California and Global Warming

In an a new attempt to show that he really isn’t a Republican, Gov. Arnold Schwarzenegger endorses a bill that will “combat global warming”,

Republican Gov. Arnold Schwarzenegger and Democratic leaders endorsed landmark legislation Wednesday that could serve as a national model for combating global warming and, according to Silicon Valley business leaders, spur a wave of cleaner-burning energy technologies.

“This is groundbreaking legislation,” said Rafael Aguilera, a climate change expert for Oakland-based Environmental Defense. “It sends a clear message to Washington and the rest of the world that California is serious about a low-carbon future.”

And along with it even higher energy prices than the state already has (some of the most expensive in the nation). Some were clearly aware of this,

The bill, AB 32, mandates that California reduce greenhouse gas emissions by 25 percent — to 1990 levels — by the year 2020. Major carbon-emitting industries will be forced to report their emissions to the state Air Resources Board, which will craft regulations to reach those goals. Those regulations would take effect in 2012.

Opinion within the business community was divided. Some business groups argued the measure could dramatically increase energy costs for companies, hurting the state’s business climate and potentially causing some companies to leave California.

Potentially? There is no potentially about it when it comes to larger business such as refining large scale manufacturing.

But business interests in Silicon Valley, including prominent venture capitalist John Doerr and alternative energy company executives, lobbied heavily for the bill. They said it would spur investments in energy technologies such as solar, wind, coal gasification and fuel cells, which can produce energy with low or no emissions of greenhouse gases and other pollutants.

Ahhh rent seeking in action. And misleading as well. Putting in a bunch of solar panels might reduce green house gases (GHGs), but it might very well increase other types of pollution. For example, a large solar array out in the desert could adversely impact the environment.

PG&E, the major California utility, also issued a statement Wednesday backing the legislation.

Sure why not. After all, they will likely be one of the main entities to implement much of the legislation via their power purchases. And who cares if their costs go up, they’ll just go to the State Public Utilities Commission (PUC), point to the law, point to their costs, argue reasonableness–which they’ll likely win–and then pass on the costs to their customers.

One of the main sticking points in negotiations over the legislation was the role of a so-called “cap-and-trade” program, which would create a marketplace for trading carbon emissions. It would work like this: If a company reduced its carbon emissions to levels below the mandated cap, it could sell its remaining “credits” to another business that was unable to reach the cap.

Gov. Arnold Schwarzenegger insisted that such a system be a mandatory part of the state’s regulations. Democrats, concerned that a “cap-and-trade” system could cause disproportionately more pollution in low-income communities, pushed for such a system to be optional. Schwarzenegger ultimately relented on that and other negotiating points, although both sides said a cap-and-trade system will likely be adopted.

What a load of baloney. We are talking GHGs here for the most part and these things do not respect community boundaries. I know for a fact that very, very well to do neighborhoods have really poor air quality while less well-to-do neighborhoods have very good air quality. For example, if you are in a less well-to-do neighborhood and are somewhat close to the beach and not up against the mountains around L.A. you wont have same crappy air that one would find in San Marino–a very well-to-do neighborhood.

A cap-and-trade program actually makes sense because in has an added incentive to reduce GHG emissions over-and-above reducing the costs of doing business.

One thing that was not addressed in the article, and I’d be cursious to see if it is in the legislation, is what to do with low income consumers of things like electricity. After the 2000/2001 electricity crisis the PUC protected such customers from the rate hikes. Not only that, but periodically the criterion for becoming one of these low income customers has been periodically increased. The result is that a very large segment of the residential consumers of electricity are protected from the high rates. These people have less incentive to consume than those not on the “low income” rates. If a similar policy is put in place with regards to the GHGs then this bill will likely fail in curbing GHGs and increase electricity prices futher for businesses and non-“low income” residential customers.

Personally, I expect this to be one big gigantor fiasco. That is what we had with deregulation, and why should we expect the politicians to have learned anything from that? In fact, we should expect the politicians to have learned nothing. California has term limits and many of the politicians that were in office that brought us the 2000/2001 crisis are now out of office for that reason. Those now in office have to come up to speed on the issues and it is a very steep learning curve. California…the land of fruits and nuts.

