According to a Public Policy Institute of California poll released Wednesday, a majority of Californians support government efforts to improve the environment, despite possible rises in energy costs and ongoing debates about the legality and effectiveness of the state’s environmental policies.

The study, which surveyed around 1,700 California residents about various environmental concerns, found that the majority of Californians supported existing plans to combat global warming, and were willing to expand these laws, even if that means paying more for gasoline and electricity.

“We find strong support today for the state’s greenhouse gas emissions targets set 10 years ago,” PPIC president Mark Baldassare said. “The commitment to help reduce global warming includes a surprising willingness on the part of majorities of Californians to pay higher prices.”

Big dreams for a cleaner California

Sixty-nine percent of Californians approved of plans to reduce greenhouse gas emissions to 1990 levels, as laid out in AB32, one of the state’s landmark environmental laws.

But government plans to reduce emissions have been met with mixed results. The cap-and-trade program, created by the Air Resources Board in response to AB32, places carbon emission limits on businesses and allows them to purchase credits for exceeding those limits. But at May’s quarterly auction, businesses purchased only 2 percent of the anticipated revenues.

The program faces legal challenges as well. A lawsuit by the California Chamber of Commerce claims the program is actually an illegal tax on businesses, requiring a two-thirds vote to become law.

Critics have complained about how the cap-and-trade revenue is spent – that the money doesn’t often fund projects that meet the required emission reduction goals. Assemblyman Adam Gray, D-Merced, said he is concerned about how the revenues are spent, calling the program “a feeding frenzy for a multitude of pet projects,” according to The Sacramento Bee.

And though there has been a decrease in greenhouse gas emissions, some say the lower levels may reflect outside factors like business scale-backs during the Great Recession.

“The jury’s really out on whether we’ve seen a lot of reductions caused by cap-and-trade,” James Bushnell, an energy economist at UC Davis, told the Los Angeles Times. 

Despite varied expert opinions, 54 percent of respondents in the PPIC survey approve of the cap-and-trade program – after the surveyors gave a brief explanation to the 55 percent who had never heard of the program before.

Respondents also support a proposed new law that would ramp up AB32’s plans to control emissions, which would exceed AB32’s reduction goals and extend the program to the year 2030.

And 58 percent of those surveyed believe local and state governments should devote more resources to other environmental issues, as well – electric cars, solar power and drought management.

A big paycheck for California residents

Californians know that reducing greenhouse gas emissions could raise energy costs – and they are ready to foot the bill.

The majority of respondents said they would be willing to pay more for gas (63 percent) and solar- or wind-generated electricity (56 percent). The Legislative Analyst’s Office estimates that gas prices would rise 11 cents as a result of the cap-and-trade program.

But this widespread support of energy reforms comes alongside equally widespread opposition by those who prioritize economic concerns over the environment.

How it’s playing in 2016

Alternative energy plans come with a cost – and according to Assemblywoman Cheryl Brown, the Inland Empire may not be able to afford it. In 2015, the San Bernardino Democrat opposed a petroleum-reduction provision of Senate Bill 350, another key piece of California’s environmental policy, citing concerns that potential rising energy costs could harm lower-income families.

However, some voters said Brown’s opposition amounted to a rejection of the entire clean energy campaign and retribution was swift. Protests, rallies and criticisms from other officials have threatened Brown’s re-election, while the campaign has become a proxy war between Big Oil and Big Environment. 

“Do you ever feel that something is not going quite right?” Brown asked the Los Angeles Times in March. “They are after me, and I still don’t know why. I don’t know who ‘they’ are. But I will find out soon.”

Concerns about the impracticality of California energy reforms are reflected in the PPIC survey, as well. The majority of respondents supported clean energy programs like electric cars and charging carports, with 68 percent in favor of tax credits for purchasing electric cars, and 77 percent supportive of infrastructure for charging the vehicles.

But less than half (47 percent) are actually considering purchasing an electric car themselves, suggesting that good intentions may not match up with environmentally conscious decisions.

This is Part 1 of a two-part series.

Most people probably know more about Cap’n Crunch cereal than about California’s complicated cap-and-trade air emissions regulation program.  But according to a new study, perhaps Cap’n Crunch would be a better name for cap and trade, which “crunches” industrial C02 (carbon dioxide) emissions by requiring large industries to buy pollution allowances or permits.

A new study conducted by economist Charles R. Frank of the liberal-centrist Brookings Institution puts its conclusion in its title: “The Best Path to a Low-Carbon Future is Not Wind or Solar Power.”

