California Governor Jerry Brown Proposes Borrowing $500 Million From Cap and Trade Program

California Governor Jerry Brown has proposed borrowing $500 million from the state's carbon cap-and-trade auctions and using those to help balance the general fund budget.

The governor presented a $96.4 billion revised spending plan for the coming fiscal year that included the loan from the carbon trading program, a move that triggered outrage from environmental and community groups.  The Legislature will have to approve the revised budget

By law, the Golden State must spend the funds on efforts that reduce carbon emissions or otherwise meet the purposes of California's climate measure, A.B. 32.  Shifting the money from the Greenhouse Gas Reduction Fund -- where emissions trading money lands -- is very controversial because this is the first full year that California is selling carbon allowances and there isn't a good estimate of how much revenue to expect.

The first two sales of greenhouse gas permits generated about $140 million for the state. The $500 million loan includes money from the first auctions plus allowances still to be sold this coming fiscal year. Brown and other state officials said that the loan was a one-time option and that they expected the monies beginning next year to go toward programs that shrink carbon.

Communities and environmental groups have questioned whether the delay in spending the money on climate causes would undermine public support for the program. The loan will delay opportunities to use those funds to actually get reductions in global warming pollution.

Low-income communities are accusing Brown of subverting the intent of S.B 535, legislation passed last year that requires part of the auction money go toward helping economically disadvantaged areas. Voters of color turned out in force to protect A.B. 32, the clean energy law, when it was under attack by Prop. 23, and they did it based on the promise that it would bring clean energy investments to polluted and struggling communities.

State officials did not commit to any repayment plan for the cap-and-trade revenues, but state EPA Secretary Rodriguez said that the loan "is short term and the money will be repaid with interest."
Karen Finn, program budget manager for the California Department of Finance, said that the money would be refunded as it became needed, once the Legislature approved specific programs. (E& E Publishing, LLC, 5/15/2013)