Tensions are steadily mounting in advance of California’s November 2010 general election as the state’s landmark climate bill, the Global Warming Solutions Act, or AB 32, faces possible suspension by the California Jobs Initiative. Also known as Proposition 23, the California Jobs Initiative is a ballot measure aimed at halting the progress of regulations and initiatives enacted under AB 32 until the unemployment rate in California remains at or below 5.5% for four consecutive quarters. At the heart of the highly controversial issue, currently being debated by numerous members of the California community ranging from NGOs and businesses to industry groups and politicians, are the economic impacts of each of the bills.
Here, I’m hoping to provide a summary of pertinent information in order to inform voters and non-voters alike on the two sides of this debate. While I think it will become clear early on which side I support, I have researched both bills thoroughly, and have presented quite a bit of information for each. This posting will be done in two sections. In this post, I have done up a brief background of relevant emissions data and California legislation preceding AB 32 and Prop 23, as well as a summary of the two bills. The second post, entitled Climate Change Controversy in California: Effects of Prop 23 on AB 32 and Arguments in Support of AB 32, focuses on the direct and indirect effects of Proposition 23 on AB 32 if the former were to be passed, and my arguments in favour of AB 32.
Relevant Background Information
United States Greenhouse Gas Emissions
Up until 2006, the United States was the largest emitter of carbon dioxide emissions in the world. Currently second only to China in terms of total carbon dioxide emissions, in 2008 the United States emitted 6,956.8 teragrams of carbon dioxide equivalent (Tg CO2e). This represents an increase in total US emissions of approximately 14% since 1990, shown in Figure 1 below.
Figure 1: Total US Greenhouse Gas Emissions from 1990 to 2008
Encouragingly, emissions from the US declined between 2007 and 2008 by 2.9%, or 211.3 Tg CO2e. The most dominant contributing greenhouse gas in 2008, unsurprisingly, was carbon dioxide, which represented 85.1% of total GHG emissions. Also to be expected is that the largest source of emissions was the energy sector, which contributed 5,999 Tg CO2e. If you’d like a more detailed analysis of the recent United States greenhouse gas emissions trends, check out the EPA inventory report entitled Inventory of US Greenhouse Gas Emissions and Sinks: 1990 – 2008.
California Greenhouse Gas Emissions
California is the second highest state in terms of total GHG emissions, accounting for 6.68% of total US emissions in 2007. Texas had the number one spot in the same year, and produced just over 11% of total US emissions. Total GHG emissions in California were measured in 2008 by the California Air Resources Board (CARB), a department of the California Environmental Protection Agency (and one that is quite important to the current debate!) and were equal to 477.74 million metric tonnes of CO2e (MMt CO2e). Figure 2, below, contextualizes California’s 2007 greenhouse gas emissions on a national scale.
Figure 2: United States Greenhouse Gas Emissions by State in 2007
While California represents a significant source of GHG emissions within the United States, it also contributes significantly on a global scale; if California were to be considered as a separate country, it would be the 19th largest source of GHG emissions in the world. Worth mentioning, however, is that on a per capita basis, California is the 5th lowest ranked state for GHG emission rates.
Historical California Climate Change Legislation
Put mildly, California has a history of state leadership within the United States on environmental issues, specifically on initiatives related to energy efficiency, clean energy, and fuel use. Such leadership has, for the most part, been a direct result of the lack of federal action on these and related issues. For instance, the United States was one of only a handful of countries not to ratify the Kyoto Protocol in 2008, and it was definitely the largest emitter absent from the agreement.
California’s leadership in areas of the environment and climate change has led to the adoption of a slew of state policies directed at measuring and reducing greenhouse gas emissions and other climate change impacts. To better understand the groundbreaking nature of the Global Warming Solutions Act of 2006, I think that a brief history of previous California state statutes is necessary. I’ll keep it short though!
California’s first legislation concerned wholly with climate change was Assembly Bill (AB) 4420, which was passed in 1988. This bill required the California Energy Commission (CEC) to “study the impacts of climate change on the state and to develop an inventory of greenhouse gas emissions sources”. In 2001, Senate Bills 1771 and 527 established the California Climate Action Registry, a nonprofit organization that promotes the voluntary measurement and reporting of GHG emissions by California businesses and other organizations. The Registry also provides credible and consistent reporting standards and tools for reporting organizations, which can sometimes be difficult to come by, as well as the opportunity for early action in connection with future state, federal or international GHG regulatory programs. In short, it’s a great resource for companies looking to measure and report emissions, and stay on top of developments in reporting regulations. Check out their site at The California Climate Action Registry.
