Tax 'Brown Out' from Cap-and-Trade?

MAY 13, 2011


Will working class opposition to California’s cap-and-trade program lead to a tax “Brown Out”?

The usual meaning of “brown out” means a lowering of power voltage for a period of time, as in “rolling brown outs.” Now it will be reinterpreted to mean a “Brown Out” — a loss of political legitimacy for tax increases and utility rate hikes by usurping democracy for political expediency.

Bill McGavern of Sierra Club California has written an open letter to Gov. Jerry Brown. The letter concerns AB 32, the Global Warming Solutions Act of 2006. AB 32 was affirmed by voters in November 2010 when Proposition 23, which would have suspended AB 32, was defeated.

McGavern’s letter pleads with Brown to override the democratic process and rule by fiat to eliminate the “trade” provisions of the cap-and-trade sections of AB 32. The Sierra Club wants the “cap” but not the “trade.”

Cap-and-trade, also known as emissions trading, is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

California has spent five years since the passage of its green-power law to put the framework for cap-and-trade into place. Now the Sierra Club wants one man to throw most of it out.  But why is the Sierra Club trying to overthrow California’s cap-and-trade law when the Environmental Defense Fund, the Nature Conservancy and the Natural Resources Defense Council support it?

The Sierra Club’s letter advocates:

1. Forbidding industries from buying pollution credits from out of state.

2. In so doing, reducing air pollution in low-income communities near refineries and industry.

3. Eliminating “forest offsets” to avoid forests being turned into “tree plantations”

4. Avoiding accounting and enforcement problems of how many trees equals one ton of abated carbon.

5. Eliminating “gifts” to low-polluting industries such as oil refining and extraction industries in the form of pollution credit revenues. Such revenues should go to the state.

Cap-and-Trade is Tax on Working Class

The Sierra Club letter comes on the heels of a lawsuit filed by six environmental organizations that represent low-income communities. The lawsuit contends that alternatives to cap-and-trade, such as a direct carbon tax or carbon fee, were not adequately evaluated in the environmental impact process.

A San Francisco Superior Court judge has agreed with them, but has not issued a final order yet. The Associated Press widely misreported that the judge had suspended the state’s cap-and-trade program.

The lawsuit, on behalf of working-class communities mainly in the South Bay area of Los Angeles County, is on to something big: a cap-and-trade program would be a highly regressive tax on the working class.

What the lawsuit and the Sierra Club’s actions are apparently angling for is a judicial or executive ruling that exempts so-called working-class communities from the brunt of the electricity and water rate shocks and cap-and-trade costs loaded into the price of everything. Such costs now are looming for 2012 as a result of complying with AB 32.  But doing so would shift all the burden of California’s Green Power Law onto the middle class —  thus allowing a large economic “minority” to opt out of a law affirmed by a statewide vote!

The California Environmental Quality Act (CEQA) does not generally provide for mitigations for economic impacts. But this lawsuit is framing its complaint in environmental terms that low-income communities, mainly in the South Bay of Los Angeles, are disproportionately affected by pollution. Don’t tell the judge to visit the predominantly middle-class west end of San Bernardino County on a hot smoggy day, where the smog backs up against the mountains.  Nor should the judge visit all those upper-middle-class neighborhoods in the City of Long Beach that are affected by pollution from the Los Angeles-Long Beach ports. Fresno and Visalia also have air quality problems that do not necessarily affect only low-income areas.

What if higher green-power rates and the higher cost of everything that will result from cap-and-trade are imposed on lower-income Californians? Then all the technical mumbo jumbo about unfair pollution credits, forest offsets, green accounting problems, gifts to industries and environmental justice would be shown as a subterfuge covering for the fact that ruling Democratic politicians would lose their working-class and Latino constituencies.

Shifting Cap & Trade to Middle Class May Kill Any Tax Increase

But this creates another dilemma for Gov. Brown: How is he going to get what he calls “the popular will of the people” on his side for his much sought after tax increase if he shifts all the “rate shock” of green power onto only the middle class, which would have to ratify the tax?

