An ambitious California cap-and-trade proposal would earmark hundreds of millions of dollars annually for an energy research and development fund, rivaling the investment capacity of the federal energy moonshot program implemented under President Barack Obama.
The proposal offers the latest example of how leaders in the world’s sixth-biggest economy are working to build momentum behind aggressive climate policies and energy research, even as the Trump administration aims to slash funding and roll back regulations. It would also provide a crucial source of funds for early energy research and development at a point when venture investors have retreated from the space.
Most of the revenue from the proposed program, which State Senator Bob Wieckowski introduced last month, would go directly to California citizens in the form of a climate dividend. But the bill also sets aside money for a separate infrastructure program and the California Climate and Clean Energy Research Fund (see “California Proposes Ambitious New Cap-and-Trade Program”).
Wieckowski spokesman Jeff Barbosa confirmed recent political rumblings that the latter fund could be on the order of hundreds of millions of dollars each year. That may exceed funding for the Department of Energy’s Advanced Research Projects Agency-Energy, which collected more than $290 million last year. But unlike ARPA-E, initially funded at $400 million as part of the 2009 economic stimulus package, those funds would rise significantly over time as the price floor and ceiling for a metric ton of carbon dioxide climb each year. California’s proposed cap-and-trade program would establish one of the highest prices on carbon in the world, generating billions annually.
Meanwhile, President Trump’s budget proposal calls for axing 93 percent of ARPA-E’s funding in fiscal 2018, and eliminating the program entirely the following year, as part of more than $3 billion in cuts to DOE research programs. ARPA-E, which has provided $1.5 billion in funding to date, announced in February that 74 of its project teams have raised $1.8 billion in private sector funding, and 56 have formed new companies.
Can California take up the federal slack on energy research?
The California funding would likely go to a variety of potential recipients, including state universities, government labs, and private sector startups, Barbosa says. It may be distributed, in whole or part, through existing state grant programs. It’s unclear at this stage, however, if the funds would be restricted to only California institutions and companies.
“We’re best served by broad, federal support for clean energy R&D,” says Dan Reicher, executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford. “But this could be an important second best, especially if we end up seeing major cuts in the key federal programs.”
The exact size of the fund, and other details concerning its management, will likely appear in a forthcoming amendment.
The broader proposed cap-and-trade program would overhaul California’s existing system, which has struggled with low demand, legal challenges, and uncertainty over its authority to operate past 2020. Odds for the success of the bill, which will require two-thirds majority approval in the California Senate and Assembly, are still unclear. Several key environmental and social justice groups, including the California Climate Equity Coalition, have lined up behind it. But others favor preserving the hard-fought existing program, including the Environmental Defense Fund. Crucially, California Governor Jerry Brown has also signaled that he’s focused on extending the current system.
The next step for the bill is a hearing before the California Senate’s environmental quality committee. That hearing hasn’t yet been scheduled.
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