Moving forwards, Assembly Bill 1493, passed in July of 2002, mandated that the California Air Resources Board develop and implement GHG limits for vehicles, beginning with model year 2009. Supporting regulations to this effect were released by CARB in September of 2004, but various legal hurdles have prevented the law from taking effect, and the whole thing is currently quite the mess.
The last pieces of relevant legislation I’ll mention here are Executive Order S-3-05 and SB 1368. Executive Order S-3-05, signed into effect by Governor Arnold Schwarzenegger on June 1, 2005, required California to reduce GHG emissions to 1990 levels by 2020, and to 80% below 1990 levels by 2050. SB 1368, the last piece of climate change related legislation preceding AB 32, was passed in 2006. It imposes GHG performance standards on electric utilities, and acts to significantly reduce the construction of carbon-intensive power plants in the state.
The California Global Warming Solutions Act – AB 32
Summary of AB 32
The Global Warming Solutions Act, more commonly referred to as Assembly Bill 32 or “AB 32”, is an environmental bill adopted in California in 2006. Signed into law by Governor Arnold Schwarzenegger on September 27, 2006, the bill, the most stringent clean energy mandate currently existing in the United States, establishes a pretty rigorous timetable to bring California just about to compliance with the provisions laid out by the Kyoto Protocol. AB 32 is a landmark program of regulatory and market mechanisms, and it was designed to achieve quantifiable, cost-effective reductions in state GHG emissions.
Under AB 32, California is required to reduce statewide Kyoto greenhouse gas emissions to 1990 levels by 2020, representing a 25% reduction below ‘business as usual’ emissions estimates. Furthermore, the bill requires that California GHG emissions be reduced to 80% below 1990 levels by 2050. To achieve these ambitious goals, AB 32 requires the California Air Resources Board (mentioned earlier) to implement clean energy policies targeted at: increasing energy efficiency in homes, buildings, and vehicles; cleaner transportation fuels; increasing reliance on renewable energy; and reducing carbon pollution.
Given the significant controversy surrounding the economic impacts of AB 32, it is worth mentioning that AB 32 includes a ‘safety clause’ whereby the Governor has the authority to suspend emissions caps for up to one year in the event of an emergency or significant economic harm. However, Governor Schwarzenegger has stated pretty emphatically that he will never use this clause. In my opinion, this decisive move acted as a catalyst to the initial action to develop Proposition 23.
Role of the California Air Resources Board
According to AB 32 legislation, the California Air Resources Board (CARB) is the lead agency responsible for the implementation of the law, including the measurement of baseline GHG emission levels and the setting of reduction targets, and the development of regulations and market mechanisms to achieve emission reductions goals. During this process, CARB is required to evaluate a bunch of factors, including California’s economy, environment and public health, equity between regulated entities, electricity reliability, and conformance with other environmental laws.
A quick summary of CARB responsibilities include:
- January 1, 2008: Establishment of a statewide greenhouse gas emissions cap for 2020, based on 1990 emissions
- January 1, 2008: Measurement of greenhouse gas emissions of industries it classified as significant sources
- January 1, 2009: Adoption of mandatory reporting rules for above-mentioned significant sources
- January 1, 2009: Adoption of a detailed plan indicating how emissions reductions targets will be achieved from significant sources
- January 1, 2011: Adoption of regulations to achieve the maximum technologically feasible and cost effective reductions in greenhouse gas emissions through the use of market mechanisms and alternative compliance mechanisms
- January 1, 2012: Adoption of regulations to establish a cap and trade program
Support for AB 32
So, who’s on the side of AB 32 in this debate? The answer is pretty varied. Support for AB 32 is diverse, and includes members not only of the California community, but also of the United States, North American, and international communities. Within California, a large number of the state’s largest employers support AB 32 implementation. These include (but certainly aren’t limited to): Google, eBay, Levi Strauss & Co., Applied Materials, Waste Management, the California Ski Industry Association, and Virgin America. Several business coalitions, such as Small Business California and the California Business Alliance for a Green Economy, are also supporters.
In addition, almost two hundred renewable energy, clean technology, and green companies support AB 32, including the California Clean Energy Committee, the California Energy Efficiency Industry Council, and various sustainable business groups and green building councils. A significant number of state and federal elected officials support AB 32, including Governor Arnold Schwarzenegger, as well as countless members of local governments.
