As Predicted, Jerry Brown to Propose Using Cap-and-Trade Funds for HSR
Yesterday I predicted that Governor Jerry Brown would propose using some of the cap-and-trade funds for high speed rail in this Friday’s budget announcement. Sure enough, the Sacramento Bee reported late yesterday afternoon that’s exactly what he plans to do:
Gov. Jerry Brown plans to propose spending millions of dollars in fees paid by carbon producers to aid the state’s controversial high-speed rail project, sources said.
The proposal – and the prospect of additional funding from the state’s cap-and-trade program in future years – could provide a significant lift to a $68 billion rail project beleaguered by uncertainty about long-term financing.
Brown plans to propose allocating several hundred million dollars this year….
Brown is expected to include the proposal in the annual budget plan he will release Friday. Brown has made high-speed rail a priority of his administration, and he suggested two years ago that cap-and-trade revenue, which is designed to reduce greenhouse gas emissions, would be a future source of funding for the project.
The LA Times has also reported on the story and notes that the Governor’s office won’t release details, including the specific amount budgeted, until Friday. UPDATE: David Siders of the Sacramento Bee reports that, according to “sources,” the amount will be $250 million.
Last month I took a close look at the concept of using cap-and-trade funds for HSR. If $500 million in cap-and-trade revenues were given to HSR annually, that would generate $3.5 billion by 2020 and $8.5 billion by 2030. That money would go a long way in getting the HSR project from the Central Valley to one of the coastal metropolitan areas, likely Los Angeles, enabling the start of revenue service. And that in turn is crucial for getting private investors to be willing to put up funds to help complete the system.
One could also devote an annual percentage of cap-and-trade revenues to HSR, rather than a flat sum. The entire point of cap-and-trade is that the licenses cost more each year, with the rising cost acting as an incentive to emit less carbon. If, say, 30% of cap-and-trade revenues were allocated to HSR each year, one could reach $13 billion (the number that SPUR suggested in their 2012 report) by 2030, perhaps more depending on how well future auctions go.
Jerry Brown is doing the right thing by proposing to use cap-and-trade funds for this purpose. The California Air Resources Board included HSR as part of their scoping plan for achieving the mandatory AB 32 carbon emission reductions. Estimates for how much carbon emissions HSR will reduce have gone as high as 10 million metric tons once the entire system is operating. HSR helps get people out of cars and planes and onto electric trains, which the California High Speed Rail Authority has pledged to power with 100% renewable energy.
The anti-HSR folks at the Legislative Analyst’s Office claimed in 2012 that HSR might not help achieve the AB 32 goals, a conclusion that was widely debunked at the time but still crops up occasionally in reporting. But sadly we have come to know that when it comes to HSR, the LAO is not committed to getting all of its facts in order.
Governor Brown should be applauded for this, and I look forward to his specific proposals when they are released on Friday.