Welcome back everyone, and Happy New Year! I hope you all had a restful and rejuvenating break and came into 2014 energized and ready to do great things.

There are all kinds of things happening in California this week, but the Governor has trumped them all by deciding to announce his $107 billion draft state budget proposal TODAY, a day earlier than expected. The draft budget tends to set the tone in Sacramento for the legislative session, so it’s important to get a feel for how it addresses key issues like climate, oil and gas, electricity, and transportation. I haven’t been able to fully digest the budget (I intend to listen in on the California EPA/Natural Resources Agency briefing today at noon to get more details – call in number (800) 288-8975). But here are some key points:

• AB32/carbon market revenues: You all remember that last year’s big news was that the Governor shifted $500 million from the carbon auction revenues away from energy projects and into the General Fund. This year’s story is far more positive: the Governor proposes to repay $100 million of last year’s fund, and put this year’s entire fund – potentially up to $850 million – into clean energy, sustainability, and investment in disadvantaged communities. In a controversial move, nearly a third of this total ($250 million) is allocated to the inter-city high speed rail project. The LA Times and SF Chronicle have more on the high speed rail decision, and reactions from a range of stakeholders. (For a very nice look backward over the first year of the AB32 carbon market, see this great report from EDF, just out yesterday.)
• Transportation/Equity: We’re excited to see the budget’s focus on sustainable communities and low-carbon transportation – something like $300 million (possibly more, depending on how you read it). A significant chunk of these funds is slated to go toward transit-oriented development and electric vehicles. As EDF’s Erica Morehouse writes, these investments in clean transportation will provide major economic and environmental benefits for disadvantaged communities throughout the state. I’m a planner by training, so you know I love sustainable planning and TOD. But still, as I’ve noted (perhaps obsessively) before, transit and EV solutions don’t meet the needs of some of California’s most rural low-income communities, who should also be part of California’s low-carbon energy future. Look for more from Next Generation on this topic very soon!
• Proposition 39: Coming right on the heels of the CEC’s adoption of Prop 39 regulations, I would not have expected major changes in this draft budget for P39 fund allocation next year. And mostly it’s the same as this year: the lion’s share of funds ($316 million) to K-12 school, another $39 million to community colleges, and continued support for the California Conservation Corps and the Workforce Investment Board to audit facilities, train workers, and educate students about energy projects in their schools. However, the draft budget does not extend the $28 million in loan funds that were allocated this year to the CEC. This was the one piece of the P39 funding that went out in a loan, rather than a grant, program – basically the one piece that allowed funds to be leveraged. In agreement with the position that Advanced Energy Economy has taken on this topic, we have long been supporters of leveraging these funds, and will continue to argue that position in the coming year.

There’s much, much more to say on the budget; I’ll do a better round-up next week. But now, moving on to other important issues facing the state and the nation.

• Polar vortex: My Wisconsin roots are shivering in sympathy with my Midwest and Northeast family and friends this week. The media have taken this opportunity to start questioning the reality of global warming again, even with 97 percent of scientists agreeing that it’s no longer a question. Emily Atkin at Climate Progress provides a nuanced explanation of the meteorological underpinnings of the vortex, and addresses whether changing climate could be playing a role (the short answer: maybe, but can't be sure). The Wall Street Journal’s editorial board took umbrage at such attempts by the “global-warming crowd” to “politicize” the weather by daring to relate atmospheric science to atmospheric goings-on, choosing instead to declare summarily (and with no apparent sense of irony) that “It Isn’t Climate Change.” All of which points to the importance of looking not to individual events, but to long-term trends, to better understand climate risks – precisely the goal of Tom Steyer, Hank Paulson, and Mike Bloomberg’s Risky Business project. (Stay tuned for an announcement Monday of the full leadership committee on that project!)
• Drought: Here in California, we face a natural system disaster of our own: our ongoing and crippling drought. Snowpack in the Sierra Nevada Mountains is the major source of California’s year-round water supply, and it’s at only 20 percent of average levels for this time of year. You’ll all remember that 2013 was the driest year on record for much of the state; this year is shaping up to be even drier. My prediction: Water scarcity may end up as the most heated political battle of this year, as competing interests vie for rapidly diminishing resources.
• Fracking: Look for oil and water to mix in Sacramento this year, as one of these interests may be the oil industry, which requires 3 to 8 million gallons of water per well each day for fracking operations. Speculation abounds that the proposed twin-tunnel project to divert water from the Bay Delta will send more water to the Central Valley for oil extraction. Expect fracking to remain a contentious issue in Sacramento this year: four state legislators signed a letter to Governor Brown last week calling for a moratorium on fracking “until health and environmental concerns are addressed.”
• Clean Tech Confusion: CBS News aired a truly perplexing episode of 60 Minutes on Sunday night, purporting to expose the “cleantech crash,” and claiming that the U.S. government’s investments in clean energy haven’t paid off. Among its other failings, the episode neglected to make a single reference to climate change, which, as Dana Hull of the San Jose Mercury News points out, is “the whole point of cleantech, after all: using the promise of technology and innovation to try to wean our economy off of fossil fuels.”
• Clean Tech Reality: Meanwhile, back in the real world, California ended 2013 having installed more rooftop solar in a single year than in the past three decades combined. The New York Times ran a story last Friday on Wall Street’s ravenous appetite for shares of rooftop system providers like Bay Area start-up Solar City, which, according to the Guardian, attracts a new customer every five minutes, hires 15 additional workers per day, and has launched a nonprofit to deliver rooftop solar to schools in developing countries.
• Inside the Beltway: On the national scene, Politico’s Darren Samuelsohn argues the Affordable Care Act debate will sink any near-term chance of comprehensive federal action on climate. The EPA hasn’t gotten that memo: they’re full speed ahead in working to regulate carbon under the Clean Air Act. This week, the EPA held firm to its promise to regulate CO₂ emissions from new power plants. The proposed rule, posted in the Federal Register yesterday, essentially requires newly constructed coal-fired power plants to incorporate carbon capture and storage technology. Supporters and opponents have 60 days to comment.

I’ve gone on way too long, but since this is basically a wrap-up of three weeks of news, I don’t feel guilty. For those of you who need even more news and analysis, please check out the invaluable Pat’s Picks, written by my colleague Pat McVeigh. My clips are culled from hers, but she includes even more analysis and articles than I do.

See you with a shorter and pithier Cliffnotes next week!