In the wake of Proposition 23, the “No to 23: Stop the Dirty Energy Proposition” coalition against the California Jobs Initiative was created. Supporters of AB 32 are continuously joining the coalition against Prop 23, and “No to 23” currently has a total of 579 Californian organizations, and thousands of individuals. If you’d like to read a bit more about the coalition, or join up, their site is No on 23: Stop the Dirty Energy Proposition. Member organizations of the “No on 23” coalition are diverse, and include environmental, health, good government, student, labor, faith, and technology groups. Associations include the American Lung Association in California, League of Women Voters of California, the California Labor Federation, the California Coalition for Civil Rights, the California Student Sustainability Coalition, and the California Teachers Association. Perhaps more importantly, 66% of Californians supported AB 32 last year, according to a poll by the Public Policy Institute of California (PPIC) published in July 2009. For the full text, please read the PPIC Statewide Survey Californians & the Environment.
As I mentioned earlier, the impacts of each of AB 32 and Prop 23 on the California economy are absolutely central to the debate. Therefore, it’s worth noting that in July of this year, 118 Ph.D. economists published an open letter warning against the suspension of AB 32 and the subsequent delay in the implementation of its policies. These economists, each with expertise in issues of energy and climate in California, are fully in support of AB 32, and state concisely in their letter that “Delaying action now and waiting for the future before initiating accelerated action to reduce global warming gases will be more costly than initiating action now”. (Of course, this only matters if you want to initiate action at all) The letter goes on to suggest that “Acting now is more likely to limit further environmental degradation, lower the cost of mitigation, and spur innovation in renewable energy ad conservation technologies”. To access the full text of the letter, and view a complete list of the California economists who support AB 32, please read The Most Expensive Thing California Can Do Is Nothing: An Open Letter on Clean Energy and Global Warming from Economists, published July 2010 through the Union of Concerned Scientists. Financing in support of AB 32 continued implementation comes primarily from three sources: the Green Tech Auction Fund (top dogs in the tech world), the Natural Resources Defense Council, and the Environmental Defense Fund.
Implementation Measures of AB 32 to Date
A number of measures have already been implemented by CARB under AB 32, and, in many cases, the affected parties have begun transition processes to meet the new standards and regulations.
In the four years since AB 32 was signed into law, CARB has made some significant progress. The first actions put into place under AB 32 legislation were nine discrete early action GHG emission reduction measures, which were effected January 1, 2010. Together, these measures are expected to achieve approximately 12% of the overall reductions called for by AB 32. Table 1, sourced from the University of California Berkeley Law white paper entitled California at the Crossroads: Proposition 23, AB 32, and Climate Change (a great source of information on both bills and the effects of Prop 23), summarizes these nine discrete early actions.
Table 1: Brief Summary of the Nine Discrete Early Actions for AB 32
On December 6, 2007, the target for 2020 greenhouse gas levels was set. The Air Resources Board conducted a GHG inventory of historic California GHG emissions, and determined that GHG emissions in 1990 were 427 million metric tonnes of carbon dioxide equivalent (MMt CO2e). So, that’s the 2020 target. This emissions target is approximately 11% below current levels of GHG emissions in California. Around this time in 2007, regulations requiring the mandatory reporting of greenhouse gases by large industrial sources and electricity providers were also adopted. Emissions covered by this reporting rule account for approximately 40% of total emissions.
