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California Governor, Lawmakers Agree on Cap-And-Trade Expenditures

California Gov. Jerry Brown and state legislative leaders agreed Wednesday on a distribution plan for proceeds from California's $3.2 billion cap-and-trade program for the new fiscal year.

The deal announced by Brown, Senate President pro Tem Kevin de Leon and Assembly Speaker Anthony Rendon allocates $900 million in investments and reserves another $462 million for fiscal year 2016-2017, much of the money going to various clean transportation programs that are part of the state's climate change initiative.

Under current law, 60% of annual cap-trade auction proceeds are allocated to public transit, affordable housing, sustainable communities and high-speed rail, such as Brown's pet project, the development of a bullet train between Northern and Southern California.

As the centerpiece of the state's milestone 2006 climate change law (AB 32), pieces of which the California Air Resources Board (CARB) has been implementing for more than a decade, the cap-and-trade program was created to have electric generation plants, major industrial operators and refineries limit greenhouse gas (GHG) emissions while allowing the trading of emissions credits over multiple years as the limits are gradually tightened (see Daily GPIJuly 4, 2011).

Brown said the agreement gets "the most bang for the buck," directing hundreds of millions of dollars where they are most needed (see Daily GPIOct. 20, 2014).

Rendon said the agreement shows that the legislature is both progressive and prudent. "We take an aggressive approach to investing cap-and-trade funds that provides tangible results for cleaner air and helps lower-income Californians," while maintaining a "responsible reserve" to provide for the future, he said.

De Leon said some communities across the state already are experiencing the harmful effects of climate change and air pollution, noting the lingering effect of a historic drought the past five years. "That's why it's so imperative that we put the GHG Reduction Fund to work immediately," de Leon said.

The bulk of the funds ($368 million) will go to CARB for a combination of clean vehicle rebates ($133 million), enhancing and modernizing fleets ($80 million), heavy-duty vehicles and off-road equipment ($150 million), and $5 million for carbon smoke reduction programs.

Another $50 million is allocated to early and extra methane emissions reductions programs from dairy and livestock operations, while the state transportation department will get $135 million for transit and intercity rail programs.

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