The Trump administration is on the brink of what could prove its most consequential legal battle with the state of California, with EPA chief Scott Pruitt expected this week to 

Last week saw confirmation of months of White House and EPA leaks that President Donald Trump would throw out a 2012 Obama administration edict that required average miles per gallon to nearly double to 54.5 for automakers’ fleets of new cars and trucks by 2025. Trump’s skepticism about climate change made him particularly open to the argument from General Motors, Ford and Chrysler that out-of-touch regulators under the previous president were trying to force them to sell vehicles that U.S. consumers didn’t want to buy.

But as The New York Times reported over the weekend, Trump and Pruitt went further than automakers wanted both by rolling back mileage standards more than expected and by signalling their readiness for a court fight over the deference that federal regulators have traditionally shown to the California Air Resources Board.

The Golden State’s problems with smog in the Los Angeles Basin – visible in the 1973 EPA photo shown above – led to the first state law in the U.S. targeting air pollution being adopted in 1947, among many other precedent-setting regulations. The air board continued California’s role as a pioneer in setting vehicle emission standards after it was launched in 1968 under then-Gov. Ronald Reagan. Its vehicle emission and safety rules often end up being copied by Congress and federal regulators and by nations around the world. The state’s present rules are followed by 12 other states, including New York and Pennsylvania – meaning the Golden State dictates what automakers must provide in about one-third of all new cars sold in the U.S. each year.

California’s special status may be only state carve-out in federal law

But with California’s pollution problems beginning to look more like the rest of the nation’s in recent decades, Republicans have increasingly chafed at the idea that CARB and not the EPA should have the dominant policy-making role on vehicle fuel and emissions standards.

An analysis in The Atlantic laid out how unusual the state’s status is:

“California is written into the Clean Air Act by name: At any time, it can ask the EPA administrator for a waiver to restrict tailpipe pollution more stringently than the federal government. If its proposed rules are ‘at least as protective of public health and welfare’ as the EPA’s, then the administrator must grant the waiver.

“This power is reserved alone for California, and it only covers pollution from cars. No other state can ask for a waiver. (In all of federal law, this might be the only time that a specific state is given special authority under such a major statute.)”

The administration of President George W. Bush became the first to challenge California’s special status when it rejected the state’s request to expand its definition of what substances in the atmosphere it could regulate to include non-polluting greenhouse gases. That prompted the filing of a lawsuit in January 2008 by then-Attorney General Jerry Brown that was backed by Gov. Arnold Schwarzenegger. But it became moot after Barack Obama succeeded Bush in the White House and the EPA resumed treating California’s proposals with deference.

Over the past 14 months, California Attorney General Xavier Becerra has filed 28 lawsuits against the Trump administration, according to a tally kept by the Washington Post. But even before Becerra began his litigation, Gov. Brown anticipated the upcoming CARB-EPA fight and emphasized its importance. In comments made in December 2016 – a month after Trump’s election – Brown framed the dispute as having consequences for the “survivability of our world” because of the threat posed by global warming.

At an American Geophysical Union conference in San Francisco, according to a Sacramento Bee account, the governor said, “We’ve got the scientists, we’ve got the lawyers and we’re ready to fight. We’re ready to defend. …. And, if Trump turns off the satellites, California will launch its own damn satellite. We’re going to collect that data.”

Continuing a years-long push, the California Air Resources Board cracked down further on emissions, sharpening the debate over the scope of its plans.

“The new rules, green-lighted [March 23] … seek to curb methane emissions at oil and gas production plants by up to 45 percent over the next nine years,” the San Francisco Chronicle reported. “The cuts will come from a combination of heightened efficiency requirements, inspection mandates and rules meant to ensure that leaks are discovered and fixed swiftly. The regulations apply to both onshore and offshore oil and gas centers.”

“The standards, which experts said mark the first major piece of environmental regulation passed by any state since the turnover of power in Washington, were hailed as a triumph by environmental activists, but criticized as cumbersome, costly and ultimately unnecessary by oil and gas producers.”

Federal fortunes

CARB’s actions took on a particular edge as political battles in Washington have concentrated around environmental standards put in place over the previous eight years. “In the works for over a year, the rulemaking comes as the Trump administration and Republican lawmakers work to unravel Obama-era measures to control emissions of the potent climate pollutant at oil and gas production sites nationwide,” according to Bloomberg BNA.

The foray into gas indicated CARB wasn’t satisfied with controlling vehicle emissions, although those make up the lion’s share of regulated pollutants. “The state’s proposal is its first attempt to reduce greenhouse gas emissions at its onshore and offshore oil and gas facilities and natural gas storage sites and is part of broader effort, now mandated under state law, to curb emissions of short-lived climate pollutants like methane,” the site added. 

The automotive industry, working to pivot toward lower- and zero-emissions vehicles without surrendering market share in a still-robustly gas-powered economy, was instrumental to the inside-the-Beltway shift. “The CEOs of Ford, General Motors, and Fiat Chrysler moved fast to cut a quick deal with Trump to reopen a review by the Environmental Protection Agency and the Department of Transportation of emissions and fuel-economy standards that had been closed under President Barack Obama,” Business Insider noted. “The automakers don’t like that California effectively plays by its own environmental rules and as a subplot in the Trump deal had argued for a single national standard to govern fuel-economy and emissions standards.” 

