Steinberg says California cap-and-trade money should be spent on housing, transit, high-speed rail

04/14/2014 9:41 PM

04/15/2014 10:48 AM

Abandoning a controversial effort to add a gasoline tax to California’s fledgling program to reduce greenhouse gases, Senate President Pro Tem Darrell Steinberg, D-Sacramento, on Monday shifted his focus to how to spend billions of dollars on affordable housing, mass transit and high-speed rail.

“National and international experts say that the climate problem grows worse, that we have no time to sit back and wait and think about an investment strategy year-to-year or just short-term. Now is the time to grab the moment and create these permanent sources,” Steinberg said, arguing that his plan would forestall annual legislative fights over who gets money for what.

The proposal differs from Steinberg’s previous suggestion for changing the state’s system for curtailing carbon emissions. That plan, which he unveiled in February, would have imposed a gasoline tax rather than have businesses purchase allowances for greenhouse gases emitted from “nonstationary fuels,” a category that includes fuel sold at the pump. Steinberg said the mechanism would offer consumers more certainty.

Steinberg’s original plan sought to charge motorists a “carbon tax” starting at 15 cents per gallon next year and rising to 43 cents per gallon in 2030. Otherwise, he said at the time, fuel companies starting next year will be required to buy carbon credits for the fuel they sell and will likely pass the costs on to consumers, a system some expect will lead to unpredictable price fluctuations.

But the gas-tax plan was hit from the left and right, and Steinberg said he pitched it in the spirit of being a “provocateur.” On Monday, by contrast, the senator spoke amid a phalanx of backers, including groups representing local government, labor and environmental interests.

“We stoked a debate a couple months ago, and a lot of consternation and controversy, and I understand it. But now many of us stand together,” Steinberg said.

Now, rather than emphasize how California puts a price on greenhouse gases, Steinberg aims to manage how the state spends the proceeds. With an influx of dollars from the cap-and-trade program likely to set off a scramble for funds, Steinberg wants to prioritize lower-cost housing, public transportation systems and the state’s divisive high-speed rail project.

Under AB 32, the 2006 law that created California’s cap-and-trade program, industry must purchase permits for generating the type of emissions blamed for global climate change. After six auctions, the program has generated $663 million for the state so far, according to the California Air Resources Board. Steinberg’s office projects the auctions could soon bring in $3 billion to $5 billion a year.

Current law dictates that the revenue will flow into a Greenhouse Gas Reduction Fund. From there, entities like local governments and transit systems can apply for some of the proceeds by explaining how they will use the money to reduce overall emissions. One quarter of the money must go to disadvantaged communities, an acknowledgment that some of California’s poorest places are choking on poor air quality.

Housing and public transportation sit at the center of Steinberg’s proposal. Forty percent of the cap-and-trade revenue would go to affordable housing, including communities built around transit options; 30 percent would subsidize transit projects; and 10 percent would fund basic transportation infrastructure like road and highway maintenance. All three would be administered through competitive grants.

“Permanent sources of funding for mass transit and affordable housing are key if we are committed to long-term change,” Steinberg said on Monday, noting that the two areas “face a catastrophic funding crisis in California” after years of cutbacks.

In addition to those outlays, $200 million a year would go to water-efficiency projects, to consumer rebates to offset fuel costs, and to accommodating the use of electric vehicles.

California’s proposed bullet train would get 20 percent of the carbon kitty, channeled through a continuous appropriation that would not require year-to-year approval by the Legislature.

Already, Gov. Jerry Brown has stirred controversy by proposing to spend $250 million from emissions permit sales to pay for his financially precarious high-speed rail project, which has a funding plan facing legal uncertainty. Some environmentalists have called high-speed rail an inappropriate use of the carbon auction funds.

But Steinberg’s blueprint embraces high-speed rail as a tool for reducing emissions – provided, Steinberg said, it is one element of a larger strategy.

“I understand that high-speed rail is controversial,” Steinberg said. “If it were the only thing that we were talking about or the only thing on the table, I think that would be problematic. I think this is a better approach.”

While much of Steinberg’s plan focuses on urban projects like transit-linked housing, he stressed funding for high-speed rail as an example of a benefit that rural Californians will see. The train’s route maps through a large chunk of the Central Valley.

That defense did not persuade Assemblywoman Kristin Olsen, R-Riverbank. In addition to echoing her constituents who oppose high-speed rail, Olsen said that devoting so much money to affordable housing means cities would disproportionately benefit to the detriment of rural California.

“Most of that money is going to be spent outside of the San Joaquin Valley, and that will further the divide between our inland communities and our more urban or coastal communities,” Olsen said.

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