In summary
Gov. Gavin Newsom’s new carbon market rules threatened climate funding for water, air and transit projects. A last-minute compromise between him and lawmakers provides some funding to narrow that gap.
California lawmakers stared down Gov. Gavin Newsom and emerged with hundreds of millions of dollars in climate money for projects he didn’t necessarily want to fund.
As a result, the state will funnel $450 million to transit, clean air and drinking water from its main climate fund under a deal Newsom struck with Democratic lawmakers.
The measure cleared the state Senate 29-4 and the Assembly 60-11 on Tuesday.
The agreement, Assembly Bill/Senate Bill 113, comes after months of pressure from Senate Democrats and environmental advocates who warned that those projects could lose funding under changes Newsom’s administration made to California’s carbon market earlier this year.
State leaders last fall reauthorized California’s 13-year-old carbon market, which charges companies to pollute and deposits the revenue into California’s Greenhouse Gas Reduction Fund for projects combating climate change. That deal also created a three-tiered system to determine which projects get funding.
In May, California’s air regulators adopted new rules that offered as much as $2 billion in free pollution permits to fossil fuel companies following intense lobbying from the oil industry. The Legislative Analyst’s Office estimated that the change would cut California’s estimated $4 billion a year in carbon market revenue in half and could drain funding from some programs that were expected to receive money.
In response, Senate Democrats accused Newsom of stripping climate programs of critical funding and threatened to block many of his budget priorities. Newsom and lawmakers later agreed to use most of the funds — $1.25 billion — to backfill the state fire department’s budget and to spend $115 million on electric vehicle incentives, but punted other climate negotiations to the summer.
The agreement lawmakers approved Tuesday is the result. The $450 million deal includes:
- $230 million for public transit agencies statewide
- $70 million for wildfire prevention
- $50 million for land conservation
- $40 million for safe and affordable drinking water
- $20 million for clean air monitoring
- $20 million for the University of California’s Climate Institute
- $10 million for reducing emissions from agricultural equipment
- $10 million for geothermal development at the Natural Resources Agency
More than half the money comes from the unallocated balance of the greenhouse gas reduction fund. Lawmakers also relied on $100 million in interest earnings and borrowed another $100 million from the state’s fire department budget, with a promise to make it up next year.
The deal provides a one-time infusion for a handful of climate programs on top of their established funding, which ebbs and flows depending on the carbon auctions.
Taylor Valmores, senior legislative manager for Community Water Center, said the safe drinking water program will get a total of $171 million this year, including $71 million from the greenhouse gas reduction fund.
“What today’s proposal means is we get to have another year of working towards … serving Californians who (are) still waiting for that clean water,” he said.
But some advocates argued the funding is far from enough. Michael Pimentel, executive director of the California Transit Association, said while he appreciates the $230 million in regional transit funding, the deal does not increase funding for other transit programs on bus and rail services, which might see abrupt losses under Newsom’s new regulations.
“The bottom has fallen out from the (carbon) market,” Pimentel said. “We have never faced a year where there has been this type of sudden, shocking decline in (Greenhouse Gas Reduction Fund) revenues.”
And some projects, such as affordable housing, did not receive any additional funding in the deal.
“It’s pretty deeply disappointing at a time when California needs to be doubling down on our affordable housing goals,” said Jordan Grimes, legislative director at Greenbelt Alliance, which supports streamlining housing projects.