Fight for money

But California hasn’t budged. In fact, it has been rewarded for holding the line on its strict enforcement of auto emissions rules. “As part of its court-ordered payback for cheating on diesel vehicle emissions tests, Volkswagen might bring a heap of green – in the form of money and technology – to Sacramento,” observed the Sacramento Bee. “Under a settlement with federal officials and the California Air Resources Board, the disgraced automaker is poised to spend tens of millions of dollars promoting zero-emission vehicles in Sacramento and four other cities. In addition, Sacramento is the lead contender for Volkswagen’s first ‘Green City’ designation, which would bring the city $44 million between now and 2020 for public outreach and other programs related to zero-emission vehicles, according to a proposal Volkswagen has filed with CARB.”

Adding to the adversarial climate, automakers have grown frustrated with CARB’s unwillingness to loosen up on standards for zero-emissions vehicles despite what have become disappointingly flat sales. “With state rebates, federal tax credits and manufacturer discounts, the effective monthly payments in California for zero-emission vehicles including the Nissan Motor Co. Leaf and Ford Motor Co. Focus Electric can add up to zero – or less – a month, the Alliance of Automobile Manufacturers said in written comments to the California Air Resources Board,” according to Automotive News. “Yet the ZEV market share has remained at the 3 to 3.5 percent level,” the alliance said in its 80-page submission, asking the agency […] to ease up on plans to require more sales of the vehicles.”

In an uncertain political landscape, cap and trade in California faced a fresh hurdle as hearings began before an appeals court over the constitutional legitimacy of the regime. 

“A long-running lawsuit filed by the California Chamber of Commerce seeks to have the system declared an illegal business tax that should have required a two-thirds vote of the legislature to take effect,” the San Francisco Chronicle reported. “Oral arguments in the case, first filed in 2012, are scheduled to begin in January.”

“Gov. Jerry Brown, who has made addressing climate change a central part of his legacy, spent much of the summer trying to convince legislators to explicitly extend the system past 2020. But he set a high bar, trying to line up the support of two thirds of legislators, in case the Chamber of Commerce won its suit. Republicans and business-friendly Democrats balked.”

That set the stage for the state Chamber of Commerce to bring a challenge. Rather than making a direct frontal attack on the provisions of California’s landmark emissions legislation, its lawsuit claims that California lacks an adequate legal ground to perform one of its central tasks, arguing “the state has no right to sell permits and generate revenue,” Reuters noted. 

A long road

The Chamber’s suit was accepted for hearings along with a separate filing, which could result in joint appeals if the court ends up siding with the California Air Resources Board. The plaintiff in the second lawsuit is Morning Star Packing Company, “the world’s largest tomato processor and a company that is required to buy carbon-emissions permits through the program,” as the Christian Science Monitor observed. “The case is expected to reach the state Supreme Court, as both sides have said they will appeal if they lose.”

Although, four years ago, the Sacramento Superior Court ruled that CARB “was given broad authority to design a program to meet emissions targets, including the sale of permits,” Reuters added, “CalChamber’s appeal of that ruling has kept the issue alive, casting a shadow over the emissions trading market, which has at times suffered a lack of participation due to uncertainty over its future. Despite the state’s earlier victory, the Third Appellate District Court’s request last year for supplemental information indicates they are taking a close look[.]”

The money factor

Still, this year, the market for carbon bounced back to a degree from previous lows. “For much of 2016, many companies appeared to be boycotting the state’s emissions-trading system,” the Chronicle noted, with buyers hesitant to commit if the system’s end might be in sight. “In May, when the state held its quarterly auction of greenhouse gas permits, only 11 percent sold.” This week, however, “state officials reported the results of the year’s last quarterly auction, held Nov. 15 — and they showed a dramatic rebound,” the paper reported. “This time, companies snapped up more than 88 percent of the current-year permits offered, the best performance of any quarterly auction since February.”

Critics of the lawsuit, including CARB, have warned that a defeat in court could wipe out a myriad of projects reliant on cap-and-trade revenues for funding. “Auction revenue is a key funding source for a high-speed rail project seeking to link Los Angeles and San Francisco by train,” the Associated Press recalled. “It also generates billions for transit construction, housing and energy conservation efforts.” But the state Chamber has countered that even a clear victory would leave a broad array of options open for the air authority. “If the auction is allowed to stand, there’s nothing to prevent the California Air Resources Board from inventing new ways to raise revenue, James Parrinello, a lawyer representing the Chamber of Commerce, told the judges.”

Environmentalists won on Wednesday

Lawmakers on Wednesday sent a measure to Gov. Jerry Brown creating legislative oversight of the California Air Resources Board — a vital piece in the state’s climate agenda.

Assembly Bill 197’s companion legislation, SB32, which expands CARB’s authority to create and implement programs to meet reduced greenhouse gas emission targets, can only become law if the oversight bill is signed into law.

The oversight bill would create a joint legislative committee to oversee CARB and would add two legislators to CARB as non-voting members. 

CalWatchdog has more. 

In other news:

• “If the state’s revamped standardized tests are accurately measuring what they set out to measure, one thing is clear: California has miles to go before all of its students are on an equal footing to face an economy that increasingly demands a college degree and stronger workplace skills. The good news, if there is good news, is there’s improvement over last year,” writes the Los Angeles Times.

• “California lawmakers have sent a bill to the governor’s desk that would expand the legal definition of rape so it includes all forms of nonconsensual sexual assault,” writes the Los Angeles Times.

