Rail Funding Scheme is a Dead End Track for Ag
During an interview with ABC7 in Los Angeles, Governor Jerry Brown recently said revenues from the statewide cap and trade program will be a source of funding for California’s high speed rail project. Brown said fees from carbon producers, raised through cap and trade, would be utilized to pay for the project.
Unfortunately, on this issue, the governor has a misguided “train of thought” on how to solve the state’s budget issues.
California’s cap and trade law requires reductions of greenhouse gas emissions to 1990 levels by the year 2020. The legislature approved cap and trade legislation and former Governor Schwarzenegger signed it into law in 2006. Enforcement of the law begins in 2013.
What do Governor Brown’s comments mean for agriculture?
Approximately 35 food processors, a key component of our agricultural community in California, are “over the cap” with respect to carbon emissions, which means participation in cap and trade is required. Costs for these employers will skyrocket, potentially into the millions of dollars per facility. The California Air Resources Board is projecting billions in revenues from the cap and trade program annually, which is an attractive source of revenue for a financially broken state. It is yet to be determined how those revenues will be spent.
At the ground level, dozens of farms and ranches are at rick due to high speed rail. The proposed route plan splits some farms in half or significantly impacts operations in one of the most agriculturally productive regions in the country. Several county Farm Bureaus are extremely concerned about the project, while some have state outright opposition, as have numerous Ag Council members.
Many food processors opposing high speed rail are cooperatives or farmer-owned businesses. What it boils down to is the governor is asking for agriculture to pay for its own destruction. This is deeply concerning given that agriculture is virtually the only industry continuing to grow and provide jobs during these turbulent economic times.
Upon his inauguration last year, Governor Brown chose to focus on closing the budget gap, and rightfully so. He did a tremendous job in providing leadership in reducing budget deficits. And, he exercised every legal option he has to reduce spending, given the political forces at play in Sacramento.
But this time he’s got it wrong.
Whether or not you support the concept of cap and trade, on thing is clear–the revenue from this program should go toward projects supporting its initial golas. These goals include reducing greenhouse gas emissions, improving energy efficiency and adapting to climate change. Any additional funds should be returned to the entities funding the program as a rebate to address increasing energy costs and a host of unknown variables that will likely emerge.
Cap and trade was created at a time when the state’s economy was flush. At the time, California was being held up as a leader in reducing greenhouse gas emissions. Even though this program was drafted in 2006, times have dramatically changed over the past six years, especially economically. That means the results should change too.
Cap and trade is law, so California is legally required to reduce greenhouse gases, but the revenues should not be used as a cash cow for the state, particularly when the legislature can’t come to grips with its own financial struggles.
By requiring food processors to pay for high sped rail, the governor is mandating them to help fund their very demise because the rail line significantly impacts farmland in the state. Given that agriculture is a $37 billion industry in our state, the ultimate result will be a further erosion of California’s place as an economic powerhouse on the world stage.
Ag Council Speaks Out as CARB Adopts
Climate Change Regulations
Late last year, CARB adopted the final climate change regulations for implementation of the AB 32 California Global Warming Solutions Act approved by the state Legislature back in 2006 and signed by then-Governor Schwarzenegger the same year. The regulations take effect in 2012 with enforcement starting in 2013.
Ag Council President, Emily Rooney, spoke on behalf of members at the CARB meeting. Rooney urged CARB to continue to strengthen cost-containment measures in the program and stated that creating a $10 price floor on allowances is counter-productive to this effort. She also reiterated Ag Council’s ongoing request that CARB move food manufacturers from the medium leakage risk category to the high leakage risk category due to increasing international and domestic competition and the inability to pass along costs to consumers.
By moving into the high leakage risk category, food manufacturing is provided more flexibility, and we help protect our agricultural economy. A final decision will be made by January 1, 2014 regarding which emissions leakage category food manufacturing will be placed in under the regulations.
As a reminder, AB 32 is the landmark climate change law approved in California to reduce the state’s greenhouse gas emissions to 1990 levels by 2020.
Click here for a video of remarks by Ag Council President, Emily Rooney, at the CARB meeting.
Study Approved by CARB to Look at the Impact of
Climate Change Regulations on Food Manufacturing
Ag Council, along with the League of Food Processors, worked with the California Air Resources Board (CARB) staff to develop resolution language to conduct a study of agriculture and food processing as it is affected by the climate change regulation. Specifically, the study will review whether agriculture and food processing are able to pass on regulatory costs to consumers given existing domestic and international competition.
The resolution language, approved by CARB, reads as follows:
Be it further resolved that the Board directs the Executive Officer to initiate a study to analyze the ability of the agricultural industry, including food processors, to pass on regulatory costs to consumers, given domestic and international competition and continually fluctuating global markets. The Executive Officer shall identify and propose regulatory amendments, as appropriate.
Ag Council looks forward to completion of the study to demonstrate the serious impacts of the regulation on our members. The study is expected to be conducted by an outside academic source.
Please view the links below for more details about actions undertaken by Ag Council on climate change issues affecting our members.