By Wayne Lusvardi

Utility companies reportedly bought most of the $280 million in total pollution permits, about $162 million worth, at last week’s statewide cap-and-trade auction. It was the third auction held since last November.

Several city-run municipal power utilities in California still import a substantial percentage of their power from out-of-state providers to meet stringent California air quality standards.  So electricity customers in some California cities could have to pay pollution taxes for pollution that doesn’t even occur in California.  Cap and trade might be called a “non-pollution tax” for the cities of: Los Angeles, Anaheim, Riverside, Pasadena, Azusa and Vernon.  The total population in these six cities is more than 4.6 million.

A cap-and-trade system is considered a market mechanism where industries and public utilities that keep their emission levels below a designated level, called a “cap,” may “trade” surplus permits to over-polluters, who can use the permits to offset excess emissions.  California’s program has two phases: power plants and large utilities in 2013 and distributors of oil, natural gas and transportation fuels in 2015.

Six tax-zapped cities 

Six Southern California cities that rely on a large portion of their power from the Intermountain Coal Power Plant in Utah and the Navajo Coal Power Generating Station in Arizona bought pollution permits at last week’s cap-and-trade auction. The six cities and the percentage of coal they buy from out-of-state providers are:

California Cities That Import Substantial Portion of Power

The above six cities also buy large-scale hydropower from Hoover Dam through the Southern California Power Authority.  But under the AB 32, the California Global Warming Solutions Act of 2006 and its Cap and Trade law, clean hydropower is also considered a “dirty” source of energy.  Call this a “tax on non-polluting clean power.”

Non-pollution taxes for a budget non-deficit

And on top of that, Gov. Jerry Brown has announced he wants to siphon $500 million of the cap-and-trade pollution taxes collected this year to plug the so-called state budget deficit.  Brown is contriving to use cap-and-trade tax revenues as a loan to the State General Fund.

But California is currently running a $851 million budget surplus due to greater tax revenues from the passage of Proposition 30 and an emerging economic recovery.

So we might call cap-and-trade taxes in these six cities “non-pollution taxes for a budget non-deficit.”

Anti-pollution taxes for un-green activities

Said Tim O’Connor, spokesperson for the Environmental Defense Fund, “Cap and trade is working.”  He added that the prices for carbon are reasonable and emissions are declining.

But are carbon pollution taxes on cities that export their pollution out of the jurisdictional boundary of California “reasonable”?

Environmentalists are outraged that Brown has decided to divert cap-and-trade tax monies to the state General Fund instead of to pollution-reduction projects, as was required by AB 32.

Tax farming scheme

Also, in 2012 Brown signed into law Senate Bill 535, which guaranteed cap-and-trade funds would not be diverted for unrelated purposes, but would go to pollution abatement, in particular in low-income communities.

The courts will determine if Brown can get away with borrowing from the cap-and-trade program. But if his borrowing is implemented, will customers in the above-listed six cities be eligible for rebates on their electric bills?  The many irrational contradictions and potential illegality of California’s cap-and-trade program are why some commentators have called it nothing but a “tax farming” scheme.

By Wayne Lusvardi

California is  subtly shifting the spending goals of its cap-and-trade taxes from reducing air pollution to reducing the “urban heat island effect.”  In so doing, it believes it has found a green justification finally to divert pollution taxes to pet political low-income constituencies of the majority Democratic Party.

In 2012, the California legislature passed a law to divert cap-and-trade taxes to low-income communities under Senate Bill 535. But that legislation needed a scientific justification for diverting taxes these communities, many of which have less air pollution than wealthier but smog-prone suburban communities.

Now, Gov. Jerry Brown’s Office of Planning and Research has found what it believes will be a scientific justification for redistributing cap-and-trade taxes from the suburbs to low-income communities: reducing the urban heat island effect.

The urban heat island effect is defined as a “higher-temperature ‘dome’ of heat created over an urban or industrial area by hot layers forming at building top or chimney level.” The “heat island effect” disappears by midday, when temperatures rise, so it technically should be called the “nighttime urban heat island effect.”  The science behind reducing urban heat island effects has been seriously questioned by scientists from California’s highest institutions of learning.

Green smokescreens for wealth redistribution

Anthony Watts reports on his website WattsUpWithThat.com that the motivation for this project is to provide justification for CalEnviroScreen.  This is a so-called scientific-based method for lessening environmental impacts on disadvantaged communities.  In other words, neighborhoods near freeways or smokestack industries might end up with utility bill subsidies or green jobs projects to offset “global warming” by reducing urban hot spots.

Ironically, the alleged low-income victims of urban heat islands are the same people who travel on hot concrete surface freeways.  How are wealthier suburbs any less affected by the urban heat island effects from freeways than industrial areas?

The shift from reducing air pollution to reducing urban hot spots is politically necessary because California government has to concoct some green justification for failing to clean up suburban smog. Air pollution doesn’t stay put in the Los Angeles Air Basin or anywhere else.  In Los Angeles County, any visible pollution is typically pushed up into the wealthy suburbs near the San Gabriel Mountains, such as Pasadena, Arcadia, Fontana, Rancho Cucamonga and Upland.

Should smoggy and wealthy industrial-based cities — such as the City of Industry, the City of Commerce, and Vernon in Southern California — subsidize “poorer” but clean coastal cities such as Oxnard, National City, and the Wilmington area of Los Angeles?  Where is the science behind such a policy?

Should smoggy inland agricultural cities in the Central Valley — such as Visalia-Porterville, Fresno, Merced and Bakersfield — end up subsidizing green jobs in lower-income industrialized coastal industrial cities that have cleaner coastal air, such as Oakland, Alameda and Richmond?

The governor’s apparent solution to this dilemma is to subtly shift from the air pollution reduction goals of cap and trade to reducing the effects of urban heat islands. Presumably, the suburbs are greener and thus cooler than the central cities and industrial areas.  So cap-and-trade taxes would be diverted from reducing suburban air pollution to reducing urban hot spots in low-income communities, many of which ironically have cleaner air.

Carbon offsets for reducing urban heat islands

This is why California’s Cap and Trade program is considering 25 projects that would, for the first time, allow carbon offset credits. Among the projects being considered are timber harvesting and the reduction of bio-gas from farm animals. The reduction of urban heat islands will likely be added to the list of eligible carbon offset projects.

There is little political compromise between suburbs and cities in this scheme to shift from pollution reduction to reduction in wealth inequality.  Wealthy suburbs won’t get any smog reduction or higher property values in return for being disproportionately taxed to create green jobs programs or utility bill subsidies in lower-income areas.

Opinion polls shows that lower-income communities do not perceive environmental issues as a high cause of concern. The intent of this shift is to buy green votes in blue collar communities at the expense of white collar suburbs that won’t get any real reduction in air pollution specifically from this action.

How the smokescreen of science behind the state’s CalEnviroScreen computer model can withstand legal challenge also is questionable. There is no legal nexus — logical connection — between air pollution emissions and urban heat-island effects. And many lower-income areas arguably have cleaner air than wealthier suburbs.

Making communities cooler would also likely result in worsening the “inversion layer” that traps smog.  The state’s shift from reducing air pollution to reducing urban heat island effects might also end up reducing the credibility of science and, if voters revolt, the Democratic Party supermajorities in the state Legislature that concoct such programs.