• “Welcome to the state Legislature’s annual civil war. Forget Democrats and Republicans – the divide most likely to make an impact on the outcome of this session is the perpetual rivalry between the Senate and Assembly. It’s a long-running tension, built naturally into the bicameral setup of the legislative process, that might wax and wane with differences in the relationships between house leaders and policy priorities. But it tends to flare up again at the end of every session as each house gets its hands on the other’s bills, holding some for ransom and enacting their revenge for slights, real or perceived,” writes The Sacramento Bee.

• Legislature sends bill curbing abuses by law enforcement of civil asset forfeiture to Gov. Jerry Brown, reports The Sacramento Bee.  

Assembly:

• In at 10 a.m.

Senate:

• In at 10 a.m.

Gov. Brown:

• No public events announced. 

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Environmentalists get big win

Good morning. Happy hump day. 

Speaking of getting over the hump, California environmentalists notched a major victory yesterday, as an extension and expansion of one of the state’s landmark environmental laws cleared the Assembly on Tuesday — all but guaranteeing the bill’s ultimate passage. 

Senate Bill 32 would require the Air Resources Board to ensure that greenhouse gas emissions in the state are reduced at least 40 percent below 1990 levels by 2030. Essentially, the bill builds on its predecessor, AB32, which required the ARB to achieve 1990 levels by 2020. 

To achieve these goals, the measure would continue to give the ARB the authority to create and implement regulations with blanket legislative approval, which has been one of the main critiques of the current program.

CalWatchdog has more. 

And if we needed yet another reminder that we’re in an election year, more than a dozen members of the Assembly switched their votes from last year to support the measure, reports the Los Angeles Times.

In other news:

• “The cap-and-trade market had another bad day Tuesday, with hundreds of millions of dollars worth of unsold carbon credits left over following the latest state-run auction. … It was the second straight quarterly auction in which scores of carbon credits failed to attract buyers, although there was higher demand this time around,” The Sacramento Bee has more. 
• “For the second straight year, California lawmakers have failed to pass any major legislation regulating police body cameras after a bill that would have allowed families of fallen police officers to block the release of body camera footage showing the officers’ deaths stalled in a legislative committee Tuesday,” reports the Los Angeles Times.
• A San Jose legislator’s efforts to abandon Daylight Saving Time ended Tuesday when the state Senate rejected a measure that would have allowed California voters to end the twice-annual ritual at the ballot boxes,” reports The San Jose Mercury News.
• “If Californians legalize marijuana under Proposition 64 in November, legal cannabis sales in the state likely will climb by $1.6 billion within the first year of implementation, according to a report released Tuesday.” The Orange County Register has more.  

Assembly:

• In at 10 a.m.

Senate:

• In at 10 a.m.

Gov. Brown:

• No public events announced.

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New followers: @AMJ_AlexJohnson

Despite years of success in doing what it was supposed to do — cut emission levels — California’s controversial cap-and-trade system has run up against opposition that could be strong enough to sink it. But with nothing to lose and everything to gain, Gov. Jerry Brown has shifted into political overdrive to save it instead.

Big plans

Through the California Air Resources Board, Brown’s administration has tried to restore confidence among big California businesses that the state’s carbon-trading regime is here to stay. Amendments to the cap-and-trade rules proposed by CARB “envision a carbon market through 2050 with increasing allowance prices,” according to Scientific American. But legal uncertainty has clouded CARB’s ability to promulgate such regulations beyond the year 2020, “thanks to a combination of potentially limiting language in the original climate law, AB32, and a lawsuit challenging the legality of cap-and-trade auctions under a law requiring a two-thirds legislative majority to approve taxes,” the magazine added.

“The amendments released [last month] would establish decreasing emissions caps for covered entities through 2031, to reach 40 percent below 1990 levels, and would include preliminary caps through 2050 ‘to signal the long-term trajectory of the program to inform investment decisions.’ Other proposed amendments would provide for compliance with U.S. EPA’s Clean Power Plan for existing power plants, allocate allowances to businesses in order to prevent emissions from escaping state borders, and streamline how emitters register and participate in auctions.”

Backrooms to ballots

Despite broad support for an extended cap-and-trade system among influential Democrats, whose grip on Sacramento is virtually unchallenged, California’s legislative counsel has sided against CARB on the extension plan. “Meanwhile, a lawsuit from the California Chamber of Commerce charges that the permit fees are a tax and should have required a two-thirds vote in the Legislature to take effect,” as the San Francisco Chronicle reported. “Although the suit has dragged on for nearly four years, questions raised by an appeals court judge in April suggested that he might side with the chamber.”

The ordeal has presented Gov. Jerry Brown with a potentially devastating threat to one of his keystone policies. Although the governor “has been trying to muster support from at least two-thirds of the Legislature, in case the Chamber of Commerce wins its suit, […] convincing Republicans and business-friendly Democrats hasn’t been easy,” the paper added. “And the current legislative session ends Aug. 31.” Beyond the obvious challenge of securing Republican support, Brown must contend with members of his own party, who have split awkwardly on cap-and-trade since before its inception.

 “When the law enabling cap and trade was being argued over, the whole progressive left-of-the-left were pretty suspicious of carbon trading,” as Stanford Law energy expert Michael Wara told Wired. “So the law’s authors offered a compromise: the state Legislature would re-evaluate cap and trade in 2020,” the magazine noted. “It didn’t seem like a big gamble at the time.” But Brown’s determination to use revenues from the program to fund his cherished high-speed rail project — according to environmentalists, not the greenest expenditure to choose from — added another political wrinkle.

