Jerry Brown’s brilliant plan to fund the California high-speed rail line out of greenhouse gas emissions allowances appears to be coming to a screeching halt. California’s most-recent sale of such allowances was expected to bring in at least $600 million; instead, it earned just $8.2 million. At the projected average cost of $200 million per mile, that’s enough to build about 200 feet of rail line.
The problem is that there is a “glut of emission allowances on the market” because so many entities, including various European nations and, in California, various public utilities, are trying to earn money selling them. On the other hand, potential buyers are unsure about whether the program will continue; if it is cancelled, the allowances they buy will be worthless. The California law is supposed to sunset at the end of 2020, and if revenues remain so law the legislature is not likely to renew it.
The other problem is that Brown was counting on emissions sales to fund projects the state can’t really afford. While the efficiency benefits of cap-and-trade are proven, it is far from efficient to use permit revenues to fund boondoggles. Even the Pope questions the morality of selling the right to pollute.
A couple of weeks ago, Republican members of California’s Congressional delegation asked Secretary of Transportation Elaine Chao to not fund the planned electrification of the Caltrain line between San Francisco and San Jose, and she agreed to at least postpone her decision on the question. Such electrification would have trivial benefits for commuters riding the train but would be a prerequisite for running high-speed train on the same tracks, and the opponents hope that stopping the electrification will help stop the high-speed rail project.
As approved by voters in 2008, the San Francisco-to-Los Angeles line was supposed to have its own right-of-way for the entire route. But costs quickly rose well above the 2008 estimates, so the High-Speed Rail Authority decided to build an abridged system that would operate at high speeds for part of its route and conventional speeds for other parts, including the section from San Francisco to San Jose. Even with these adjustments, the line is expected to cost $68 billion, about 50 percent more than the $44 billion promised in 2008; a true high-speed line the entire length is now expected to cost at least $100 billion.
As the Antiplanner has noted before, back in 1996 the high-speed line was supposed to cost less than $10 billion and even at that price it would have cost more to take the train from L.A. to the Bay Area than to fly or drive. If the project was marginal at $10 billion, how can it make sense at $100 billion?
Brown’s answer to that question was that cap-and-trade revenues were free money that would pay for the line (which supposedly would save on greenhouse gas emissions but, when emissions during construction are counted, probably won’t). But if there are no cap-and-trade revenues, then the only choice may be to stop the train.