Background Information Regarding Low Carbon Transportation Investments and Air Quality Improvement Program

This page last reviewed February 16, 2017

Low Carbon Transportation BackgroundCA Climate Change Investments

Cap-and-Trade auction proceeds have been appropriated to the California Air Resources Board (CARB) for Low Carbon Transportation projects that reduce greenhouse gas (GHG) emissions, with an emphasis on investments that benefit the State’s disadvantaged communities.  Per statute these funds must be used to further the purposes of Assembly Bill 32 (AB 32; Nunez, Chapter 488, Statutes of 2006).  The Low Carbon Transportation investments build upon and greatly expand existing advanced technology, clean transportation programs, which provide mobile source incentives to reduce criteria pollutant, air toxic, and GHG emissions.

In 2012, the legislature passed and Governor Brown signed into law 3 bills – AB 1532 (Pérez, Chapter 807), Senate Bill (SB) 535 (de León, Chapter 830), and SB 1018 (Budget and Fiscal Review Committee, Chapter 39) – that established the Greenhouse Gas Reduction Fund (GGRF) to receive Cap-and-Trade auction proceeds and to provide the framework for how the auction proceeds will be administered to further the purposes of AB 32.

The legislation establishes broad categories of GHG emission reducing projects that may be funded with these proceeds, including investments in: sustainable communities and clean transportation; energy efficiency and clean energy; and natural resources and waste diversion. This legislation also establishes the framework for investments that can meet multiple policy objectives to enhance economic, environmental, and public health benefits.  For low carbon transportation, the legislature annually appropriates funding to CARB.  In fiscal year (FY) 2014-15, $200 million was allocated.

SB 535, one of the implementing statutes for auction proceeds, directs that at least 25 percent of the available proceeds are allocated to projects that provide benefits to disadvantaged communities and at least 10 percent of the available auction proceeds are allocated to projects located with disadvantaged communities.  The California Environmental Protection Agency (Cal/EPA) identified disadvantaged communities for the purposes of SB 535 using the California Communities Environmental Health Screening Tool (CalEnviroScreen2.0). More information on the CalEnvirosceen model and the identification of disadvantaged communities is available at:

In 2014, CARB approved Investments to Benefit Disadvantaged Communities: Interim Guidance to Agencies Administering Greenhouse Gas Reduction Funding Monies that establish the criteria for determining whether projects qualify as being located in or benefiting a disadvantaged community.  The guidance also identifies approaches for implementing State agencies maximize the funding to benefit disadvantaged communities and identifies common needs identified by disadvantaged communities in addition to reducing GHG emissions that State agencies should strive to achieve with their investments.  These include reducing health harms and exposure to toxic air contaminants among other needs.  This direction to achieve air quality and health cobenefits factors into CARB’s investment decisions and provides additional rationale to consider AQIP and Low Carbon Transportation investments together.

Air Quality Improvement Program (AQIP) Background

AQIP is a voluntary, mobile source incentive program that focuses on reducing criteria pollutant and diesel particulate emissions with concurrent reductions in GHG emissions.  AQIP was created in 2007 by AB 118, the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007 (Núñez, Chapter 750, Statutes of 2007).  AB 8 (Perea, Chapter 401, Statutes of 2013) reauthorized the fees that support AQIP through 2023.  

CARB adopted regulations in 2008 and 2009 that establish the administrative procedures for implementing AQIP in order to ensure that the program is run efficiently, with transparency and public input, and complements California’s existing air quality programs.  Central to these program guidelines is the requirement for a Board-approved annual funding plan developed with public input.  The funding plan is each year’s blueprint for expending AQIP funds appropriated to CARB in the annual State Budget describing the projects CARB intends to fund, establishing funding targets for each project, and providing the justification for these decisions.  AQIP guidelines also establish the rules and requirements for soliciting projects and awarding funds.

Funding for AQIP comes primarily from the smog abatement fee assessed annually by the Department of Motor Vehicles (DMV) during a vehicle’s first six registration years in lieu of providing a biennial smog certification. In addition, a small portion of AQIP funding comes from two additional sources: an initial registration fee for new watercraft and a special equipment identification plate fee for certain types of equipment. Annual funding for AQIP projects is generally $20-25 million, depending on the revenues generated from these fees.  For FY 2015-16, the legislature appropriated $23 million to CARB for AQIP projects.

CARB has focused AQIP investments on technology advancing projects that support California’s long-term air quality and climate change goals in addition to providing immediate emission benefits. AQIP investments have concentrated on three main categories: commercial deployment of clean vehicles, precommercial advanced technology demonstrations, and finance assistance to small trucking fleets.

Additional Legislation

SB 1275 (De León, Chapter 530, Statutes of 2014) establishes the Charge Ahead California Initiative with the goals of placing one million zero-emission and near-zero emission vehicles in California by 2023 and increasing access to these vehicles for lower-income consumers and consumers in disadvantaged communities.  SB 1275 directs CARB to make a number of changes to CVRP including limiting consumer eligibility based on income, ensuring that rebate levels can be phased down, and conducting various planning and technology assessment activities, among other provisions. 

SB 1204 (Lara, Chapter 524, Statutes of 2014) creates the California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program, funded with auction proceeds from GGRF, to support the development, demonstration, precommercial pilot, and early commercial deployment of zero- and near-zero emission technologies with priority given to projects that benefit disadvantaged communities.  SB 1204 establishes specific requirements related to how CARB prioritizes project categories and selects projects.