Now, the prospect of a drawn-out loss in the Legislature has raised speculation that Brown will respond, in a manner somewhat reminiscent of former Gov. Arnold Schwarzenegger, by taking his plans directly to the voters. Preparing for a showdown, Brown has launched — perhaps for the last time as governor — back into campaign mode. “Mr. Brown last week created a PAC, Californians for a Clean Environment, signaling he may turn to voters for support to extend cap and trade and the state’s emissions-reduction goals through a ballot initiative,” the Wall Street Journal recalled. “The program is particularly important to Mr. Brown, as profits help fund the state’s planned bullet train, among other goals by the state’s Democrats.”

Within the Brown camp, however, the official line has remained more optimistic than the ballot preparations might suggest. “There is no state or nation in the Western Hemisphere doing more to curb carbon pollution and our dangerous addiction to oil than California,” said Brown’s executive secretary, Nancy McFadden, in a statement noted by the Journal. “The governor will continue working with the legislature to get this done this year, next year or on the ballot in 2018.”

But on niche websites devoted to energy production and energy markets, the picture of how California is responding to its mandates is more muddled. A recent free report from SNL, the McGraw-Hill financial publication that typically charges for the proprietary information it provides to shareholders and potential investors, puts California’s progress in a different light:

Carbon laws are choking demand for coal-fired power in California, but the state still imports a large amount of coal-based power and is one of the nation’s top industrial users of coal, providing a needed market for Western producers facing dimming prospects elsewhere.

 

California’s carbon law AB32, which requires the state’s greenhouse gas emissions to return to 1990 levels by 2020, sets in-state plant performance standards that are too stringent for conventional coal units. But California is still importing coal-based power from neighboring states until current power purchase and plant ownership contracts expire.

 

In 2014, less than 5 percent of California’s total energy demand was served by coal and petroleum coke-fired plants, nearly all of it from plants outside the state, according to an Oct. 12 report from the California Energy Commission. By 2026, California will end virtually all its reliance on coal.

 

But at times, as much as 50 percent of Southern California’s electricity still comes from coal-fired plants, Steve Homer, director of project management for the Southern California Public Power Authority, or SCPPA, told SNL Energy.

 

The three main out-of-state coal plants serving California — the Intermountain Power Project in Utah, the San Juan plant in New Mexico and the Navajo plant in Arizona — together received 10.1 million tons of coal in the first seven months of 2015, according to U.S. Energy Information Administration data. …

 

California is also one of the country’s biggest industrial users of coal, although consumption for that sector is relatively small. In 2013, the latest year for state-level EIA data on industrial coal consumption, California was the eighth-biggest industrial coal user, burning 1.4 million tons.

How states game energy reports

The report is another interesting example of how states play games with energy exports and imports to make themselves look greener than they are. In 2010, Orange County lawmaker turned Austin policy wonk Chuck DeVore laid out how California and British Columbia benefit from this maneuvering:

California has become America’s largest electricity importer. With 37 million people producing about 13 percent of the U.S. gross domestic product, California imports about 23 percent of its electricity.  …

Complicating matters are a trio of California energy policy laws passed in 2006: AB32, SB1368 and SB107. AB32 mandates a 30 percent reduction in California’s greenhouse gas emissions by 2020 … . SB1368 outlaws the renewal of coal-fired electricity contracts — imported coal energy powered about 16 percent of California’s grid in 2008. While SB107 accelerated the requirement that California derive 20 percent of its electricity from renewable sources [in 2010], renewable being defined as small hydro, geothermal, wind, solar and biomass (we missed the target, meaning utilities, read ratepayers, get dinged).

Enter government-owned BC Hydro and its Powerex subsidiary. With abundant hydro power potential, British Columbia is seeking to become the Saudi Arabia of “green” energy.  … [But] in fact, BC Hydro has imported more energy than it has exported in 10 out of 11 years.

What’s going on here? British Columbia sells its clean hydropower to neighboring governments which need to meet renewable energy mandates. But then it doesn’t have enough power for its growing economy, so it imports power from coal and gas-fired power plants in Washington state and Alberta.

A California compromise — or a loophole?

A 2014 Los Angeles Times story raised similar questions about the gaming of the intention of the state’s landmark climate change laws. Its key conclusion:

California regulators say they have taken steps to prevent utility company executives from outwitting them and insist state rules will lead to real reductions in carbon dioxide, the main gas scientists blame for global warming. But officials concede their efforts have run up against the limits of California’s ability to control what takes place outside its borders, a point the utilities also emphasize. …

Originally, California’s climate-change policies included a provision that would have demanded utility executives swear under penalty of perjury that the actions they took to reduce emissions would not result in a spike in greenhouse gases someplace else.

 

But federal officials warned Gov. Jerry Brown that too aggressive an effort to control emissions across state lines would risk disrupting the complex interstate electricity system.

 

In the end, the California Air Resources Board — which oversees the state’s 2006 climate-change law — allowed utilities a dozen “safe harbor” conditions under which electricity companies would be permitted to shift emissions to nearby states.

 

Critics called the conditions loopholes. …

 

The exemptions are so broad, the board’s own advisory committee cautioned, that all the reductions in greenhouse gas emissions made by electricity companies could end up existing only on paper.

Brown also said the problem is so complex that it’s likely no one knows how to solve it.

Emissions Targeted

The governor conveyed his warning at the California Air Resources Board’s Oct. 1 workshop, “California Climate Change Scoping Plan: 2030 Target.”

