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Gov. Brown diverts Calif. cap-and-trade money again, to cheers rather than jeers

Last year, California environmental groups howled when Gov. Jerry Brown (D) diverted half a billion dollars from the auction of carbon dioxide permits to bolster the state's financial reserves.

The news this week that Brown wants to keep the lion's share of the money for at least another year was met with muted criticism, however, as environmentalists were lured by another piece of news: $600 million of cap-and-trade money would go for renewable energy, energy efficiency and other carbon-cutting programs.

"That's a significant chunk of money, and that's what we're happy about, as opposed to last time, when that number was zero," said Bill Magavern, policy director for the Coalition for Clean Air. "It should be more than $600 million, but to go from zero to $600 million is a lot of progress."

The money will go toward energy efficiency retrofits and solar installations for low-income communities, low-carbon transportation, transit-friendly planning and other programs, according to people briefed on Brown's plans. Brown is scheduled to present his proposed budget of $154.9 billion today, amid projections of a rosier-than-expected fiscal outlook.

Brown plans to return $100 million of the $500 million he borrowed last year from the cap-and-trade account, which is projected to grow to $850 million over the next fiscal year as the state continues its economywide carbon trading system.

Brown is also proposing to spend nearly a third of the expected proceeds on high-speed rail, a move that drew criticism from some groups that say the train won't reduce greenhouse gas emissions by 2020, which the cap-and-trade money is supposed to do. The rail line, which is scheduled to connect San Francisco to Los Angeles by 2028 at a cost of $68.4 billion, has become a political football amid fluctuating costs and long-term funding uncertainty Greenwire, Dec. 16, 2013).

"We think that high-speed rail is not an appropriate place for greenhouse gas emissions reduction money to go right now, but we like the other things he's proposing," said Kathryn Phillips, director of Sierra Club California. That said, "You don't want to slap somebody down when they're making a good effort."

Leaving a legacy project

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A political observer said that Brown is balancing his commitment to climate change and his desire to leave a more tangible legacy.

"For the governor, high-speed rail is a sort of signature project," said Manuel Pastor, a professor of sociology, American studies and ethnicity at the University of Southern California. "He's inherited the legacy on climate change and inherited the cap-and-trade system; that's really a legacy of the previous governor."

"He's come into a very difficult time, where if he left now, his major legacy would be that he balanced the books, which isn't really that all exciting. For him, the idea he's moving forward high-speed rail, which is equivalent to the aqueduct project and freeways connecting the state ... that's something that really has meaning to him."

Viewed in that light, his return of some of the cap-and-trade revenues is a relative victory.

"His proposing to spend $600 million on clean transportation and energy and natural resources and waste programs is a big shot in the arm for green programs in California," Magavern said. "I think you're just seeing a reflection that we think this budget proposal is pretty good."

Green light from green groups

A flurry of positive press releases from environmental groups that had been lobbying for the entire $500 million of diverted money to be included in the budget followed the initial articles Monday and Tuesday in The Sacramento Bee and the San Francisco Chronicle.

The Bee article, on Monday, focused on the high-speed rail proposal. The Brown administration then released details about the rest of the proposed cap-and-trade expenditures, according to someone familiar with the political situation.

"The governor's a smart politician and has been very skilled at figuring out what some of the sweet spots are," Pastor said. "It's not a surprise to me he might do this in a way which is meant to build some confidence."

"This proposed budget responds to the urgency for immediate and enhanced action that governments should undertake if we hope to prevent dire changes to the climate," said Louis Blumberg, director of the Nature Conservancy's California climate change initiative, in a statement.

Groups are happy that Brown appears to be complying with a bill he signed in 2012, S.B. 535, which reserves 25 percent of the market's proceeds for projects that help communities with low income, high unemployment, low levels of homeownership or other economic disadvantages.

"It looks like we're going to see a quarter of the funds benefiting disadvantaged communities," said Vien Truong, environmental equity director for the Greenlining Institute, which advocates for racial and economic equality. "We're excited about that. Of course, the devil's in the details."

Truong said she didn't have a position on the high-speed rail allocation. "High-speed rail in and of itself is not a bad thing," she said, adding that she hoped Brown would not spend transportation dollars on the train to the detriment of nearer-term improvements. "There are people in our communities waiting for buses for an hour because the lines have been cut," she said. "We hope the governor will be spending more money on things that are an urgent need for our communities."

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