Frank calculates the net benefit for replacing coal plants with wind, solar, hydro, nuclear and natural gas power.  His findings support the impartial California Legislative Analyst Mark Taylor’s conclusion that California’s cap-and-trade emissions program is unneeded and can be accomplished by other means.

California’s cap-and-trade program was established in 2012 by the California Air Resources Board and conducts  quarterly auctions of greenhouse gas allowances.

No net green benefit from wind and solar

First, Frank says policy incentives are biased in favor of wind and solar power and against hydro, nuclear and modern natural gas power; and that the bias is a very expensive and inefficient way to reduce C02, as shown below. Especially notice Line 5, in red:

Line 5 shows how much the comparative benefit is to replace a coal power plant for wind, solar, hydro, nuclear and natural gas power in cents per kilowatt-hour. Using parentheses means the “benefit” actually is negative.

Thus, switching to solar results in a 13.63-cent increase in costs.

Six solar farms, four wind plants to replace coal power plant

As Frank summarizes:

“The emission benefits of four of the five low-carbon alternatives per kilowatt-hour are roughly the same, about five cents per kilowatt-hour (see line 3). The benefits of wind and solar, minus their additional costs, are negative (line 5, columns a, b). The net benefits of the other three alternatives are positive and substantially higher (line 5, columns c, d, e). Gas combined cycle ranks number one in terms of net benefits while hydro and nuclear rank two and three.”

Here’s how Frank explains why wind and solar are losers:

“A wind or solar plant operates at full capacity only a fraction of the time, when the wind is blowing or the sun is shining. For example, a typical solar plant in the United States operates at only about 15 percent of full capacity and a wind plant only about 25 percent of full capacity, while a coal plant can operate 90 percent of full capacity on a year-round basis. Thus it takes six solar plants and almost four wind plants to produce the same amount of electricity as a single coal-fired plant.”

Cap and trade not needed to reduce pollution

In 2015, the California Air Resources Board will intentionally reduce the amount of allowances sold to meet reduced air pollution goals.  This will increase the price of the allowances sold at auctions. But Frank warns:

“Recent prices in trading systems in California have been around $12. … However, the price of emissions need only be about $12 to $22 per metric ton to tip the longer-term balance in favor of investing in a new gas combined cycle plant than a new coal plant.”

In other words, the best way by far to reducing C02 emissions would be to shift to hydro and natural gas power. But hydropower in California  does not count in meeting C02 reduction goals (source: CARB, page 18).

A new study by the U.S. Department of Energy Water Power Program has estimated California has enough untapped potential hydropower resources possibly to double its power generation from that source. And many of its natural gas basins are not associated with oil deposits and can be drilled by conventional methods.

Part 2 of this series will be about cheap, clean or cleaner power imports.

By Wayne Lusvardi

Recessions are painful, especially for those who lost their jobs. But there is one upside to less economic activity: lower levels of pollution.

Ironically, the Great Recession short-circuited the California Air Resources Board’s auctions for pollution permits under its new Cap and Trade program. Cap and Trade was instituted as part of AB 32, the Global Warming Solutions Act of 2006. AB 32 mandated reductions of 25 percent in greenhouse gases emitted in California. Ironically, it was passed just before the Great Recession slammed California harder than any other states except Nevada and Rhode Island.

What Cap and Trade is

Cap and Trade is a pollution management system that sets a maximum cap on how much pollution is allowed for each industry or utility.  If a company emits less pollution than its cap, it has “credits” it may sell to others that exceeded their caps. The selling is done through the CARB Cap and Trade system.

Conversely, if a company exceeds its pollution cap it, has to buy credits from CARB.  Cap and Trade is a system to disguise pollution fines or taxes as a market-trading system.

CARB’s primary Cap and Trade market holds auctions quarterly.

A secondary sales market is held periodically for trading companies and banks also to participate.  This secondary market of traders and bankers is essentially an insurance market where polluters can hedge their losses, just as farmers buy insurance to protect against crop damage from hail or frost.  The secondary market can involve speculation.

Both primary and secondary markets can be “gamed” for advantage by buyers and sellers.

The California Air Resources Board scheduled a supplementary auction of pollution permits for March 2013. But no industries or electric utilities filed the required “intent to bid” notice by the bid guarantee deadline of Feb. 27. 

That meant no private industries or public utilities exceeded their government-set pollution maximums and needed to “buy” extra pollution permits after CARB’s Feb. 19 Cap and Trade auction. Most industries seem to be buying pollution permits rather than installing more pollution reduction technologies, which had been a major goal of AB 32.