The 2030 target reduces California’s greenhouse gas emissions to 40 percent below 1990 levels in the next 15 years. Brown also designated a 2050 target: emission reduction to 80 percent below the 1990 level.

The 2030 target is “the most aggressive benchmark enacted by any government in North America to reduce dangerous carbon emissions over the next decade and a half,” said Brown in an April 29 statement.

The governor began his remarks at the workshop with an admission of ignorance on climate change science.

“I come today because this is a topic that is not easy to grasp,” he said. “It’s complicated. The more you dig into controlling air pollution or measuring greenhouse gas emissions or attempting to understand the [climate] models that examine and attempt to predict how world climate patterns will change over time, it definitely is a very complicated science that we mere lay people just get little glimpses of.”

That complexity makes it easy for climate change skeptics to disseminate misinformation, according to Brown.

“It allows people who have bad motives or soft minds to then raise doubts that are not based on science or facts, but are able to be communicated without people reacting with total ridicule,” he said. “And it takes enough knowledge that it’s hard to be in this conversation at any level of depth.

Relying on Climate Scientists

Brown said we should rely on climate change scientists who “have clearly stated that human beings and the industrial activity of our modern lives is affecting climate by building up heat-trapping gases, and that the effects over time will be catastrophic.”

“When and how all of that unfolds is something that cannot be said on a precise date,” he continued. “But we know with a high degree of confidence that we are facing an existential threat to our well being and the well being of the generations that come afterwards.”

Brown acknowledged that the public has thus far been largely indifferent to the climate change issue, ranking it well below crime and jobs among issues they are most concerned about. That indifference or ambivalence may be due to the omnipresence of fossil fuels in the quality of our lives.

“What we are looking at is making a shift in the way life shows up,” Brown said. “We are who we are because of oil, coal and natural gas. Fossil fuels is what makes it. I assume that most of the people here are here because fossil fuels got you here, clothed you, medicated or whatever way you are functioning as a modern person, you are dependent on fossil fuels.

“So when we say we are going to reduce [emissions by] 10 percent, 20 percent, 40 percent, we are setting forth a huge challenge that is very easy to state. But anybody who has any understanding of what is implied by what is being called for, realizes this cannot be done lightly or without a mobilization globally that we have never seen before outside of time of war.”

Potential Economic Meltdown

Brown, citing a Sept. 29 speech by the Governor of the Bank of England Mark Carney, warned there is a potential for a global economic meltdown when energy companies are forbidden from using up to a third of their fossil fuel resources.

“Once it becomes conventional wisdom, once we get it that climate change is going to be catastrophic and that becomes clear and vast majorities of people at all levels of society agree with that, it may be too late because we’ll be too far down the road,” he said.

“If the oil and gas companies are undermined, the financial system itself can be undermined. We can’t wait until everybody gets it. We have to start now.”

Brown said the state’s current annual output of 460 million tons of carbon dioxide-equivalent emissions must be reduced to 431 million tons by 2020 and down to 260 million tons by 2030.

“To go from 460 where we are to 260, that takes heroic effort, scientific breakthroughs, massive investments, a lot of cooperation and a political understanding that does not exist today,” he said. “So this is not stuff for amateurs. This is quite challenging.”

“It’s a political problem,” Brown continued, “but also it’s a technical problem. And it’s going to require a lot of breakthrough, a lot of research and billions, tens of billions of dollars, invested by many, many different sources.”

It will also require Californians driving a lot less, he said, by living closer to where they work and telecommuting. “Californians drive over 330 billion miles a year – 32 million vehicles of various kinds moving around on almost entirely fossil fuel,” he said. “We’re going to reduce and take fossil fuels out of our lives and out of the economy.

“And we’re going to creep our prosperity and ability to keep inventing and improving the quality of everybody’s life. And not only here, but we’re going to do it all over the world. And we’re going to add a couple billion people besides and probably another billion cars.”

Changing Lifestyles

The governor admitted, “How the hell we do that, probably nobody knows. But the people who have the best understanding and the best capability to do things [are] right here.”

Brown acknowledged that it will be a big challenge convincing people to change their lifestyles. He also admitted that even getting the conversation started is tough:

In my world of politics this is … a dark reality that you just can’t even talk about. Because it’s too obscure, too complicated, it’s not high in the polls, “don’t bother me now.” But if that mood persists … it will be too late then, and there will be a real catastrophe.

People don’t like to think that something horrible could happen. We all like our happy time news in the morning. But you got to see it, and then we have to take steps to make sure it doesn’t happen.

This is about taking the steps to deal with fuels, the investment in biofuels, [energy] efficiency in appliances and buildings, across the whole range of how our modern civilization works, within the limited reach that the Air Resources Board has confidence and the legal authority to do, which is quite a lot. Everything that can be done will be done. California will do what it has to do.

Leading the Way

Brown believes California is setting an example other states and countries will follow.

“People know about California, people are watching what’s going on, and there’s a lot of goodwill to get us to the goal,” he said. “Of course, it’s going to take a lot more than goodwill. It’s going to take billions, trillions of dollars. And it’s going to take commitment all over the world.”

Brown’s pep talk received a standing ovation. After the applause died down, CARB Chairwoman Mary Nichols said, “You can see why I get up raring to go to work every morning.”

Facing Opposition

No one at the workshop questioned whether California’s efforts will do much to prevent the planet’s climate from changing, and whether the cost will be worth it.

