SAN FRANCISCO - Private firms looking to build California’s $68 billion high-speed train system have concerns about the state’s ability to finance some of the project’s cost through an untested ‘cap-and-trade’ carbon trading levy. The doubts, mentioned in correspondence to the state and reviewed by Reuters through a public records request, are not likely to stall financing for the United States’ largest infrastructure project, but indicate a tentativeness among firms to use the money as a stand-alone money-generating tool. The California High-Speed Rail Authority (CHSRA) expects to raise $500 million per year for the rail line from the cap-and-trade scheme, essentially funds paid by companies to offset carbon emissions. State rail officials have described the revenue stream as a “game changer” for the project, set to be completed in 2029. But international firms such as Cintra and Kiewit worry that the unpredictability of such revenue could leave a funding gap, if the money were to be used to repay project debts, and ultimately discourage competition from potential investors. “There would need to be some assurances,” wrote OHL Group, an international construction firm based in Spain, “that the funding of the construction and future availability payments would be protected from such market fluctuations.” California’s carbon market has raised $2.2 billion since auctions began in 2012 and is expected to bring in $15 billion by 2020, according to the California Air Resources Board. A quarter of the funds are slated for the train project, a priority for Governor Jerry Brown. CHSRA Chief Executive Jeff Morales said earlier this year that the cap-and-trade funding “fundamentally changed discussions” with private industry for the better. The authority is interested in “pulling the money forward,” by using projected cap-and-trade revenue, for example, to repay an investor’s upfront investment. Plenary Group, an international infrastructure developer, along with other firms, suggested California provide a guarantee to fill the gap if cap-and-trade revenues dropped too low. “In the event the funds are not available for whatever reason, equity investors and lenders will need comfort that a credit-worthy entity (e.g. State of California) will backstop any payment shortfalls,” Plenary wrote. The CHSRA has said it will not seek more public funding for high-speed rail in the near term, after raising about $13.2 billion from state and federal funds plus cap-and-trade money. High demand for the first cap-and-trade auctions raised enthusiasm among private investors. But limited historical data does “not establish sufficient comfort in the market,” wrote Siemens, the German engineering company which would like to supply rolling stock and mechanical systems for the project, and already has a manufacturing facility in Sacramento. “We perceive the market as very cautious in lending long-term based on this new kind of revenue stream, especially due to its early stage and potential self-diminishing nature,” Siemens noted. John Laing Group, a British infrastructure firm, similarly warned of the scheme working “too well,” meaning the cap-and-trade program would accelerate the adoption of low-carbon energy sources and drive down carbon revenues. “What you’re seeing was not a surprise,” said CHSRA Chairman Dan Richard, in response to questions about the firms’ doubts. “Cap-and-trade is a very attractive funding source. But as a financing source, it’s not there yet. This is a matter of both time and the marketplace getting used to these revenues.” The viewpoints of international construction, engineering and finance firms are important, given that other states and countries are considering similar carbon-emission programs. California is being closely watched to see how the state capitalizes on new revenues at a time when the country faces an estimated $3.6 trillion of needed infrastructure improvements. Legislative support appears to back extending the cap-and-trade program from 2020 to at least 2030. Meridiam, a French infrastructure finance firm, among others, recommended that “the state do everything it can to extend this legislation as soon as possible.” “A reliable, long-term source of funding will not only attract more competitive teams, but it will also make it easier for firms to raise debt in the market,” wrote Meridiam.