Brown is faced with a double-sided legitimacy crisis.  If he somehow overthrows just those portions of AB 32 that would adversely affect the working class, his proposed tax increase will be seen as illegitimate by those middle-class taxpayers who will have to pay for it.  If he is unable to exempt the working class from utility rate shocks, his party’s working class coalition may unwind.

Moreover, the whole cap-and-trade program may implode before it gets off the ground if Brown cannot figure out 1) how to protect the working class from a regressive pollution tax loaded into the price of everything; and 2) how to avoid shifting all the burden of cap-and-trade onto the middle-class, thus undermining his tax-increase proposal.  And if cap-and-trade does implode, the environmental wing of the Democratic Party coalition may be alienated, thus resulting in a three-sided legitimacy crisis.

A four-sided crisis might occur if cap-and-trade triggers another middle-class tax revolt, such as happened with Proposition 13 in 1978.  Ironically, Democrats had an escape hatch out of this legitimacy crisis when Prop. 23 was on the Nov. 2010 ballot. But they helped defeat Prop. 23’s suspension of AB 32.

What the Sierra Club letter actually does is alert the middle class that it is going to get stuck with all the “rate shock” from AB 32 and the bulk of the costs of cap-and-trade, albeit covered up as a hokey environmental lawsuit against the so-called discriminatory impacts of AB 32 on low-income communities.

The Sierra Club is a political organization that is using environmental laws and language to obscure its political objective to hold together the Democratic Party coalition. Environmentalism serves some of the same functions that religion once did in legitimating certain duplicitous actions of the state, only under the rubric of science.  When the state drags out the Sierra Club, you can most likely suspect that there is some action of the state to be covered up or reframed as “environmental justice.”

Routine Eclipse of Democracy

Brown is not facing a legitimacy crisis as much as he is facing a legitimacy dilemma. How long he can maintain social cohesion and political legitimacy with mainly the help of the mainstream media, while continuing to undermine democracy, remains to be seen.

The usurpation of democracy may be politically adroit, but may unravel any political legitimacy for Brown’s much touted tax increase package for the continuation of temporary sales tax and vehicle license fee hikes.  Ironically, the historical usurpation of democracy by the Democratic Party continues to morph California into an oligarchic democracy ruled by a coalition of elites and non-elites against the private-sector middle class.

Now, a “Brown Out” by the middle-class could lead to a democratic revolt against the governor and his party.




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  1. Cicero
    Cicero 13 May, 2011, 08:42

    I am so old that Brown signed my college graduation diploma. He was a Commie-Pinko nutcase then and he is a Commie-Pinko nutcase today.

    Reply this comment
  2. Tylerle13
    Tylerle13 13 May, 2011, 10:12

    I seriously doubt they would ever consider removing the “Trade” aspect of their Master Plan because it would alienate a large portion of the people who have been ramming these insane regulations down our throats. A vast majority of the people who have been extremely vocal about “Global Warming” & “Going Green” have taken up the cause simply because they see it as an opportunity to make insane amounts of money without actually having to build anything.

    People like Tom Steyer, Al Gore, Ahnold, Mary Nichols, etc. have positioned themselves to make incredible amounts of money if they can extort money from the businesses they have demonized by simply selling them a piece of paper which will give them “Permission” to release carbon into the air. They will buy up countless “Credits” for a rock bottom price from their friends companies, who they granted the credits to in the first place, then they will falsely inflate the “Value” of each “Credit” and force CA businesses to pay obscene amounts of money to them to obtain the “Credit” or face the outrageous “Penalties” administered by CARB(Mary Nichols).

    Without the ability to create & control a Multi-Trillion Dollar imaginary marketplace that they can milk Billions of Dollars out of, their whole reason for supporting the “Green” & “Global Warming” movements will be gone, as well as their Millions of Dollars worth of Propaganda funding. These people are absolutely crazy with greed and that is why they push these laws so hard. If there was no way for them to make Billions of Dollars from “Global Warming”, Tom Steyer & Al Gore wouldn’t blink an eye if the sea rose up 3 feet and displaced millions of people in Indonesia. Remove the ability for these people to enrich themselves in the name of “Global Warming” and they will walk away from the cause all together.