But state Sen. Andy Vidak, R-Hanford, issued a statement on Oct. 7 in opposition to Brown signing into law Senate Bill 350, which mandates an increase in renewable energy among other emission reduction actions:

The district I represent is still reeling from the Great Recession and the devastating years-long drought. Too many people in rural and inland communities are impoverished; standing in food lines because they can’t find work to make ends meet.

Senate Bill 350 is a devastating measure that will force already-struggling families deeper into poverty by drastically increasing energy costs that are already some of the highest in the nation.

It’s wrong when parents have to choose between the necessities of keeping the lights on and feeding their children. The governor’s signature on SB350 kicks folks while they are down. It is a selfish gesture designed to fluff up his “legacy” and pander to coastal elites’ “environmental” self-righteousness.”

The impact on most Californians from the state’s climate change regulations has been minimal thus far. The state has been averaging a 1 percent reduction in greenhouse gas emissions annually. That pace is projected to continue through 2020, and is enough to meet the 2020 reduction goal.

But residents and businesses will be hit harder after that. Emissions will need to be reduced by at least 5.2 percent annually from 2020 to 2030 in order to meet the 2030 target.

“This gives an indication of the challenge of the work that we have ahead of us in the scoping plan to develop an approach, to develop a set of measures that can contribute to and achieve this ambitious greenhouse gas reduction level for 2030,” said ARB Assistant Executive Officer Michael Gibbs.

An analysis of the economic impacts of the climate change regulations will be conducted as a part of the scoping plan. No cost estimates were provided at the workshop, but several officials in addition to Brown said that billions of dollars in increased funding will be required.

“Investment in [energy] efficiency [in buildings] will need to be quadrupled or quintupled from today’s levels in order to reach the scale necessary to meet the 2030 and 2050 goals,” said Patrick Saxton, representing the California Energy Commission. “Clearly this is much more than ratepayers and taxpayers can fund on their own.”

Regional workshops on the scoping plan will be held this fall; the Air Resources Board will receive an update on Nov. 19. The draft plan is scheduled to be released in spring 2016. The final plan is expected to be approved in fall 2016.

On Friday, the Sacramento Bee reported that the governor and legislative majority leaders agreed to put aside a discussion on how much is in the cap-and-trade pot and how to spend increased money over what was already authorized.

On the same day last week that the California state Senate passed bills mandating new regulations to deal with climate change, business people met in Burbank to understand the effects, and particularly the costs, of the state’s cap-and-trade program.

Sponsored by the Los Angeles County Business Federation (BizFed), money and costs were the central theme of the discussion.

Energy attorney Dennis Luna, who also serves as editor-in-chief of California Oil and Gas Report, predicted that the reported doubling of funds brought in by the cap-and-trade auctions was “probably low by a lot.” He said that the pot of money generated by the cap-and-trade auctions and designed to deal with climate issues was a tempting target for those seeking government funds. “The new game in town – whatever you are doing, you are reducing greenhouse gases,” he said.

Colleen Callahan, Deputy Director of UCLA’s Luskin Institute for Innovation said the Legislature passed bills to ensure that spending from the cap-and-trade fund would help produce jobs and benefit businesses.

However, she was challenged by a manufacturer in the audience who was fearful that her manufacturing plant might not survive because of the new costs imposed by the law.

Other audience members also raised concerns about cap-and-trade. One argued that California only produces 1 percent of carbon emissions worldwide and the plan has not reduced that mark while at the same time encouraging manufacturers to move and causing economic disruption.

Gary Gero of Climate Action Reserve responded that while it appears California is making the fight against carbon emission alone that was not the case. He said 40 percent of the world’s population lived under carbon pricing programs. He also contended that when the United States Environmental Protection Agency’s Clean Energy Plan kicks in, other states in the country would become more engaged in carbon control. He said California would lead as a model to the nation with a robust and clean economy.

Another member of the audience asked if the predictions the effect of the law would have on small business when the bill was signed nearly 10 years ago came to pass. Richard Stapler of the California Natural Resources Agency simply stated it was too early to tell.

The cost question to small business and families was of paramount importance to the gathering. On the panel, Tiffany Roberts, representing the Western States Petroleum Association, argued that small business energy costs are up and that families will feel the cost increase in goods and services. She reasoned that must be the case since the program was designed to put a price on carbon.

As to how the money gained from the cap-and-trade program is spent, there was surprisingly little mention of the high-speed rail, which currently will take about $500 million dollars from the cap-and-trade fund. Richard Stapler said the Air Resources Board will scrutinize the use of the money and citizens can monitor how the money is spend on the ARB website.

The California Chamber of Commerce has sued over cap and trade, arguing that revenue produced by the cap-and-trade law is the result of a tax increase, which required a two-thirds vote in the Legislature. The legislative vote was below two-thirds.

If an appeals court sides with the Chamber of Commerce position, attorney Dennis Luna said it would cause an earthquake shaking the foundation of the cap-and-trade program.

Senate Bill 350 mandates that the state meet three clean-energy goals by 2030:

• Fifty percent reduction in gasoline and diesel fuel used in vehicles.
• Fifty percent of electricity generated from renewable resources (an increase from the current 33 percent mandate by 2020).
• Doubling of the energy efficiency of existing buildings.

The bill does not specify how those mandates will be achieved. It leaves the details and the authority to implement and enforce them to the California Air Resources Board, the California Energy Commission and the California Public Utilities Commission.

