September 1, 2010

Will California's kill their landmark climate bill in November?

As California governor Arnold Schwarzenegger leaves office in November, state residents will be asked to vote on a ballot measure that could kill their landmark climate bill

Post Copenhagen, support for carbon trading has been falling globally. Now it appears that even California, famed for its environmental trend-setting, is losing its enthusiasm. Bucking the trend is China, which reportedly will launch domestic carbon-trading programmes during the next Five-Year Plan period (2011-2015) to meet its carbon-intensity target by 2020.

As governor Arnold Schwarzenegger leaves office in November – having served the maximum term permitted by law -- Californians will be asked to vote on Proposition 23 [full text]. If approved, this ballot initiative would stall, if not kill, the landmark climate-solutions bill on which the outgoing governor has staked his political reputation as a business-friendly environmentalist.

Two Texas oil companies are behind this latest bid to roll back California’s climate- change legislation until unemployment in the state stabilises at 5.5% -- from its current 12.3% -- for a full fiscal year, even though a bill with similar wording was roundly defeated by state legislators in January. Valero Energy and Tesoro, corporations that both own refineries in California and would benefit from delaying the state’s greenhouse-gas reduction programme, are the initiative’s biggest financial backers. They also are reported to be among the state’s biggest polluters.

Their campaign is gathering pace. Advertising spending on both sides of this high-profile issue is predicted to reach US$150 million, which would make it one of the most expensive campaigns in California history. Environmentalists have redubbed Proposition 23 the “Dirty Energy Proposition”, while fossil-fuel lobbyists and Tea Party enthusiasts opposed to government meddling prefer the more anodyne “California Jobs Initiative”.

The initiative has little direct connection to jobs. The target is the Global Warming Solutions Act (Assembly Bill No 32, or AB 32) [full text], passed in 2006, which is designed to cap the state’s greenhouse-gas emissions in 2012 and to reduce them to 1990 levels by 2020. Through cap-and-trade requirements on California’s biggest polluters, the law paves the way for investment in clean-energy alternatives throughout the state – yielding $9 billion in new projects so far.

Renewable wind or solar power will provide for at least one third of the state’s energy needs under the current law. Implementing this California version of the Kyoto Protocol in order to spare future state residents the prospect of living in a post-industrial wasteland is a complex task. Bureaucrats took years of analysis in order to determine current emissions levels and how to monitor the pace of reduction and carbon trading. And just as tougher standards and fines for those who flout them are about to kick in, affected industries are crying foul and objecting to costly new regulations that they fear will drive too many jobs out of state.

The benchmark climate law AB 32, which public-opinion surveys indicate is supported by the majority of Californian voters, now is being derided by some conservatives as an exorbitant “energy tax” or a “global-warming tax” in disguise. Because Schwarzenegger, the erstwhile action hero, will no longer be in office to strong-arm its enforcement, environmentalists around the world view this as a hot-button issue. If the initiative passes, pollution controls and clean-fuel standards may lapse and undercut California’s position as a leader in renewable-energy innovation.

To pay for implementing its climate law, California must levy extra charges on natural gas utilities, pipeline owners and operators, producers and importers of petrol and diesel fuels, refineries, cement manufacturers, retailers of imported electricity, plus facilities that burn coal. These new fees have raised the temperature of debate.

Leading businessmen are confident that the California climate law will nurture a burgeoning clean-tech industry and will create at least half a million new jobs. “AB 32 is an incubator of innovation,” Eric Schmidt, the head of Google, told the Los Angeles Times earlier this summer. Schmidt predicts that employment will rebound as “business responds to the need for energy-efficient buildings, transportation and a growing portfolio of renewable energy resources.” Power from offshore wind, rooftop solar and waste biofuels will prove cheaper in the long run than conventional energy derived from fossil fuel or nuclear plants.

Utilities companies have spent the past four years preparing to comply with new standards and they oppose Proposition 23. The chairman of Pacific Gas and Electric Corporation (PG&E), Peter Darbee, pledged the company’s commitment “to helping California make progress, moving us toward a low-carbon economy while minimising the impact on customers as we make this necessary transition”. He notes that “unchecked climate change could cost California's economy tens of billions of dollars a year in losses to agriculture, tourism and other sectors,” adding: “Thoughtful and balanced implementation of AB 32 is one of the most important opportunities we have to avoid this costly outcome while spurring new clean-tech investment, innovation and job creation in California.”

Unsurprisingly, Schwarzenegger wants to combat Proposition 23. Recently the Republican governor was touted as America’s next green hero, a celebrity who could help put some muscle behind US environmental policies and reach out to partners overseas for a global solution to climate change.

“This initiative sponsored by greedy Texas oil companies would cripple California's fastest-growing economic sector, reverse our renewable energy policy and decimate our environmental progress for the benefit of these oil companies' profit margins,” he wrote on his official website. "I will not allow this to happen on my watch."

Schwarzenegger’s trade overtures to China’s Jiangsu province, as well as to other foreign countries and provinces, have already yielded international collaboration in green technology for energy efficiency, but uncertainty over California’s future energy policies is likely to hinder planning for new projects -- at least for a few months. Promoting regional green economies and nudging national governments towards the same goal is a priority.

“Our mission is to address climate change while enhancing trade, and to share best practices with Jiangsu province,” said Elizabeth Turner Fox, director of US programmes for the US-Jiangsu Green Partnership. “New technology will be developed if there is research and development partnership. The faster climate change is addressed, the better news for the planet.”

Whoever wins the race for governor in November will set the tone for California’s next decade or so. The frugal and eco-friendly Democratic Party candidate (and former governor) Jerry Brown openly supports the cap-and-trade measures of AB 32 and is against the proposal to roll it back. He has his own nuanced green agenda, too:

“You'll see a great plan for new energy jobs, about 500,000 from investing in 20,000 megawatts of renewable energy and efficiency retrofits,” he told the CNBC business news channel earlier this summer. “This is a very powerful proposal. I know what I'm talking about.”

The Republican Party challenger, Meg Whitman, is less forthcoming. She urges a one-year moratorium on AB 23, ostensibly to enable Californians to ride out their current unemployment crisis and to coordinate the state emissions standards with any federal climate legislation that might be passed in the interim. The wealthy former eBay chief executive has not explicitly supported Proposition 23. Recently she toned down the rhetoric on her glossy campaign pamphlets to be less strident on this topic, which does not resonate with her Silicon Valley colleagues, nor with the independent suburbanites who her political advisers pinpoint as the swing voters who could win her the governorship.

“California has a choice,” Whitman said on a recent television broadcast. “We can put our head in the sand and continue to lose jobs overseas and to other states, or we can say, `You know what? We are not going to lose another job from California, and we're going to be the very best place to start and grow a business.' So I'll be the chief sales officer for California businesses.”

Californians still view themselves as global trend-setters, and even though the bankrupt state is $20 billion in the red and its economy has dropped from ranking as the world’s eighth largest down to 12th place, its blue-sky thinkers hanker for renewable energy and a boost in the green-job sector.

Most of California’s consumer-protection measures, such as a cigarette-smoking ban in public places or mandatory smog regulators on cars, eventually became mainstream and have been adopted in much of the United States. Whether this can happen with climate legislation, despite the economic downturn, remains to be seen.

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