February 18, 2014 Page 2
CARB provides some allowances for free, while making others available for purchase at auctions. Once the allowances have been allocated, entities may then “trade” (i.e., buy and sell on the open market) the allowances in order to obtain enough to cover their total emissions for a given period of time. To date, CARB has conducted five separate auctions since November 2012.
Cumulatively, these auctions have resulted in a total of $532 million in state revenue, and future quarterly auctions are expected to raise additional revenue. By law, auction proceeds are placed into a special fund in the State Treasury – the Greenhouse Gas Reduction Fund – from which they are available for appropriation by the Legislature.
Gov. Code, § 16428.8. From there, the monies must be used “to facilitate the achievement of reductions of greenhouse gas emissions in [California] consistent with” AB 32.
Health & Saf. Code, § 39712. 2.
The Governor’s 2014-15 Proposed Budget
The Governor’s 2014-15 budget proposes to allocate $250 million of cap-and-trade auction revenues to the Authority, including $58.6 million for Phase I project planning as well as $191.4 million for construction and right-of-way acquisition for the first phase of the Initial Operating Section.
Use of Cap-and-Trade Auction Proceeds to Fund High-Speed Rail Will Not Furtherthe Purposes of AB 32 and Therefore Will be Vulnerable in a Legal Challenge.
The constitutionality of CARB’s cap-and-trade program has been raised in two separate lawsuits,
California Chamber of Commerce v. California Air Resources Board
(Case No. 34-2012-80001313, Sacramento Superior Court) and
Morning Star Packing Co. v. California Air Resources Board
(Case No. 34-2013-80001464, Sacramento Superior Court), respectively. If found to be unconstitutional, the cap-and-trade program would be undone in its entirety.
Even assuming that cap-and-trade is found to be constitutional, however, cap-and-trade auction proceeds nevertheless may not be appropriated by the legislature for unrelated revenue purposes. And because the construction of high-speed rail would not further the purposes of AB 32, any such appropriation would be subject to legal challenge.
A sixth auction will be held on February 19, 2014.
, http://www.arb.ca.gov/cc/capandtrade/auction/auction.htm (last visited February 8, 2014).
In addition to the auction revenues, AB 32 and the implementing regulations authorize CARB to collect a fee to recover the administrative costs of carrying out AB 32.
Health & Saf. Code, § 38597; 17 Cal. Code Regs., §§ 95200 et seq. Such fees are intended to collect an amount of funds necessary to recover CARB’s costs of implementing and enforcing AB 32 each fiscal year.
In fall of 2013 the Sacramento Superior Court upheld the constitutionality of the cap-and-trade program, finding that such program did not constitute an unconstitutional tax.
Joint Ruling on Submitted Matters, Case No. 34-2012-80001313 (Aug. 28, 2013). This issue now is pending on appeal.