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  3. Michael Hawke
    Michael Hawke 13 May, 2011, 10:12

    This is why Brown and the Democrats are pushing to cement Democrat control by undemocratic means – SB 168. SB 168 will tilt the Initiative process towards Big Labor, and weaken the political power of businesses and individuals.

    Reply this comment
  4. Wayne Lusvardi
    Wayne Lusvardi 13 May, 2011, 11:32

    Tylerle13 -Good observations. So you see Brown unable to hold his working class constituency due to payoffs to the elite Cap and Trade gamers. Any other observations you want to share would be appreciated.

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  5. Tylerle13
    Tylerle13 13 May, 2011, 13:01

    As long as he has the Cap & Trade Gamers(Steyer, Gore, Nichols, etc.) he will have plenty of funding for a propaganda war chest which will be used to fool the working class into believing that Cap & Trade is going to “Create Green Jobs that will Drive our economy.” They did the same thing with the Anti-Prop 23 campaign when they hired Snake Oil Steve Maviglio to lie to the public, then took the Million of Dollars from Steyer & other Gamers and ran a Meg Whitman style media blitz of lies & alarmist fear mongering. They overinflate the benefits of their regulations while marginalizing the devastation that their actions will cause. When confronted with the fact that their actions will kill off hundreds of thousands, if not millions, of blue collar jobs, they try to justify sacrificing those jobs & businesses by claiming that new “Green” jobs will replace any jobs lost, which is simply not true. They pitch it to the working class people as the “Solution” for fixing our economy and getting them back to work, but in reality it depressing our economy and keeping us from recovering. Guys like Maviglio have no problem spewing lies to the public as long as it gets him a good front page headline because he know that even if his lies are exposed, the retraction will be buried in the back of the paper where no one will see it.

    They try to equate their push for “Green Jobs”(Their definition of this has never been clarified, they just mold it to fit their needs) to the Tech Boom of the Silicon Valley despite the fact that they are nowhere close to the same. The Tech boom was not Mandated & funded by the government, it was the free market running its course, which is why it continues to be a stable in the bay area and not a flash in the pan. While the Tech Boom was dependent on Micro Chips & Intellectual Property (Both of which take up virtually no space and can easily be developed elsewhere and transported here), the “Green Economy” they dream of is dependent on 2 things that are damn near impossible to utilize in CA while staying competitive with the rest of the world; Manual Labor or Land.

    The labor costs in this state prohibit companies from being able to manufacture their products(Solar Panels, Wind Turbines, etc.) for a price that allows them to compete with the products that are manufactured elsewhere. Many of these companies have their HQ Based here, but their manufacturing plants in other places for this reason. You can look at companies like Solyndra, right in Silicon Valley, which have burned through Hundreds of Millions of Taxpayer dollars & Hundreds of Millions more from investors, all with the promise of building new factories in CA and creating thousands of new jobs. In reality, Solyndra had to cancel their planned IPO, they abandoned their opening of a new taxpayer funded factory that was supposed to employ 2,000 new workers, they actually cut 1/2 of the workers that they already had, and are still nowhere close to being able to manufacture their Solar Panels for anywhere close to what their competitors can make them for. So for the Countless millions that have been dumped into creating a few thousand “Green Jobs”, they have actually lost 1,000+, yet Obama & Arnold use it as their go to place for holding press conferences to show the world what the Future of CA looks like, and they may be right.

    In the event that they want to develop a “Clean Energy” Power Plant, they get cannibalized by their own kind because the other Enviro Nuts don’t want Hundreds of Acres of natural land destroyed for the purposes of building an extremely inefficient & unreliable “Wind Farm”, “Solar Field”, or “Heliostat”. They will be held up for years, if not decades, with Environmental Impact Reports, Endangered/Threatened Species Identification & Relocation Efforts, Archeological Delays, a never ending stream of Lawsuits, etc. which will render their plans obsolete by the time they even break ground or get connected to the grid.

    The way this is playing out, Brown will be able to promise (Without providing) “Green Jobs” & prosperity to the working class for just long enough for people like Gore, Steyer, Nichols, & Maviglio to game the system & make Billions. By the time it blows up in our faces, the Gamers will have made their Billions & moved on, leaving the working class to deal with the consequences & clean up the wreckage.

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