Cap & Trade parasite bill signals civil war on business

May 31, 2012

By Wayne Lusvardi

Speaker John A. Perez’s push of Assembly Bill 1532 through the State Assembly on Tuesday, May 29, signals a shift from regulation of air pollution to an outright civil war on business and industry in California.

AB 1532 is not content with just using pollution taxes collected under California’s Cap and Trade emissions trading program to lower water, power, and natural gas bills for ratepayers, due to the looming higher price of green power. Rather, AB 1532 will directly use Cap and Trade taxes to parasitically transfer jobs taken from the private sector, to political pork jobs in the public sector.  It could also end up circumventing the limitation of new taxes of Propositions 13 and 26.  The passage of AB 1532 is a provocative act that crosses the line between regulation and outright plunder of the private sector for public sector make work green jobs programs.

AB 1532 passed the State Assembly by a 47 to 26 vote. The record of who voted for or against AB 1532 was not available online as of the writing of this article.

AB 1532 is a parasitical public sector jobs grab

Cap and Trade is a set of regulations under California’s Global Warming Solutions Act of 2006 — AB 32 — to reduce air pollution by requiring industries and public utilities to buy pollution permits, also called pollution credits or allowances.

In reality, Cap and Trade is a program to socialize water, power, and natural gas rates to shift the coming burden of the high cost of green power onto the middle class.  Thus, the enormous taxes collected under the Cap and Trade program were to be rebated to utility ratepayers to socialize the “rate shock” of green power.  But AB 1532 takes this one step further by using Cap and Trade taxes to fund local governments and create parasitical green jobs programs.

AB 1532 will not backfill jobs lost in those industries directly affected by California’s Cap and Trade pollution permit trading law.  Instead, it will create another self-perpetuating bureaucracy of political patronage and jobs programs under the guise of “clean tech” industries and air pollution reduction programs.

AB 1532 will divert “investment towards the most disadvantaged communities in the state.” It will also fund “small businesses, schools, affordable housing associations, water agencies, local governments, and other community institutions (including public universities) to benefit from statewide efforts to reduce greenhouse gas emissions.”

In other words, AB 1532 is just another tax to fund government and public schools, and redistribute jobs in return for political patronage.  It is an end run around Prop 13 and Prop 26, both of which require a two-thirds vote for any tax, fee, levy, or tax allocation.

Price of pollution permits will go up even without gaming system

Once established, it will incentivize government gaming of the Cap and Trade system to inflate the price of pollution credits. According to energy consultant Robert Lucas of the California Council for Environmental and Economic Balance, government gaming of the Cap and Trade system will likely double the annual amount of taxes collected under Cap and Trade regulations. Cap and Trade taxes would be expected to rise from $6.25 to $12.5 billion per year — or from $50 to $100 billion over the next 8 years.

Even if government does not game the system to its taxing advantage, the program is supposed to reduce the number of pollution permits each year as air pollution is improved.  The fewer the permits, the higher the price for the pollution permits, and the greater the pollution taxes collected. By design, there will be about 15 percent fewer pollution permits available to trade by the year 2020. Thus, pollution permit prices will likely rise without any gaming of the system. What is made to look like the workings of the so-called pollution credit market will actually be a structured way to inflate the price of pollution permits.

Reduce production or ration public utilities?

If, however, there are no credits to buy because there is no more pollution that can be realistically reduced, then industries and utilities may offset their pollution by planting trees or burying carbon in the ground. More of a false economy will be created and expanded.

But this will do little to reduce air pollution as long as population policies under AB 375 — the anti-urban sprawl bill — continue to divert growth to urban air basins that trap pollution.  The solution to pollution is dilution, not concentration.

Or if all else fails, industries and utilities can simply reduce production or call for rationing of water, power, and natural gas. Clean air at any cost.

AB 1532 is point of no return — the “Pottery Barn Rule”

The next step with AB 1532 will be its review in the state senate. Under Senate President pro-tem Darrell Steinberg, this is likely to result in passage and forwarding to Gov. Brown for signature.  The legislature and governor are likely to pass AB 1532 before political redistricting may change the composition of the legislature.

AB 1532 has fired the first symbolic shots in a civil war of what is permitted under the Global Warming Solutions Act — AB 32.  Several nonprofit liberal think tanks have rendered quasi-legal opinions that California’s Cap and Trade taxes cannot be used beyond providing utility ratepayers with rebates.  But Assembly Speaker John Perez has signaled he is going to push the legal limits of what can be funded with Cap and Trade taxes.

In the ancient Roman Empire, Julius Caesar crossed the Rubicon River with his army, thus signaling civil war with the Roman Senate.  At Fort Sumter, the South fired the first shots in the Civil War between the North and South states. California State Assembly Speaker John Perez has crossed the point of no return with AB 1532, signaling a war on California’s business, industry and the middle class.

Gen. Colin Powell once cited what is called the “Pottery Barn Rule” about starting an unpopular war: “if you break it — you buy it.”  And Assembly Speaker John Perez and the Democratic Party are about to buy themselves a civil war chock full of unforeseeable consequences.