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Clean Fuels Groups Seek More Cap-and-Trade Funds for New Incentive Programs

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June 6, 2016

Clean fuels groups have launched two new campaigns that, combined, ask for more than $300 million in cap-and-trade funds from the 2016–17 state budget.

The Cap and Trade Biofuels Initiative is seeking $210 million from the Cap-and-Trade Program’s Greenhouse Gas Reduction Fund to create incentives to produce biofuels in California. The Incentives for Clean Heavy-Duty Freight initiative is requesting $100 million from the GGRF to spur the deployment of near-zero-emission heavy-duty natural gas trucks. The state’s current proposed budget allocates some funds for both purposes, but not nearly enough, initiative proponents say.

“Everyone is asking for cap-and-trade funds, but in keeping with the cap-and-trade goals of decreasing carbon emissions, a significant portion of the GGRF should be reinvested in the in-state development of low-carbon biofuels,” said Johannes D. Escudero, executive director of the Coalition for Renewable Natural Gas. The RNG Coalition is also a member of the California Biodiesel Alliance, a collaboration between the biomethane, biodiesel, and ethanol industries formed to spearhead the drive for in-state biofuel production incentives and infrastructure grants.

Biofuel production incentives

The state’s current budget proposes allocating $65 million for the in-state production of biofuels—$40 million to CARB for biofuels production and $25 million to the CEC for infrastructure development. “The Biofuels Coalition could take a fraction of monies that have been appropriated for future technologies and provide an immediate return on investment in the form of available and sustainable lowest-carbon-intensity transportation fuel,” said Escudero.

According to the CBA, a $210 million appropriation would help increase the amount of low-carbon fuels produced in California from 250 million to 906 million gallons per year by 2019.

“Fifty percent of CNG used in natural gas vehicles in California is RNG, but almost all of that is imported. We want to see California produce more of the RNG it consumes,” said Escudero.

Proponents say the biofuel production incentives program would also create 25,000 jobs in California, reduce greenhouse gas emissions by 6 million metric tons, displace 714 million gallons per year of petroleum, and generate fuel tax revenues of $230 million. It could also drive $11.5 billion in economic development and net additional state and local tax revenues of $408 million.

Clean truck incentives

Led by the Coalition, Clean Energy Fuels, and Southern California Gas Company, the Incentives for Clean Heavy-Duty Freight initiative is asking for $77 million more than the $23 million already in the current proposed state budget. The appropriation would be added to CARB’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project in the Low Carbon Transportation Program.

The money would help buy down the initial cost of Class 7 and 8 trucks that use a 0.02 grams per brake horsepower-hour NOx engine, hasten the retirement of older diesel trucks, and stimulate innovation in zero- and near-zero-emission truck technologies. The vehicle incentives campaign is separate from AB 2415, which would establish heavy-duty truck incentives from 2018 to 2023.

Ryan Kenney, senior public policy and regulatory affairs advisor at Clean Energy Fuels, pointed out that the $590 million shortfall from this year’s cap-and-trade auction funds, the possibility of a reserve fund to cover future programs, and the potential expansion of AB 32 may delay GGRF appropriations past the June 15 state budget deadline.

“Because cap and trade isn’t in the general fund, the Legislature could delay it until this summer or next year,” Kenney said. “But we need incentives now. Delaying them will only hurt the industry—and those who will benefit directly from cleaner air. If that’s the case, we’ll fight for these incentives just as hard next year.”

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