California approves cap-and-trade revenue bill

California lawmakers have passed a bill that clears the way for the state to collect more than $1 billion a year in revenue from selling allowances in the nation’s CO2 cap-and-trade market, which is due to start next year.

On Tuesday, the California Assembly voted 47-26 to approve AB 1532, a bill written by Speaker John A. Pérez, which provides a framework for how the state will spend revenue generated by its carbon market.

California’s cap-and-trade program launches on January 1, 2013; the launch will be preceded, on November 14, by the first of three state-run carbon allowance auctions scheduled for the California’s 2012-2013 fiscal year.

Capitol insiders had predicted that the fate of the billions in auction revenue would dominate the legislative agenda in Sacramento this year. For lawmakers who have grappled in recent years with California’s chronic budget shortfalls, the sums involved are not inconsequential. Governor Jerry Brown’s budget plan, released in January, projected auction revenue of $1 billion in 2012-13. When the cap-and-trade program expands to include transportation fuels in 2015, auction revenue will ratchet upwards.

AB 1352 designates five broad categories as permissible expenditures for auction revenue: renewable energy and energy efficiency; low-carbon transportation and infrastructure; natural resource protection; research and development; and empowering local leadership climate change planning and implementation.

The bill would create the Greenhouse Gas Reduction Account within the Air Pollution Control Fund, which is controlled by the Air Resources Board (CARB). AB 1352 would further direct CARB, the agency tasked with administering AB 32, California’s pioneering climate change law, to develop an investment plan for the auction revenues every three years. CARB would be required to submit a status report by December of each year to the Legislature on projects funded by the account.

Speaking at a carbon market conference in San Francisco last month, Panama Bartholomy, an energy adviser to Speaker Perez, had predicted that a final auction revenue bill would likely be a composite of his boss’ bill and several others. His office, he said, would work with the authors of competing bills to “try to have a smaller food fight.” Bartholomy’s magnanimity aside, it would appear that the Speaker’s Office has assured passage of the bill it wants, which happened to be its own.

“California is a global leader in combating climate change, and we are proud that our state is the first to have created a carbon cap and trade system to reduce Greenhouse Gas emissions,” said Speaker Pérez in a statement.

“This measure will move that effort forward by establishing a process to allocate the funds generated by carbon auctions, ultimately helping our economy become more sustainable and prosperous for every Californian.”

AB 1352 now moves on to the Senate, where passage is likely. Legislation sponsored by the legislative leadership rarely languishes.

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