Senate President Pro Tempore Darrell Steinberg (D-Sacramento) announced a proposed plan to create a permanent spending strategy for cap-and-trade revenue [PDF] that prioritizes investments in affordable transit-oriented housing, transit expansion, and CA high-speed rail. Unlike the Governor’s plan for this year’s budget, Senate Bill 1156 also proposes investments in “complete streets” and transit operations.

Calling the plan a “long-term investment strategy in greenhouse gas emissions,” Steinberg said he wanted to spark a “healthy debate” about how the state should spend the revenue collected via the state’s cap-and-trade system created under A.B. 32, California’s Global Warming Solutions Act.

“This strategy is designed to achieve the objectives of A.B. 32 through significant reductions in greenhouse gas and the direction of public and private investment to California’s low-income and disadvantaged communities, which are disproportionately burdened by air pollution and the effects of climate change,” Steinberg said in a press release.

Steinberg’s staff emphasized that the plan provides a permanent funding stream for affordable, transit-oriented housing and mass transit, which are key to reaching the goals of A.B. 32 yet lack stable sources of funding. 

The proposal replaces a bill Steinberg introduced in February to replace cap-and-trade with a carbon tax. Steinberg acknowledged that the carbon tax proposal was “not that popular,” and said that the current proposal was a product of the debate provoked by the earlier bill.

A.B. 32 requires California to reduce greenhouse gas emissions to 1990 levels by the year 2020, and calls for the California Air Resources Board to create a market system for helping achieve those reductions. In response, CARB created a cap on emissions from GHG producers and an auction system to allow those who don’t meet the cap to buy emission “credits” from those who do. This cap-and-trade system currently applies to the state’s manufacturing sector, and is scheduled to include fuel producers next year.

Meanwhile, the auctions are producing revenue, which by law must be spent on further reducing GHG emissions to help California reach A.B. 32’s the goals.

Steinberg’s proposal was well-received by transit advocates.

“We’re very thankful that Governor Brown has recognized the importance of cap-and-trade funding for implementation of sustainable communities, with an acknowledgement that clean mass transportation systems should receive a share of these funds,” said Joshua Shaw, executive director of the California Transit Association, in a statement. The CA Transit Association represents nearly 200 member organizations, including transit agencies, across the state. “Senator Steinberg’s plan builds upon the foundation laid by Governor Brown, by confirming that public transit is not simply a discretionary service; it is essential – and becoming increasingly more vital to the health and well-being of our state.”

“While there is work to be done in the weeks ahead, and some aspects of the proposal need improvement, Senator Steinberg has made a clear commitment to provide a much needed boost in funding to meet both California’s growing demand for real transportation and housing choices while meeting our greenhouse gas reduction targets,” wrote TransForm’s Ryan Wiggins in a blog post.

The largest pool of funds in Steinberg’s plan is a 35 percent allocation for increasing the stock of affordable housing and “sustainable communities,” half of which will be aimed at creating and subsidizing affordable housing near transit. Of the total revenue, 26 percent would go towards expansions and operations for rail and rapid bus improvements, and 18 percent would go towards construction of California High-Speed Rail. (A note of clarification: Steinberg’s plan allocates dollar amounts for several small programs, with the rest allocated by percentage. Because it’s unclear how much revenue cap-and-trade will produce, the numbers reported by different organizations are slightly different.)

Governor Jerry Brown’s proposed cap-and-trade expenditure plan, currently being discussed by legislators, proposes spending 70 percent of the revenue on transportation-related projects and programs, with more than a third of that amount for high-speed rail. None of the funds would go towards bicycle and pedestrian infrastructure or bus transit.

Steinberg emphasized the importance of helping disadvantaged and low-income communities contribute to GHG reductions. His proposal would require that all investments considered be ranked according to effectiveness in reducing GHGs.

The funds in the plan that could be used for bike facilities would come under the “State Highway and Road Rehabilitation and Complete Streets” program, which would receive about 8 percent of the revenue. This category could include “traffic management, repair, deferred maintenance, bikeways, and retrofits of roads and highways.”

Steinberg’s plan also includes smaller amounts for the preservation of natural resources, encouraging electric vehicle use, and for something called a “climate dividend.” It’s not clear how that dividend relates to GHG reductions, but the proposal says it would be distributed in a yet-to-be-determined way “to show consumers that California’s climate policies are generating new dollars for them where such use would not create new legal vulnerabilities for the use of those funds.”