Jobs created and economy boosted?

The bill’s author, Senate President Pro Tem Kevin de León, D-Los Angeles, told the Senate Energy, Utilities, and Communications Committee at an April 7 hearing that the legislation will “make sure California keeps leading and building the new economy of tomorrow. SB350 puts in place standards that will spur innovation and power and a sustainable future for the Golden State.

“Clean energy jobs are growing across California. Our state leads the nation in solar employment with nearly 55,000 solar jobs and counting. The world’s largest solar array is under construction right now in Antelope Valley down in Kern County. We are second only to Texas in wind energy capacity, and have the nation’s largest wind energy facility at the Alta Wind Energy Center at the Tehachapi Pass.

“We need to pursue policies that build on this economic growth by strengthening incentives for energy efficiency and clean energy technologies. These standards send a strong market signal to California businesses and leave no doubt the direction we are heading in. These policies will drive innovation here, bring investments here, bring jobs here and bring revenue here to this state of California.”

De León said that experience with implementation of AB32, the California Global Warming Solutions Act of 2006, shows that increased energy regulation can help the economy.

“Skeptics said back in the day it would destroy our economy, it would slow down economic growth, that it was naïve and in fact unrealistic to set such targets,” he said. “Well, yet here we are today well on our way to meeting those targets with an economy that is stronger than ever.

“In just 10 years we’ve increased our electricity generation from renewable sources nearly 25 percent, put almost 150,000 electric vehicles on the road and reduced the smog-forming emissions of our cars and trucks by 90 percent. This is not just sound energy and climate policy, it is a smart economic policy.  Let’s continue to lead the world, colleagues. Let’s continue to take the bold action, despite the fear of failure.”

Steyer backs de Leon

De León was backed by Tom Steyer, an environmental activist who donated $2.5 million to the campaign that defeated Proposition 23 in 2010. That proposition sought to suspend AB32’s regulations until California’s unemployment rate dropped below 5.5 percent. Although the national unemployment rate has dipped to that level, California has lagged behind. The state’s rate was 6.8 percent in February.

Tom Steyer

“SB350 focuses on several of the most important and fossil-fuel-intensive areas of our economy: transportation, electricity generation and energy used in buildings,” Steyer told the committee. “By directly engaging with our biggest emission sources, we can get the best bang for our buck in reductions.

“For too long the oil companies that make billions in profits from California consumers have claimed that sustainability is not compatible with a strong economy. Far from being a job killer, California’s climate policy has put thousands of people into good-paying jobs. According to a recent report from Advanced Energy Economy, there were 430,000 clean energy jobs in California during 2014, a figure that’s projected to increase by 17 percent this year to 500,000 clean energy jobs.

“We have led the nation in solar capacity and electric vehicle sales. We have gained billions of dollars of investment in wind and solar power and created hundreds of thousands of clean energy jobs. Energy efficiency upgrades have created hundreds of thousands more.

“We don’t have to choose between our environment and our economy. California, as the seventh largest economy in the world, can be more than part of the solution – we can lead. But to do so we have to be on a completely different cost curve. One that is inevitably going down, thanks to innovation research, rather than one that is driven inevitably up due to issues of scarcity around fossil fuels. SB350 is a critical step in this direction and a clean aspect of maintaining our global leadership.”

Steyer said that much of the $60 billion that Californians spent on gasoline and diesel fuel in 2014 can be replaced with low-carbon alternatives such as electricity, renewable natural gas and biofuels. Californians have purchased more than 100,000 electric vehicles, he said, and touted that 18 pumps in the Central Valley are selling renewable diesel fuel made from waste oil.

A win-win

He also discussed the requirement to double the energy efficiency of existing buildings. “The cheapest and most environmentally friendly way to cut energy costs is, of course, to use less energy,” said Steyer. “Our state’s commitment to energy efficiency has led to the third lowest per capita energy consumption rate in the nation. Electricity use per person in California has remained flat for 40 years, while consumption in the rest of the country has increased by 50 percent.”

Steyer is confident that the clean-energy goals will be a win-win for both the state’s environment and its economy.

“I have spent most of my life as an investor,” he said. “And I can say for certain that investors look for consistent long-term signals to know that their capital will yield returns. SB350 demonstrates our firm commitment to clean technology, and sends a clear signal to markets that long-term investment in sustainability will be rewarded. California can unlock the potential of our businesses by committing to long-term goals and by building a market that rewards innovation.

“In conclusion, I know these goals are challenging, but we have to do it. Overcoming these kinds of challenges is what leadership is all about. California is at a crossroads yet again. We can choose to continue moving forward and leading the world on creating a cleaner, more sustainable future for our children, or we can give up our leadership role. I’m confident that we will make the right choice.”

Business leaders see devastating economic impact

But business leaders are just as confident that the energy mandates will hurt the state’s economy. The Western States Petroleum Association is particularly concerned about the requirement to cut in half gasoline and diesel use by 2030.

“In the absence of available and affordable alternatives, we believe such a step would have a drastic and devastating impact on California’s economy, businesses, and families statewide,” said WSPA President Catherine Reheis-Boyd in a press release. “SB 350 would give the California Air Resources Board vast new authority to develop those mandates with providing clear policy or regulatory direction.”

The California Chamber of Commerce has dubbed the bill a “job killer.” It issued a statement urging legislators to oppose the legislation, saying that it sets an “arbitrary and unrealistic reduction of petroleum use, increase in the current Renewables Portfolio Standard and increase in building energy efficiency without regard to the impact on individuals, jobs and the economy.

