Environmentalists could feel their own temperatures rising when Governor Jerry Brown proposed in his revised May budget this week that $500 million from newly-instituted cap-and-trade energy auctions be shifted away from promised action on climate change.

Brown’s $96.4 billion budget would borrow the money from the Greenhouse Gas Reduction Fund (GHGR) and use it for unspecified General Fund purposes.

The law that set up the cap-and-trade program, AB 32, did not earmark exactly how money in the GHGR Fund would be spent. But the legislation’s formal name, the California Global Warming Solutions Act of 2006, and an accompanying directive that its proceeds support its goals, seemed to indicate that the money wasn’t meant to be dumped in the General Fund.

In fact, the Legislature passed Senate Bill 535 last year which stipulated that a large percentage of the funds should be allocated to projects in disadvantaged communities and excluded any of it from being spent on high-speed rail.

“This shift in funds is extraordinarily disappointing,” Sierra Club California Executive Director Kathryn Phillips said in a statement (pdf). “The governor is using bizarre accounting to ‘balance’ the budget and making future generations pay the price with climate disruption.”

Cap-and-trade allows polluting companies to buy credits for production of more than their share of carbon emissions. The credits can be purchased from the state and other businesses that don’t use their full share via public auctions. The state’s groundbreaking carbon-trading program raised $140 million in its first two auctions of greenhouse gas permits. A third auction is scheduled for this month, and some observers think cap-and-trade could raise billions of dollars for the government in the coming years.

Many environmentalists would have preferred a more straightforward tax on polluters and regulations that control carbon emissions directly, but lost the fight to the more corporate-friendly, market-based cap-and-trade approach. As part of the deal, government officials made assurances that the state’s share of proceeds from the auctions would be used to reduce global warming and help save the world from imminent destruction.

But balancing the budget in a state currently running a $4.5 billion surplus would be nice, too.

–Ken Broder

To Learn More:

Gov. Brown Proposes to Borrow $500M from Cap-and-Trade Revenue (by Anne C. Mulkern, E & E Publishing)

Brown Raids Cap-and-Trade Funds, Delaying Action on Climate Change (by Steven T. Jones, San Francisco Bay Guardian)

Gov. Brown Chided for Plan to Borrow from Cap-and-Trade Funds (by Patrick McGreevy, Los Angeles Times)

State Ponders Spending Millions to Keep Polluters in Largely Unknown Cap-and-Trade Program (by Ken Broder, AllGov California)