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Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.


  1. anjin-san says:

    >California…the land of fruits and nuts.

    Wow, bigotry and ignorance in one sentence.

    New flash Steve, guys who use expressions like “fruits” tend to have latency issues.

    As for nuts, yea, we give a crap about the environment. I guess in George Bush’s America, that makes you crazy.

  2. Boyd says:

    Wow, pilot-boy, you’re the first Californian I’ve ever heard object to the “land of fruits and nuts” phrase. Before now, the only reaction I’ve ever heard is acknowledgment of its accuracy.

    And latency issues? So by casting Steve as a homophobe (not necessarily accurate, IMHO), you’re stating that he has slow Internet connectivity? Or am I too much of a tech geek to understand some other meaning? Like, he’s a latent homophobe?

    And why don’t you dispute any of his actual points on the legislation? He didn’t say “to hell with the environment, we’re better off spewing as much filth as possible into the air,” he said that this legislation not only won’t help the environment, but it will raise costs as well.

    Nuts, indeed.

  3. McGehee says:

    I seem to recall that Rush Limbaugh once acknowledged getting grief over his then-still-local show on KFBK in Sacramento, because he would open the show with something like, “Greetings, conversationalists all over the western fruited plain.”

    It’s obvious that some people just aren’t happy unless they can claim other people have insulted them.

  4. JKB says:

    You have to look at the big picture here. Perhaps California has a larger goal of forcing out the low-income immigrants. They can’t attack them directly as that backfired in the past so by being virtuous and environmentally pure, they can raise the cost of living and shutdown the employment so the immigrants and poor natives have no choice but to move out of state. Who do you think works in these dirty old industries? Silicon Valley entrepreneurs? High tech programmers? No, it is the last remnants of California’s blue collar citizens and many of them are either legal immigrants or first generation natives.

    Of course, the hard targets are the illegal immigrants who can’t apply for the low income electricity subsidy, can’t get the high paying jobs and can’t complain.

    It’s diabolical genius!

    How’s that work for a conspiracy theory?

  5. I see the subtle hand of the fourth horseman of the GOP apocalypse here.

    Fact one. California governors are limited to two terms, each term is four years.

    Fact two. Schwarzenegger is well on his way to winning a second term.

    Fact three. The regulations won’t start taking effect until 2012.

    Supposition. The GOP recognizes that it is not likely to have a republican succeed Arnold, so they need to get the democrats to sow the seeds for the destruction of their next democratic governor. Further, by pointing to the voting record of each democratic state legislator, they can begin the process of breaking the democratic party in California in the years between 2012 and 2020.

    Armitage plays a long and careful game, but he plays for keeps.

  6. Steve Verdon says:

    Wow, bigotry and ignorance in one sentence.

    I live in CA and it was sarcasm.

  7. anjin-san says:


    If that’s the case, its just in very bad taste.

  8. Steve Verdon says:

    If that’s the case, its just in very bad taste.

    In your opinion which, frankly, concerns me not one bit.

    And latency issues? So by casting Steve as a homophobe (not necessarily accurate, IMHO), you’re stating that he has slow Internet connectivity? Or am I too much of a tech geek to understand some other meaning? Like, he’s a latent homophobe?

    No, and this is, to me the amusing part. Anjin-san is insulting me in his own hypocricital and ham-handed way. You see, he saw my comment figured I was a homophobe so he’d insult me by implying I have some homosexual urges which are the basis for my homophobia. Funny, that the guy upset about what he percieves as homophobia tries to insult me by…wait for it…calling me a homosexual. You gotta love the hypocrisy and indignation all rolled up into one.

  9. anjin-san says:


    I don’t have any problem with people’s sexual orientation, so speculating that you have latency issues is not an insult, just an observation.

    If you are so unconcerned with my opinion, why bother responding?

    BTW, I have not heard the term “fruit”, used in this context since grade school recess.
    Pretty weak dude…