uphill battle than the bank bill. Passing AB 69 requires a two-thirds vote of each legislative chamber. It further needs the assent of a governor who voices support for cap-and-trade. Getting such a supermajority that would be impervious to a veto will require solid Republican backing, plus considerable support among moderate Democrats, who’ve largely remained mum on the issue.
