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Cap-and-Trade Auction Proceeds Implementing Legislation



In 2006, the Legislature passed the California Global Warming Solutions Act of 2006 (Assembly Bill 32 (AB 32); Statutes of 2006, chapter 488).  AB 32 directed the Air Resources Board to address climate change using multi-year regulatory programs to reduce greenhouse gas (GHG) emissions in California.  AB 32 requires California to reduce greenhouse gases to 1990 levels by 2020, and to maintain and continue reductions beyond 2020.  The Air Resources Board (ARB) has adopted a Scoping Plan and, together with other State and local agencies, has developed and implemented numerous programs to reduce emissions to meet these goals.

In 2012, the Legislature passed and Governor Brown signed into law three bills - AB 1532 (Pérez, Chapter 807, Statutes of 2012), Senate Bill (SB) 535 (De León, Chapter 830, Statutes of 2012), and SB 1018 (Budget and Fiscal Review Committee, Chapter 39, Statutes of 2012) - that establish the Greenhouse Gas Reduction Fund (GGRF) to receive State proceeds from the distribution of allowances and to provide the framework for how those auction proceeds will be appropriated and expended. 

These statutes require that the State portion of the proceeds be deposited in the GGRF and used to facilitate the achievement of GHG emission reductions and, where applicable and to the extent feasible, to further additional goals of AB 32 and the Legislature.  Passage of SB 852 (Leno, Chapter 25, Statutes of 2014) enacted the Fiscal Year (FY) 2014-15 State Budget, including appropriations from the GGRF.  The expenditure of FY 2013-14 and 2014-15 auction proceeds must be consistent with an Investment Plan that the Administration completed in May 2013 in accordance with AB 1532 and SB 535.  In addition, expenditures must comply with the requirements contained in SB 862 (Senate Budget and Fiscal Review Committee, Chapter 36, Statutes of 2014), the bill which establishes requirements for State agencies receiving appropriations of GGRF monies in FY 2014-15 and later years. GGRF statues are listed below from earliest enacted to latest.

Senate Bill 1018 (Budget and Fiscal Review Committee, Chapter 39, Statutes of 2012)


SB 1018 established the Greenhouse Gas Reduction Fund as the account to receive auction proceeds and established accountability requirements to help ensure that all GGRF expenditures achieve GHG reductions and further the purposes of AB 32.  SB 1018 requires State agencies that have been appropriated monies from the GGRF to prepare an expenditure record.  An expenditure record is a document that provides five pieces of information documenting use of the monies.  The agency preparing the expenditure record must describe:
  • The proposed use of GGRF monies;
  • How a proposed expenditure will further the regulatory purposes of AB 32;
  • How a proposed expenditure will contribute to achieving and maintaining GHG emission reductions;
  • How the State agency considered the applicability and feasibility of other non-GHG reduction objectives; and
  • How the State agency will document the result achieved from the expenditure.

Assembly Bill 1532 (Pérez, Chapter 807, Statutes of 2012)


AB 1532 requires that cap-and-trade auction proceeds be used to facilitate the achievement of GHG reductions and where applicable and to the extent feasible:
  • Maximize economic, environmental, and public health benefits to the State.
  • Foster job creation by promoting in-state greenhouse gas emissions reduction projects carried out by California workers and businesses.
  • Complement efforts to improve air quality.
  • Direct investment toward the most disadvantaged communities and households in the State.
  • Provide opportunities for businesses, public agencies, nonprofits, and other community institutions to participate in and benefit from statewide efforts to reduce greenhouse gas emissions.
  • Lessen the impacts and effects of climate change on the state’s communities, economy, and environment.

For allocating proceeds from the sale of State-owned allowances, AB 1532 establishes a two-step process:
  • Three-Year Investment Plan:  The Investment Plan identifies priority programs for investment of proceeds to support achievement of the State’s GHG emission reduction goals.  The first Investment Plan was released on May 14, 2013.
  • Annual Budget Appropriations:  Funding is appropriated to State agencies and programs consistent with the Three-Year Investment Plan by the Legislature and Governor through the annual Budget Act.
AB 1532 requires a report to be submitted each year by March 1 to the Legislature describing the status and outcomes of projects funded with auction proceeds.

Senate Bill 535  (De León, Chapter 830, Statutes of 2012)

 
SB 535 requires the California Environmental Protection Agency to identify disadvantaged communities for investment opportunities and requires ARB to provide guidance on maximizing benefits to the identified disadvantaged communities. SB 535 allocates 25 percent of the proceeds to benefit disadvantaged communities and at least 10 percent of the proceeds expended for projects located within those communities.

Senate Bill 862  (Senate Budget and Fiscal Review Committee, Chapter 36, Statutes of 2014)


SB 862 establishes requirements for agencies receiving GGRF monies and provides continuous appropriations of future GGRF monies for transportation, transit, land use, housing, and agricultural land preservation programs.  In addition to specific agency and program requirements, SB 862 requires that ARB develop over-arching guidance on investments for disadvantaged communities, SB 1018 expenditure record preparation, reporting, tracking, and quantification approaches, and other guidance to be used by all agencies that receive appropriations from the fund.

Senate Bill 852  (Leno, Chapter 25, Statutes of 2014)


SB 852, the Budget Act of 2014, provided funding appropriations from the GGRF to multiple agencies for projects that reduce GHG emissions and provide investments in and for the benefit of disadvantaged communities.  ARB has created a program page for more information about agencies with GGRF appropriations.

Assembly Bill 1550 (Gomez, Chapter 369, Statutes of 2016)


AB 1550 amends the existing SB 535 disadvantaged community investment minimums and requires new investment minimums for low-income communities and low-income households as described and shown in figure below. The other provisions of SB 535 remain unchanged.
  • A minimum of 25 percent of the proceeds be invested in projects that are located within and benefiting individuals living in disadvantaged communities;
  • An additional minimum of 5 percent be invested in projects that are located within and benefiting individuals living in low-income communities or benefiting low-income households statewide; and
  • An additional minimum of 5 percent that are located within and benefiting individuals living in low-income communities, or benefiting low-income households, that are within a 1/2 mile of a disadvantaged community.

To receive electronic notices of meetings and materials, you can sign up for the Auction Proceeds Email List.

For questions on the program, please contact:
Melissa Niederreiter at 916-323-6576 or via e-mail
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