Big Chill Hits AB32

The independent and nonpartisan California Legislative Analyst was finally forced to answer questions about the impacts of AB32 on job creation in California.  The Legislative Analyst Office (LAO) has tried to avoid this fate since 2006 when California sought to goad Congress and the Bush Administration into action by adopting the Global Warming Solutions Act (AB32) with the goal of reducing greenhouse gas emissions to 1990 levels by 2020.

But Mac Taylor, the Legislative Analyst’s time ran out when State Senator Dave Cogdill (R-Fresno) demanded an assessment of California’s Global Warming Solutions Act which is set for full implementation in 2012.  The LAO tried his best to provide wiggle room not wanting to totally trash AB32 but his ten page report casts increasing doubt on the impact of the current implementation scoping plan[1] adopted by the California Air Resources Board and concludes that the net impact of the current plan is likely to be negative on job creation. You can read the report for yourself at the link below.[2]

The conventional wisdom was that if California acted others would follow as has happened on so many other fronts since the willingness to pioneer seems to be in the DNA of the Golden State.  In fact, we Californians are quite proud of this tradition and use it in all manner of advertising and marketing—California—the land of new ideas where dreams are born!

All was well while Al Gore convinced the political and chattering classes that the “science was settled” and California tagged the California Air Resources Board to lead AB32 implementation.  The governor also directed the California Energy Commission and the California Public Utilities Commission to cooperate and assess the costs of implementation.

But stuff happens!

  • Cap and Trade Legislation Stalls Out. The 2008 election was seen as change we can believe in and the new administration was expected to usher in a new sense of environmental accountability and leadership, but it has not quite worked out that way. The grand strategy of adopting cap and trade legislation to turn AB32 into national policy in the form of the Waxman-Markey Bill was adopted in the US House of Representatives only to stall out in the Senate.
  • Climate Gate Craters Settled Science. Climate gate cast doubts on just how settled the science actually was when the scandals over manipulating data and freezing out opposing opinions or just plain fabricating forecast outcomes to fit the policy prescription desired were leveled—and not refuted.
  • COP 15 Flames Out. The high expectations that the December 2009 Copenhagen Climate Change Conference would result in a son-of-Kyoto treaty that had enforceable reduction targets were dashed when China, India and other developing countries said NO!  We will not volunteer to cool off our economies to meet your political aspirations—unless you pay us BIG TIME to do so.
  • The Great Recession Hits Home. Add in the impacts of the recession, concerns about jobs and uncertainty about the global banking system and the climate for climate change began to chill.

Back on the front lines here in California, plans for implementing AB32 suddenly took on more urgency as proponents realized the strategy of goading Congress to act with a sympathetic president in office were not working out so well and California might have to actually do what it threatened to do and go it alone—or at least first—in imposing emissions reduction rules on business in the midst of the great recession despite the howls of protest.  Egads!

The CARB adopted its “scoping plan” to lay out implementation steps for AB32.  Protests were almost immediate and nitpicking the plan has resulted in a serious effort now underway to modify and revise it to address some of the concerns raised.

Meanwhile, the CEC and CPUC were scoping out the costs of implementing AB32 as ordered by the Governor and the answer was not pretty either.  They concluded that in order for AB32 to be effective that natural gas prices would have to be $13.87 per mmbtu ( that is roughly three times the current price of natural gas as I write March 10th) and carbon taxes or fees would need to approach $100 per tonne to get the results targeted by the bill.[3] The latest auction for emissions allowances by the Regional Greenhouse Gas Initiative, the clearinghouse for allowance auctions in the Eastern US was $2.00 per tonne in March 2010.  Obviously the numbers don’t add up well for AB32 cost effectiveness.

After the LAO report was issued Governor Schwarzenegger fired back that he has traveled the state and found widespread support for reducing emissions and said that the LAO and others who merely issued “theoretical opinions” didn’t know what they were talking about. Other supporters of AB32 chimed in trying to mitigate the damage but AB32 had long ago turned into an election year issue in the Governor’s race.

So what?

Being a pioneer is dangerous work.  Sometimes you discover gold, sometimes you get ambushed.

California has lost none of its pioneering spirit, but the economic realities facing the Golden state are challenging everything.  One of those realities is that California politicians like those in Washington are fond of waxing eloquently about solutions and then pushing the implementation heartburn and costs off into the future for their successors.  In the case of AB32, California hoped to start the debate and shape the Global Warming Solutions with AB32 but pass the baton to President Obama and the Democrat Congress to implement as part of the grand strategy.  But Washington dropped the baton and now California is stuck with running the race on its own with a self imposed 2012 implementation deadline staring it in the face.