High Speed Rail Won’t be Built with Carbon Credits

Loren Kaye
President of the California Foundation for Commerce and Education

Don’t look now, but the California bullet train may derail the Cap and Trade auction.

The auction is the scheme devised by California environmental regulators to squeeze billions in revenues from greenhouse gas emitters to finance various energy and environmental projects. It is not necessary to achieve the GHG reductions mandated by AB 32; that can happen with or without the auction.

An offhand remark by Governor Brown last January kicked off the chatter. Asked about how he would pay for the mounting costs of high-speed rail, the Governor responded, “We do have other sources of money: For example, cap-and-trade, which is this measure where you make people who produce greenhouse gasses pay certain fees – that will be a source of funding going forward for the high-speed rail.”

Other official documents had different ideas for the proceeds, including “(1) clean and efficient energy, (2) low-carbon transportation, (3) natural resource protection, and (4) sustainable infrastructure development.” More urgent, though, were claims that much of the initial proceeds could be used to offset state General Fund spending and thereby reduce the budget deficit.

But visions of a pot of gold beneath a pile of carbon credits continued to dance in the railmen’s heads.

The Governor’s top aide engineering his strategy recently echoed this sentiment: “(Cap and trade auction) gives us a backstop dedicated funding stream that gives us confidence that we can go forward,” said Dan Richard, chairman of the California High-Speed Rail Authority.

Don’t count on it.

Even a generous interpretation of a “fee” would not permit reaching into a GHG emitter’s pocket to finance a hefty portion of the now-$68 billion rail system.

After all, a plausible case must be demonstrated that spending on high-speed rail would mitigate the “adverse societal impacts” from the greenhouse gas emissions, per the Supreme Court’s Sinclair Paint decision.

But according to the Air Resources Board in its AB 32 scoping plan, high-speed rail will account for a reduction of only 1 out of a total 174 million metric tons of CO2 equivalent  - or 0.575% of the total statewide requirement (Measure T-9).

In other words, the effect of high-speed rail on reducing greenhouse gasses in California is less than a rounding error. This will be an insufficient legal basis for using auction revenues to finance high-speed rail.

Back to the drawing board for high-speed rail. But even more important for the cost and availability of energy for California, this signals the difficulty policy makers will have justifying the massive tax increases masquerading as auction revenues.

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