Gov. Brown wants to use as much as 80% of proceeds on the budget, an unpopular and possibly illegal idea, instead of using the money to control emissions.
For six years, California has been embroiled in disputes and lawsuits over the creation of its economywide carbon trading program, the first such program in the nation and second-largest in the world.
Now, with just five months to go until its first carbon credit auction, one crucial debate remains: how to spend the billions that will be generated by the initiative.
Narrowly, the question is whether proceeds should go only to promote renewable energy and other low-carbon programs, or whether the state can use the money in other ways.
More broadly, the issue is whether California can show that the environmental and economic benefits of cap and trade, maligned in Republican circles as a regressive tax, will exceed its costs.
Late last month, the California Assembly made its position clear, by passing legislation that says cap-and-trade dollars have to be spent on programs that curb global warming emissions, a stance supported by environmentalists. The State Senate approved a related measure.
Yet neither bill would stop Gov. Jerry Brown from doing something opposed by many supporters and critics alike: diverting money to balance the state budget.