SACRAMENTO — Gov. Jerry Brown finally is showing us the money he hopes to parlay into paying for his bullet train. Basically, it's the cash from selling licenses to pollute.
It's not called pollution licensing, of course. Officially, it's a cap-and-trade program, a polite government name for allowing industries to pollute for a fee.
It's extremely complicated and somewhat controversial. More on that later.
First, let's back up.
Brown has been under pressure to specify how he's going to finance the $68-billion, 500-mile high-speed rail line from Los Angeles to San Francisco. Voters approved the project in 2008 when they were told it would cost half the current estimate. Only roughly $12 billion has been identified — about $9 billion in state bonding authorization and $3-billion-plus in federal grants.
A Sacramento judge has ruled that the state money can't be tapped until the rail agency pinpoints all the funds needed to complete the first fully operational segment from Madera to the San Fernando Valley. That's a requirement of the rail bond act. And we're talking about $31 billion.
Also, the state can't begin spending the federal dollars without soon matching them with its own money.
So right now the bullet train is sidetracked.
But in his new budget proposal last week, Brown asked the Legislature to commit $250 million in cap-and-trade funds for initial track laying in the San Joaquin Valley.
"California is still the generator of dreams and great initiatives," Brown told reporters. "And I think high-speed rail is worthy of this state."
But how does $250 million added to $12 billion magically total $31 billion?
I asked Dan Richard, Brown's hand-picked chairman of the California High-Speed Rail Authority.
For starters, he noted, it's not just $250 million. Brown is asking the Legislature to make a long-term commitment to annually appropriate cap-and-trade dollars for the bullet train. And the cap-and-trade program is expected to expand greatly, generating much more annually than the $850 million it's projected to spend on reducing greenhouse gases in the next budget year.
The rail project could use a large slice of that money — figure $500 million a year — to lay track from Madera to Bakersfield, spending on a pay-as-you-go basis rather than borrowing, Richard said. That would save on interest.
Or track could be laid to Bakersfield with state bond money if the court releases it, and Richard thinks the judge can be talked into that.
If both the cap-and-trade and bond money are available, he continued, that's enough to extend the line to Palmdale.
"The tipping point is Palmdale," Richard said. "It's the new center of the universe. There's no more discussion about trains to nowhere. It opens up all kind of things."
The line then would connect to an upgraded Metrolink line into the San Fernando Valley and on to L.A.'s Union Station.
"People could get on the train in L.A. in the morning and be hiking up Half Dome in the afternoon," he said, perhaps a bit rosy-eyed.
At Palmdale, the line also could connect to a contemplated bullet train to Las Vegas, financed by casinos and federal grants obtained through the pull of powerful U.S. Senate Majority Leader Harry Reid (D-Nev.).
All that would boost ridership substantially and attract private financing — maybe even additional federal dollars — to complete the rail line to San Francisco, Richard asserted.
But before any of that can happen, the Legislature must be sold on using cap-and-trade dollars for the bullet train. And neither are free of controversy — the usage or cap-and-trade.
Cap-and-trade funds legally must be spent on projects that help reduce greenhouse gas emissions to 1990 levels by 2020. That was decreed by a California anti-global warming law passed in 2006.
Brown argues that the bullet train will reduce greenhouse emissions. But many environmentalists point out that it won't be rolling until after 2020. Meanwhile, they contend, the line's construction will generate more greenhouse gas.
Cap-and-trade works by setting industry-wide caps on emissions. Generally, corporations can buy emission "allowances" from the state or on the open market from private entities that aren't polluting all they're entitled to. The theory is that when it starts costing companies too much to emit harmful gas, they'll emit less.
Because global warming is a worldwide problem, cap-and-trade programs sometimes team up with other states or provinces. For example, under California's pioneering program, polluters here can buy the emission allowances of outfits in Quebec.
That concerns people like state Senate leader Darrell Steinberg (D-Sacramento) — especially since California next year will extend its greenhouse reduction rules beyond such operations as oil refining and cement making to also include fuel delivering.
"You're then asking the trading market to enter directly into the energy segment again and that brings back bad memories," he says, recalling how California electricity consumers were cheated by power pirates in 2001. "And applying cap-and-trade to fuel, I worry about what it could do to energy costs."
Also, Steinberg says, "When you're allowing for trading beyond our borders, you may be reducing pollution in another state or country, but that doesn't reduce pollution in California."
"This is an experiment that is yet unproven," the senator continues. "I'm open to cap-and-trade funding for high-speed rail, but only if a more important question is answered: What is the overall funding plan for the project?"
Brown finally recognizes the need to answer that question. And targeting cap-and-trade funds — if they're to be collected at all — seems a reasonable start.