California proposes billions for climate initiatives, additional money for innovation programs

Earlier this month, California Gov. Gavin Newsom released his proposed FY 2022-2023 budget, which he said “reinforces our role as the global leader in climate protection, innovation and job creation.” The budget focuses on new investments and “positions the state as a global leader in innovation and solutions to both mitigate and adapt to the changing climate.” The proposal includes billions in one-time funding from various sources over five years to advance the state’s climate and opportunity budget and provide equitable climate solutions. Additional money is proposed for innovation hubs, clean energy and more.

In looking to further economic growth and job creation, the budget:

• restores business tax credits, including research and development credits and net operating losses that were limited during the COVID-19 Recession, and proposes an additional $250 million per year for three years for qualified companies headquartered in California that are investing in research to mitigate climate change.
• includes a new tax credit for businesses that opt in to develop green energy technologies (totaling $100 million per year for three years). These new credits would become repayable to the state when the company becomes profitable.
• proposes direct investments in climate-related R&D at the University of California system, including $185 million for applied research ($100 million for matching applied research grants), regional networks of climate-focused technologies incubators ($50 million), and workforce development and training hubs ($35 million). It also includes a one-time $20 million grant to Carnegie Science to support the Pasadena Climate Research Hub facility.
• includes $83 million to create the California State University (CSU) Bakersfield Energy Innovation Center.

In addition to the above initiatives, the budget would expand workforce training opportunities in climate-related fields, including $465 million over three years to continue expanding workforce strategies to reach its climate goals.

The budget also would provide a one-time $30 million investment to establish Golden State Awards, an award program overseen by the California Education Learning Lab in the Governor's Office of Planning and Research that would provide up to 30 grants to innovative projects based at or associated with a public college or university in California.

California Innovation Hubs and Entrepreneurship Grants

The budget proposes statutory changes to the California Innovation Hub (iHub) program, which encourages regions to build upon their existing or emerging innovation. The budget proposes statutory changes to reestablish the iHub program as the Accelerate CA: Inclusive Innovation Hubs program to focus on inclusive economic growth. It would include $20 million over four years to: (1) expand the number of Hubs from 10 to 13 regions across the state, and (2) establish the Entrepreneurship Fund to provide grants of up to $100,000 per business for five new businesses incubated at each of the Hubs. These grants would encourage science and technology-based business creation in traditionally underserved communities.

Clean energy

The budget also would make investments to meet the state’s clean energy goals, with $2 billion invested over two years to provide incentives for long-duration-storage projects, renewable hydrogen, and industrial decarbonization, including in the food processing sector. The proposed budget also includes funding for decarbonization and electrification of existing buildings in disadvantaged communities, as well as infrastructure improvements to facilitate the development of offshore wind energy production. Investments include:

• Long Duration Storage — $380 million over two years to invest in long duration storage projects throughout the state to support grid reliability.
• Green Hydrogen — $100 million in 2022-23 to advance the use and production of green hydrogen.
• Industrial Decarbonization — $210 million over two years to accelerate industrial sector decarbonization. This funding would provide a grant program for the purchase and deployment of commercially available advanced technologies and equipment to decarbonize this sector while focusing on reducing criteria pollutants in disadvantaged communities.
• Offshore Wind Infrastructure — $45 million in 2022-23 to create the Offshore Wind Energy Deployment Facility Improvement Program, which would invest in activities to advance the capabilities of deploying offshore wind energy in federal waters off California in the areas of facility planning and development.

State Small Business Credit Initiative (SSBCI)

With the state set to receive $1.2 billion for SSBCI, the IBank and state treasurer’s office intend to split the allocation evenly, and $200 million will be used to establish a venture capital program at IBank. The program will be directed toward: (1) underrepresented venture capital managers, (2) underserved entrepreneurs and business owners, (3) geographic areas that are socio-economically disadvantaged or that receive limited venture capital funding, and (4) climate equity and climate justice.

The full budget summary is available here.