California’s Tug of War over Carbon Emissions

10/12/2010 by Erica Gies
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SAN FRANCISCO — “Job killer” is a slur that has been cast both at California’s Global Warming Solutions Act, passed in 2006 and known as AB 32, and at Proposition 23, an attempt effectively to repeal the 2006 law in a ballot next month.

AB 32 was designed to bring California into near compliance with the Kyoto Protocol, requiring the state to reduce its greenhouse gas emissions to 1990 levels by 2020. Representing an emissions reduction of about 30 percent from anticipated levels, its stakes are high. And so there is Proposition 23, which seeks to stall AB 32 and which receives the majority of its funding from oil interests, the office of California’s secretary of state, Debra Bowen, has said.

The proposition, if passed, would suspend the 2006 law until the state’s unemployment rate, which is now higher than 12 percent, drops below 5.5 percent for four consecutive quarters. In the past 40 years, the state has reached that threshold just three times.

“The real issue is that, right now, we have an economic crisis the likes of which has not been seen since the Great Depression,” said Anita Mangels, communications director for Proposition 23. That concern resonates with voters, but the claims that AB 32 would make things worse are disputed.

The Proposition 23 Web site says that California would lose more than a million jobs if AB 32 were left unfettered, a statistic taken from a report by Sanjay Varshney and Dennis Tootelian of California State University, Sacramento. That report, however, is widely disputed. Dr. Frank Ackerman, an economist at Tufts University, says the report contains “elementary errors, arbitrary assumptions, and enormous guesswork.”

Governor Arnold Schwarzenegger of California expressed the views of AB 32 supporters bluntly when he questioned the title of Proposition 23, “California Jobs Initiative 2010,” and the motives of the oil companies that back it, in a recent speech at the Commonwealth Club of California.

“Does anyone really believe that these companies, out of the goodness of their black oil hearts, are spending millions and millions of dollars to protect jobs?” Mr. Schwarzenegger asked. “It’s not about jobs at all, ladies and gentlemen. It is about their ability to pollute and thus protect their profits.”

Taking the opposing view is Charles T. Drevna, president of the National Petrochemical & Refiner’s Association, a group that has donated $100,000 to the campaign to stall the 2006 law. “The opposition is spending a lot of money spreading inaccurate information about Proposition 23, which is why we want supporters of the proposition to raise funds to get the truth out,” he said.

Under AB 32, clean technologies including solar and wind energy and electric car batteries are the likely winners, while the oil industry is most likely a loser. But many studies indicate that overall job numbers are likely to hold steady or to increase because moving to cleaner sources of energy is expected to create new jobs.

Clean energy companies and venture capitalists have funded a “Facts on 23” campaign against the proposition, joined by other businesses, environmental and civic groups, and an array of private individuals. “We support AB 32 because we think it’s good for public health, good for business, and we think this is a huge market opportunity that California can be a leader in,” said Mike Mielke, senior director for environmental policy at the Silicon Valley Leadership Group, which represents 300 companies.

But Ms. Mangels, the spokeswoman for Proposition 23 , says that clean technologies do not guarantee a strong economy. “While the green tech sector is growing, green jobs are growing,” she said. “They’re still a tiny percentage of all jobs.”

Still, clean technologies have significant economic and jobs potential. While total employment in California fell 1 percent in 2007-8, green jobs grew five percent, according to a 2009 report from Next 10, an independent, nonpartisan environmental education organization founded by the venture capitalist F. Noel Perry.

Clean energy also produces three to seven more jobs per kilowatt-hour of energy than fossil fuels, according to several studies. “We find that all renewable energy and low carbon sources generate more jobs than the fossil fuel sector per unit of energy delivered,” researchers wrote in a 2009 study in Energy Policy journal.

Proposition 23, however, would harm clean energy growth in California by introducing uncertainty, says Mr. Mielke, which in turn would make it difficult for businesses to make sound investment decisions.

Steve Weissman, director of the energy and clean technology program at Berkeley Law School and one of the authors of a recent study on the legal implications of Proposition 23, agrees. For example, a five-year suspension would leave just five years for companies to comply with 2020 emissions targets. “It would be an economic disaster to push compliance in just five years. It’s a rolling form of uncertainty if you do this,” he said.

Rising energy costs concern Proposition 23 supporters who say on their Web site, Yes on 23, that AB 32 would increase the cost of electricity by 60 percent, citing testimony by a Southern California utility to the California Air Resources Board, the agency tasked with implementing AB 32. Closer inspection, however, shows that the utility actually said a 30 percent increase would result from self-imposed efficiency measures — mostly unrelated to AB 32. And its contention that prices could possibly see a 30 percent increase beyond that appeared to be aimed at gaining concessions under the cap-and-trade portions of the 2006 law, said Stanley Young, the board’s communications director.

The Yes on 23 Web site also says the air resources board predicted an increase of as much as 57 percent in natural gas rates in a plan that outlined strategies for greenhouse gas reductions. But the plan’s latest economic analysis predicts an increase of 11 percent in the price of natural gas, and Mr. Young said that, with efficiency incentives, the board expected customer bills to remain flat or to rise only slightly.

The Yes on 23 campaign Web site says that diesel and gasoline prices would increase by about $3.7 billion a year under AB 32’s low carbon fuel standard, citing a report from Sierra Research, a consultant to the government and the private sector in air pollution control. But economic analysis by the air resources board has found a $3.8 billion annual saving in fuel expenditures by 2020 based on reduced consumption tied to vehicle efficiency improvements and other factors.

More broadly, energy prices are expected to increase with or without the climate law. If AB 32 were to be suspended, electricity costs would increase 33 percent because of rising fossil fuel costs, according to an October 2009 study by Next 10.

The California Hispanic Chambers of Commerce is among those who support Proposition 23. Its members are struggling economically and fear that AB 32 will increase the cost of doing business.

“We have dire concerns about how AB 32 is being implemented and the drastic effect it will have on our small business owners,” said Julian Canete, chief executive of the group.

Small businesses, however, will not be directly regulated under AB 32, nor will they be required to pay taxes on their emissions. As for small business energy costs, they are likely to increase by just 0.3 percent of their revenues. And if they take advantage of the law’s efficiency incentives, “most small businesses could lower their energy costs significantly,” according to a December 2009 report from the Brattle Group, a consultancy firm.

The report was prepared for the Union of Concerned Scientists, an advocacy group that has contributed $50,000 to the “Facts on 23” campaign.

With so much data disputing claims put forward by the Proposition 23 campaign, and with the two leading candidates for governor coming out against it — although Republican Meg Whitman has said she would suspend AB 32 for one year because of economic hardship, as allowed under the law — it might seem that the measure is doomed.

But the oil-funded appeal to voter fears about the economy seems to be working. A poll conducted on Sept. 29 for the Public Policy Institute of California found that 43 percent of voters would most likely cast ballots in favor of the proposition, with 42 percent voting against and 15 percent undecided.