The lack of bidders is a signal that the economy is not booming and polluting more, requiring pollution permits to meet growing demands for goods and services. Instead, the still sluggish economy has reduced pollution on its own.

In a similar fashion, European Union’s Cap and Trade program recently failed when hit with bad economic times where there was no need to buy pollution permits because industrial output fell too low.

Edison bailed out first cap and trade auction

At CARB’s first ever Cap and Trade auction back on Nov. 14, 2012, Edison International bought up 72 percent of all the pollution permits and thus bailed out the auction from failure.  By doing so, it can be said that Edison bought disproportionate influence over CARB.  This is called “regulatory capture,” where a dominant industry or corporation can “capture” a government regulatory agency for its own special interests.

CARB sold 12.9 million pollution permits — called “allowances” — at its Feb. 19, 2013 auction, with an average price of $13.62 per metric ton of air pollution.  This reflected $176 million in “permit sales” — really taxes — collected from private industries and electric utilities.  It has not been revealed yet who the bidders were for the Feb. 19 auction, or how many permits each bidder bought.   The unsold permits from March will be offered at a reserve price of $40 to $50 per ton at an upcoming auction on June 27.

Arguably, since 2008, the economic contraction has caused a greater reduction in air pollution than from California’s Cap and Trade program.  Industrial production and electric power only generate about 40 percent of all carbon emissions into the air; while transportation — cars, trucks, and buses — generates about 38 percent.

CARB scheduled an extra pollution diet for March 2013. But all the pollution hogs already went on a “no CARB” diet.  It remains to be seen if a Cap and Trade system is sustainable during protracted economic downturns.

By Wayne Lusvardi

The value of 393,000 trees in the City of Long Beach in the state’s Cap and Trade pollution credit market dropped from about $1.7 million to zero on Aug. 24.

The reason: the California Legislative Analyst issued a letter saying a Cap and Trade “allowance auction is not necessary to meet the Assembly Bill 32 goal of reducing GHG (Greenhouse Gas) emissions statewide to 1990 levels by 2020.”

The city of Long Beach had been taking steps to determine the feasibility of using its trees to sell air pollution credits in the newly created California carbon market to start in November.

According to the U.S. Forest Service, each tree offsets about 0.09 of a ton of air pollution (4.5 million metric tons of air pollutants divided by 50 million trees = 0.09/ton per year).

Carbon credits are expected to sell for $50/ton in California.  So Long Beach’s 393,000 trees conceivably could generate about $1,768,500 in the state’s carbon market each year (393,000 x 0.09 x $50).

It costs Long Beach about $2.5 million per year to maintain the 93,000 street and park trees located on public property.

With all the hoopla and money spent on preparations to create a trading market in pollution credits in California, it has come down to being not necessary.  The four-page letter issued by the LAO was in response to an inquiry by California State Assemblyman Henry Perea, D-Fresno, who asked, “Is a cap and trade allowance auction necessary? What are the advantages and disadvantages? What are the steps the California legislature would have to take to stop the November auction?”

Political Grandstanding

However, Perea’s letter is pure political grandstanding. The California Air Resources Board had already planned to issue pollution credits at no cost.  It is not necessary to get the state Legislature to enact a bill to reduce the price of pollution credits.

Perea’s letter is just a way for him to appear to be pro-business while his political party is the main force behind California’s Cap and Trade Law in imposing $1 billion in taxes on large industries during a prolonged managed economic depression.

Perea’s duplicitous letter declared,  “Cap and Trade 100 Percent Free Allowance Auction Could Benefit Business and Environment.” With political friends like Assemblyman Perea, who needs enemies?

The whole scheme to impose Cap and Trade taxes is like a Rube Goldberg cartoon contraption.   Beginning in 2014, public utilities such as local municipal water departments and electric companies would also have to start paying pollution taxes or reduce air pollution.  So homeowners in Long Beach would be paying higher water and electricity bills to pay their share of pollution taxes.  But the city’s annual cost to maintain street trees might be greatly reduced by about $10 per housing unit per year ($1.768 million/176,032 housing units in Long Beach).

The California Manufacturers and Technology Association has estimated the higher cost of energy and transportation due to Cap and Trade taxes as $3,400 per average family per year.

As can be plainly seen, Cap and Trade is a taxing system as much as it is a way to reduce air pollution.  However, this question remains: Will imposing Cap and Trade taxes on industries and utilities be worth it if industries flee and those taxes are just passed through to utility ratepayers, consumers and those who commute to work by automobile through higher gasoline prices?

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.