New California laws set up framework for spending cap-and-trade revenue

While businesses deride California's new restrictions on greenhouse-gas emissions as a giant tax, lawmakers have taken steps to carve up the money.

Gov. Jerry Brown over the weekend signed two bills establishing general guidelines on how the expected $1 billion-plus in annual revenue will be spent.

Assembly Bill 1532, by Assembly Speaker John A. Pérez, D-Los Angeles, requires that the money be spent on environmental purposes, with an emphasis on improving air quality.

Senate Bill 535, by Sen. Kevin de León, D-Los Angeles, requires that at least 25 percent of the money be spent on projects that help "identified disadvantaged communities" – mainly poorer communities that tend to suffer the worst air pollution. At least 10 percent must be spent on projects specifically within those communities.

The two bills don't identify specific projects that will get money. Rather, they "set up a framework for how the state is going to invest the revenue," said Lauren Faber, West Coast political director with the Environmental Defense Fund. "It sets up the parameters."

The Legislature, the Department of Finance and the California Air Resources Board will oversee the expenditures.

The revenue will come from a series of state-run auctions of greenhouse-gas emissions allowances, better known as the cap-and-trade program. The first auction is set for Nov. 14.

Refineries, food processors and other industrial users subject to the cap will be required to reduce their carbon emissions or buy enough allowances to bring themselves into compliance with the program.

The state can't plow the revenue into its deficit-ridden general fund. If it did, Faber said, cap and trade would be considered a tax and would have to be approved by a two-thirds supermajority of both houses of the Legislature.

Big-business groups blasted the program at an Air Resources Board meeting last month. They expect to spend $1 billion on the allowances in the first year, with the amount growing significantly in future years.

State regulators defended the program, saying it's a reasonable, market-based approach to fighting global warming.

• Read more articles by Dale Kasler

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