With the reductions target set, CARB could begin to develop specific action plans targeted at reducing emissions within identified significant sources and industries. In December of 2008, the Climate Change Scoping Plan, a detailed plan created by CARB and the Climate Action Team, was finalized and approved. The Scoping Plan “proposes a comprehensive set of actions designed to reduce overall greenhouse gas emissions in California, improve [the] environment, reduce dependence on oil, diversify energy sources, save energy, create new jobs, and enhance public health”. To review the full text of the plan, please visit the California Air Resources Board’s Climate Change Scoping Plan: December 2008. The most important reductions measures outlined in the plan are detailed below, by category, along with projected reductions in GHG emissions by 2020:
- Transportation: Light duty vehicle GHG standards – 27.70 MMt CO2e
- Electricity and Natural Gas: Energy efficiency for electricity – 15.20 MMt CO2e
- Industry: Leak reductions from oil and gas transmission – 0.90 MMt CO2e
- High Global Warming Potential Gases: Reductions from stationary sources – 12.60 MMt CO2e
- Multi-Sector: Cap and trade program – 34.4 MMt CO2e
Over the past couple of years, a lot of actions have been taken for each of the above and other measures proposed in the CARB Scoping Plan. Last but not least, on January 1, 2009, the greenhouse gas reporting requirements for the largest sources and categories of sources of GHG emissions took effect. Now, time to switch gears…
Summary of Prop 23
The California Jobs Initiative, known simply as Proposition 23, is a ballot proposition to the November 2, 2010 statewide elections. If passed, the proposition would suspend AB 32 both in terms of future actions under this legislation and measures that have already been put into place. Supporters of the proposition argue that AB 32, and its related regulations, place too much stress on the California economy, and that this stress has contributed in some ways to the high unemployment rate presently observed in the state. For this reason, Prop 23 aims to halt progress on AB 32 until the unemployment rate in California remains at or below 5.5% for four consecutive quarters.
Note: At this time, I think it’s important to mention that the unemployment rate in California has only achieved a level of 5.5% or lower for four consecutive quarters three times since 1976, as shown in Figure 3 below, sourced from the white paper published by Berkeley Law.
Figure 3: Historical Unemployment Rate in California, 1970 to 2010
Note: These periods (shown by the yellow bars) were: April 1988 through to December 1989, April 1999 through to June 2001, and April 2005 through to September 2007. It should be noted that, when AB 32 was passed into law in 2006, statewide unemployment was at 4.9%, significantly lower than the present rate of 12.8%, current as of July 2010. These abnormally high levels are due in some part to the broader economic recession in the US currently. Regardless, these statistics point to the irregular nature of this rate, and also indicate that attaining unemployment rates below 5.5% for four quarters would be rather difficult, and that the time required to do so is highly unpredictable.
Anyways, the California Jobs Initiative successfully qualified as a motion to potentially defeat AB 32 the week of June 25, 2010. As mentioned above, if Prop 23 were passed, AB 32 would be suspended. Suspension in this case means that state agencies would not be able to propose, promulgate, or adopt any regulation implementing AB 32. On top of that, regulations adopted prior to AB 32 suspension would be voided for the period of the suspension. Basically, AB 32 would be dead in the water.
Support for Prop 23
Support for Prop 23 is also diverse, and includes members from the energy sector, Republican government, agricultural groups and transport groups. Support in terms of funding and financing comes primarily from a coalition of energy companies, including oil and electricity groups. In the early stages of the initiative, the main supporters – and indeed, the companies that set Prop 23’s wheels in motion – were Valero Services Inc. and Tesoro Companies, Fortune 500 and Fortune 100 oil and petroleum refining companies based out of Texas. Currently, of the twenty top donators (donators who have contributed $10,000 or more) to the Prop 23 initiative, only four are not oil or petroleum businesses. For a complete list of Prop 23 financers, please visit the California Secretary of State’s website on Campaign Finance.
Aside from energy corporations, Prop 23 has widespread support within a number of other industries. The transport and automotive industries in particular support Prop 23, as suspension of AB 32 will, in the short term, mean fewer fuel and vehicle efficiency standards. Examples of supporting organizations are the California Automotive Wholesalers Association and the California Trucking Association. Within the agricultural industry, Prop 23 has received support from a number of state associations, such as California Citrus Mutual, the California Dairy Campaign, and the California League of Food Processors, as well as a number of smaller, independent businesses. Finally, a number of lumber and logging associations, including the Lumber Association of California and Nevada, are behind Prop 23.
In addition to the above industry groups, Prop 23 has received support from a number of right wing anti-tax and political groups, including the California Republican Party and a number of county and city officials. To view a full list of the associations, companies and individuals backing Prop 23, please visit the Yes on 23 website, available here at Yes on 23: California Jobs Initiative. “Yes on 23”, the Prop 23 equivalent to AB 32’s “No on 23”, is a coalition of companies and individuals who support Proposition 23. Available on the site are related press articles and news releases, a full list of coalition members, and facts relevant to Prop 23.
Stay tuned for Part II of this discussion, to be posted soon, where I will outline the effects of Prop 23 on AB 32, and on California in general. I will also present my arguments for AB 32, and its continued implementation.
 http://www.law.berkeley.edu/files/CLEE-California_at_the_Crossroads.pdf; based on non-seasonally adjusted data