“SB 350 provides a blank check delegation of authority to CARB, and in doing so, gives no consideration to the cost or job loss associated with this yet-to-be-determined regulation.

“Most of California’s businesses and families rely on petroleum for day-to-day transportation needs. SB350 could compromise the availability of transportation fuels. The California Energy Commission reported in its 2014 Integrated Energy Policy Report that 92 percent of all transportation fuels in California are made up of petroleum.

“Businesses rely on petroleum to transport goods and people, and it is unclear how the arbitrary goal in SB350 will be met. Will there be a 50 percent straight reduction in the production of petroleum in the state? Will we have to ration petroleum to achieve the 50 percent reduction? At what cost?

“In addition to the 50 percent reduction in petroleum use, SB350 seeks to increase the current Renewable Portfolio Standard from 33 percent to 50 percent as well as increase energy efficiency in buildings to 50 percent. Both these policies will significantly increase costs to ratepayers.

“California’s energy price per kilowatt hour is among the highest in the nation and the state’s energy efficiency standards are among the strongest. Mandating upgrades to meet increased energy efficiency standards while increasing the cost of energy will make California businesses less competitive.”

Legislators voice concerns

The three Republicans on the committee voted against the bill, which passed 8-3 with all of the Democrats supporting it.

Sen. Anthony Cannella, R-Ceres, said he’s concerned that California will actually have a surplus of energy, nearly 14,000 megawatts of over-generation, by 2024. He cited a recent op-ed coauthored by CPUC President Michael Picker that warned that “when there is more electricity being generated than places to store or export it, it must be turned off or it threatens reliability of the grid.”

Cannella, who said his district has a very high poverty rate, is also skeptical that the promise of electric vehicles will be fulfilled.

“Look, I would like to drive an electric car,” he said. “I can’t afford it; most of the people in my district can’t afford it. But regardless of that, I’m concerned about the ag industry, the trucking industry and rural communities that have to drive. And, really, I just don’t think electric vehicles will be sufficient for tractors or trucks. And so, setting a 50 percent reduction without excluding those industries, I think you’re going to create a lot of problems.”

Sen. Mike Morrell, R-Inland Empire, questioned Steyer’s optimism about the economic benefits of increased energy regulation.

“You made positive comments about creating jobs in the future,” said Morrell. “But we have the Chamber of Commerce, the Manufacturers Association, the National Federation of Independent Business, among many others who have had decades of a proven track record of creating jobs, millions of jobs. These organizations with millions employed under them, with proven decades of a track record, say this is a job killer.”

Green jobs vs. oil and gas jobs

Steyer responded that the clean-energy sector of the California economy is “growing at a very large clip… . This kind of policy is the kind of thing that will make that growth much faster and more important. We’ll be the first down the cost curve in this industry worldwide. And the rest of the world has to follow us. We will build gigantic business out of this. So I strongly believe this is good for California employment.”

Sen. Jean Fuller, R-Bakersfield, isn’t buying that argument. She said that one of the counties in her district produces most of the gas, oil, solar and wind energy in the state. “It’s been very hard for us to put ourselves in that position,” she said. “As you can imagine, that’s not an easy marriage among all of those groups. But we are very pleased with that.

“But the worry that I have is that as we ramp up one – the solar and wind – we gain a few jobs, but it’s mostly like one person per solar field. And you know how large solar fields are. And usually it’s a very low-level job; it really doesn’t require a lot of expertise. The oil and gas industry is very, very much more labor intensive. There’s a lot more jobs. They are much higher expertise. Most of our small families have been there for many, many years.

“And when we ramp down that industry, you really hurt our county. You really displace workers. And you really don’t leave us a way to replace that kind of infrastructure. So the inland area, who have willingly served as the energy production for the rest of the state, will be hurt massively. And I doubt that we will ever recover.”

Helping or hurting minorities?

One Democrat on the committee, Sen. Ricardo Lara, D-Bell Gardens, also expressed concern that the state’s poorest residents, particularly Hispanics, are not enjoying the benefits of the clean-energy economy.

“Because what we see, and what we have continued to see, is that the people that are making themselves rich out of these technologies don’t look like you and I,” Lara said to de León. “And don’t come from the economic experiences and backgrounds that we share. And so, if we want to make this as successful as possible, we have to ensure that everybody reaps the benefits. Not only in terms of job creation. Because you know us people of color, all we want is a job.

“But now it’s time for us to ensure that if we’re going to create this and mainstream this, that we not only get a job out of this, that we also get economic prosperity. And that the folks are going to be able to make money off this, it’s diversified and enjoyed throughout the entire economic strata of our state. And that we don’t continue to widen the gap between the rich and the poor.”

De León responded that minorities – or as he termed them, “individuals who look like California” – will be prime beneficiaries of the building retrofit jobs spawned by his bill. “I appreciate and understand your concerns,” he said. “I know as a person, as a legislator who represents the 24^th Senate District and as a pro tem and as a person of color, I know that I’m doing my part to proactively make sure that this is an inclusive economy.”

De León applauded the bill’s approval in a press release: “The committee was presented with a clear choice: help usher California into a new era of cleaner air and a cleaner economy or stay stuck in a poisonous fossil fuel economy. I’m grateful the committee made the right choice.”

SB350 will next be heard by the Senate Environmental Quality Committee later this month.