The California Energy Commission has scheduled two additional workshops in the ongoing development of AB 118, a funding source for clean transportation technologies, such as alternative and renewable fuels. Many recent headlines about the environment have focused on climate change and the various regulatory mechanisms that could be used to reduce greenhouse gas emissions. This is especially so in California, the first state to enact a climate change law, the Global Warming Solutions Act of 2006. Given California’s ambitious greenhouse gas reduction mandate, many companies are concerned about forthcoming regulations that will require costly actions to reduce their carbon footprints. Awareness of global warming has also spawned the vibrant new “cleantech” sector, with emerging companies developing technologies for new energy sources; transmission and storage; efficient energy management; carbon reduction in construction, manufacturing and agriculture; and waste management and recycling.

However, less attention has been devoted to regulatory efforts to incentivize the development and use of clean transportation technology, such as California’s AB 118. The framework for AB 118’s implementation is currently under development, with two important workshops scheduled in the near future: First, a Sept. 2 workshop to consider comments and revisions to AB 118’s Investment Plan, the guide to be used in making project selection and prioritization decisions; second, a Sept. 9 workshop to discuss draft regulations intended to achieve AB 118’s sustainability goals.

Passed in October 2007, AB 118 will provide consistent, predictable funding for the development, improvement and deployment of clean and energy-efficient transportation technologies in California. By fostering such clean transportation technologies, the law takes a step toward meeting California’s recognized goal of reducing dependence on petroleum and the corresponding emissions reduction mandate of the Global Warming Solutions Act.

AB 118 will achieve its goal by providing grants, loans, loan guarantees and other financial assistance to private businesses, public agencies, vehicle and technology consortia, public-private partnerships, fleet owners, consumers, and academic institutions. Specifically, AB 118 created two funds to be administered by the state, primarily with money raised from increased vehicle registration fees. The first is the Alternative and Renewable Fuel and Technology Fund, to be administered by the California Energy Commission and which is projected to reach $120 million annually; the second is the Air Quality Improvement Fund, to be administered by the California Air Resources Board and which is projected to reach $80 million annually.

To maximize innovation and competition, AB 118 does not select any one transportation technology or fuel to replace petroleum. Instead, the law specifically references alternative and renewable fuel projects that could help transform California's fuel and vehicle types away from petroleum, including:

  • Developing and deploying alternative and renewable fuels (i.e., non-fossil fuels), including electricity, ethanol, hydrogen and natural gas
  • Decreasing the carbon footprint and increasing the sustainability of alternative and renewable fuels, such as through battery recycling and reuse, and using batteries to convert hybrid to plug-in technology
  • Optimizing vehicle technologies to improve fuel economy and reduce emissions, such as energy storage via batteries, hybrid technology, fuel cell technology, propulsion systems, use of light-weight materials, and implementation of design standards
  • Developing an infrastructure to deliver alternative and renewable fuels to end users
  • Creating programs to accelerate the use of alternative and renewable fuels, such as buy-down, warranty and retrofitting programs

AB 118 will also provide funding for programs that reduce air pollutants, such as incentives for vehicle and equipment replacement, emission mitigation projects, and research concerning the impacts of alternative fuels on air quality.

The two state agencies that will administer AB 118’s funding programs, the Energy Commission and Air Resources Board, are currently developing regulations to implement the law and its mandates. Among the issues discussed during recent workshops concerning AB 118 implementation was how to address projects that may qualify for AB 118 funding, but might also qualify for credits from another carbon reduction-related law or program. Comments were made in support of making AB 118 funding exclusive of credits from other programs (i.e., one project cannot qualify under more than one program), as well as in favor of allowing such "double-counting." Arguments for the former focused on maximizing benefit to the environment by counting the benefits of each project only once, while arguments for the latter were that clean transportation technology ventures should be encouraged and fostered in any way possible.

The cleantech revolution is clearly underway, with numerous new companies pioneering technologies in solar, biofuels, wind, batteries, energy management, recycling and green building materials. AB 118’s public funding programs will supplement the already robust private equity-based cleantech sector and will encourage still more innovation in clean transportation technologies. The details concerning how to implement AB 118’s funding system are currently under development, including project eligibility criteria, funding allocation guidelines and sustainability goals. But the law and its funding mechanisms are already in place, and will soon provide new opportunities in a rapidly developing sector of California’s economy.