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VICA: Cap and trade revenues could result in local opportunities

Posted: July 29, 2014 4:14 p.m.
Updated: July 29, 2014 4:14 p.m.

California has long been a leader in the nation’s efforts to curb climate change. Unfortunately, the state’s solution, Assembly Bill 32 – known as the Global Warming Solutions Act – has been a burden on the state’s power plants and manufacturers since its passage in 2006. The bill is a plan to reduce greenhouse gas emissions to 1990 levels by 2020, and includes a cap-and-trade program, a market-based system that uses economic incentives to decrease GHG emissions.

For those who are unfamiliar, cap-and-trade sets a cap on total allowable GHG emissions, and auctions off emissions credits to regulated entities, which can then buy and sell them on the open market. Companies who emit large amounts of carbon dioxide – specifically, 25,000 metric tons per year – are invited to participate in the program, but can also opt to reduce emissions on their own.

Revenues from the auctions must be used to further reduce emissions, and the proceeds are deposited in the Greenhouse Gas Reduction Fund, where they are available for the Legislature’s appropriation.

Ideally, all cap-and-trade revenue would be invested in programs that help eligible businesses comply with state emissions reduction mandates. However, Governor Jerry Brown and California lawmakers have already agreed on a completely different allocation of those revenues for the 2014-15 budget.

The plan designates 25 percent toward funding for high-speed rail; 15 percent toward funding for transit; and 20 percent toward a regional sustainable communities strategy. The remaining 40 percent is to go toward low-carbon transportation; energy efficiency and renewable programs for low-income and commercial/industrial users; projects for agricultural energy; green bank funding for commercial-scale technology deployment and clean tech innovation; and natural resources and waste diversion.

The Valley Industry & Commerce Association (VICA) supports sending cap-and-trade revenues back to the businesses complying with the policy, and has recently decided to support spending the revenues on transit, transit-oriented development, and “no regrets” high-speed rail investments – local transit connectors for Governor Brown’s project.

The majority of GHG emissions come from cars and trucks, so allocating revenues toward transportation projects could contribute largely to carbon emissions. California is sorely lacking in transportation projects, particularly the San Fernando Valley, which suffers some of the worst traffic in the nation and is starved for transit. More transportation funding from cap-and-trade could potentially reach the Valley, expediting existing projects related to freeways, rail, and transit-oriented development, and green lighting new transportation projects.

Critical transportation projects in the Valley include the conversion of the Orange Line busway to light rail, and the development of light rail along the East San Fernando Valley Transit Corridor and the Sepulveda Pass Corridor. The Valley has so far not received its fair share of Measure R funding – a countywide half-cent sales tax to fund transportation projects – and cap-and-trade revenues may be the beginning of a solution.

Revenues allocated toward companies’ compliance could be used toward energy efficiency upgrades, emission filters, and carbon capture and storage technology.

Past legislation regarding cap-and-trade expenditures proposed allocating revenues toward pet projects like combating homelessness, or building more affordable housing. While these are real problems that need solving, monies from the state’s cap-and-trade program should only be used toward the reduction of GHG emissions, and never as a new general fund revenue source.

Reinvesting cap-and-trade dollars into the businesses that participate in the program is the best way to meet the state’s goal of significantly reducing California’s carbon emissions. Financing transportation projects will also have an enormous impact on emissions and the economy. VICA encourages lawmakers to work with companies to develop a plan that aligns with AB 32 without slowing the state’s economic recovery.

The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.


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