OREANDA-NEWS. California state lawmakers have left unresolved how to spend about \$2.2bn in carbon allowance auction revenue as part of a broad budget deal announced yesterday.

The deal, which addresses how the state will spend its \$167.7bn budget in fiscal year 2015-16, does not detail where to use money generated from California's quarterly auction revenues, pushing the final decision until later this year.

Governor Jerry Brown (D) has put forward a plan that assumes about \$2.2bn in revenue from the auctions, which under California law must go to programs that further the purpose of reducing greenhouse gases (GHGs). The total amount that will come in will depend on the results of auctions during the fiscal year, which starts on 1 July.

Some of the funding is already obligated, including slices that must be spent in disadvantaged communities or for the state's high-speed rail program. The final details will likely be decided later this year when the legislature takes up bills to set the state's climate policy goals for the next decade.

The governor's proposal includes \$350mn for low-carbon transportation programs, while another \$400mn would go to creating more sustainable and affordable communities with higher density and easy access to public transit. It would also spend \$500mn on the state's high-speed rail project, \$265mn on transit and intercity rail and \$100mn on transit operations improvements to help lower carbon emissions.

The state Assembly is likely to take up the policy bills this summer. The Senate earlier this month approved its versions of the legislation. One of the two main bills, SB 32, would require the state to cut its GHG emissions by 40pc from 1990 levels by 2030. The other bill, SB 350, would require the state to cut its transportation petroleum use in half and increase its renewable energy mandate to 50pc, each by 2030.

The goals will be very difficult for the state to meet without targeted use of the revenues. In particular the petroleum reduction goal will require California to speed up the turnover of its roughly 24mn registered vehicles and ensure consumers buy far more vehicles that emit little or no CO2 than called for under existing mandates. The state has already started some programs to provide rebates to lower-income Californians for replacing their older cars and trucks with less-polluting vehicles.

Brown is calling the special session of the legislature to deal with the large gap between the state's fuel taxes and growing backlog of infrastructure repairs. The administration says that fuel taxes cover only \$2.3bn/yr in highway maintenance, leaving \$5.7bn/yr of work unfunded and deferred. Brown said the legislature should "enact pay-as-you-go, permanent and sustainable funding" for highway and local transportation infrastructure.