Cap-and-trade spending deal reached

Good morning. Welcome to the first day of September and the morning after the last day of legislative session. While the last day was tamer than some years past, the whole thing didn’t slip by without some big actions.

For example, Gov. Jerry Brown and legislators reached an agreement on Wednesday on what to do with around a billion dollars of cap-and-trade revenue.

The deal was announced earlier in the day and was approved by dinner after a longstanding battle between legislative leadership, who had a long list of ways to spend the money, and Brown, who had yet to give his blessing.

“California’s combating climate change on all fronts and this plan gets us the most bang for the buck,” Brown said in a statement when the deal was announced. “It directs hundreds of millions where it’s needed most – to help disadvantaged communities, curb dangerous super pollutants and cut petroleum use – while saving some for the future.” 

The spending plan comes at an interesting time for the cap-and-trade program, as the last two quarterly auctions have fallen flat, greatly missing revenue targets, and the program itself faces legal challenges as opponents argue it’s an illegal tax.

CalWatchdog has more. 

In other news:

• Legislators paid awkward tribute to one of their brethren who is under a restraining order for allegedly beating his wife, with one noting how “proud” she was of his ability to walk through the backlash. CalWatchdog has more.
• The Los Angeles Times puts a cap on the two-year session with the biggest wins and losses.
• “Offering a ray of hope in the struggle to save a tiny fish enmeshed in California’s water disputes, state officials say they have found a way to move around river water to produce more food for hungry or starving Delta smelt,” writes The San Jose Mercury News. 
• “Controversy around displaying the confederate flag has hit Fresno where an artist says he’s being unfairly banned from showing a painting at the county fair,” according to Capital Public Radio.
• “Legislation to overhaul California’s public utilities regulator stalled in the final hours of the legislative session as its backer said the Senate Republican leader blocked a vote,” writes The Sacramento Bee. 

Legislature: 

• Gone ’til December. It’s all politics now, writes The Sacramento Bee. 

Gov. Brown:

• No public events announced.

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But we haven’t seen some crucial context about Brown’s latest energy policy and about how the state has done in meeting the primary original goal of AB 32, the landmark 2006 state law that dictates the use of a cap-and-trade system in which emission credits are bought and sold to try to limit the gases that are believed to contribute to global warming.

The first is that business groups listened to the governor’s speech last week and came away believing that as with fracking, he is signalling he’s not necessarily in sync with the National Resources Defense Council and Sierra Club. This is from a new story in the trade publication “Inside Cal EPA,” which is not available free online:

As the debate has begun, many industry groups are seeking to ensure that any new “second generation” climate and energy programs emphasize “affordable” energy, “achievable” goals, accountability for regulators and other similar approaches.

In his inaugural address, Brown appeared to acknowledge the industry concerns. “How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels,” he said.

‘Industry groups welcomed Brown’s note of caution’

“Inside Cal EPA” reported that the governor’s green-energy speech was seen as reassuring in what may seem as some unlikely corners.

Industry groups welcomed Brown’s note of caution, with California Manufacturers & Technology Association President Dorothy Rothrock underscoring Brown’s remarks by saying “our efforts to inspire technologies to reduce climate change emissions must do so without harming the vibrancy of our economy, so we must ensure that we control costs for manufacturers and not further increase the already highest electricity rates of any industrial state.”

 That’s not how the governor’s speech was described in newspaper accounts.

Meanwhile, the coverage of the speech outlining a policy billed as a follow-up to AB 32 didn’t provide much historical context for the original measure. It imposes the cap-and-trade system as part of a requirement that the state get one-third of its electricity from cleaner-but-costlier sources by 2020. Former Gov. Arnold Schwarzenegger and former state Senate President Darrell Steinberg, among many others, now consistently depict the law as having a primary intention of helping California develop green jobs and green industries.

But the first four “findings and declarations” in the text of the law don’t mention economic development as a goal at all. Sections 38501(a) and (b) outline the threat that global warming poses to California’s environment and core components of its economy.

AB 32 text: It will have ‘far-reaching effects’ on world

And the next two sections make explicit AB 32’s primary goal.

(c) California has long been a national and international leader on energy conservation and environmental stewardship efforts, including the areas of air quality protections, energy efficiency requirements, renewable energy standards, natural resource conservation, and greenhouse gas emission standards for passenger vehicles. The program established by this division will continue this tradition of environmental leadership by placing California at the forefront of national and international efforts to reduce emissions of greenhouse gases.

(d) National and international actions are necessary to fully address the issue of global warming. However, action taken by California to reduce emissions of greenhouse gases will have far-reaching effects by encouraging other states, the federal government, and other countries to act.

The law did go on to say that AB 32 would help California’s tech economy by positioning the state to benefit from “national and international efforts to control greenhouse gases.”

But that hasn’t happened since 2006. Instead, as former Obama economics adviser Larry Summers wrote recently in The Washington Post, the rest of the world mostly gave up on a cap-and-trade approach as clunky and inefficient in reducing greenhouse gases. A simple carbon tax is viewed as a much smarter approach than the one California adopted with the stated intent of changing the world.

This axiom is playing out right now in Australia, where the government has repealed a carbon tax adopted in 2012 when another regime was in power. Here’s some analysis from the liberal Vox site:

The repeal is a big blow for climate policy. Economists have long argued that carbon pricing is one of the most effective ways to tackle global warming. The premise is simple: People should pay for the damage they cause by emitting carbon. And making fossil fuels more expensive will spur companies to seek out cleaner alternatives.

But the major weakness of a price on carbon has always been politics. So many daily activities depend on fossil fuels — from driving to home heating to industry — and the pinch from any tax is likely to be more noticeable than, say, that from more complex regulations. …

And so Tony Abbott and the Liberal Party made repeal of the carbon tax a major issue in the run-up to the 2013 elections. Abbott argued that the tax was costing the Australian economy some $9 billion per year and had little climate benefit so long as other countries weren’t also enacting their own carbon taxes.

Hilarious that Vox labels concern about how much something costs a “politics” problem.  But still.

Same populism in Melbourne and Fresno

Now of course AB 32 isn’t the same thing as a carbon tax, but both California’s and Australia’s initiatives build on the idea that families and businesses should pay more for energy that isn’t renewable. Subtext: Fossil fuels are evil.

But when believing in this truth began to have a price-tag — and especially when it seemed pointless, because most of the world wasn’t into symbolic masochism — Aussie voters bailed.

And in California, so did 16 Assembly Democrats.

Assembly Bill 69 by Assemblyman Henry Perea, D-Fresno, would delay for three years [an AB 32] rule requiring the energy industry to purchase permits for transportation fuels. Lawmakers and critics have been warning for months about a resulting price bump. …

In a show of broad discontent, 16 Democrats last week sent a letter to the Air Resources Board urging the air quality regulator to delay implementing the new rule. …

Perea said he still supports AB 32’s overarching goal of reducing emissions but does not believe consumers have been adequately prepared.

That’s from the Sac Bee earlier this month.

Notice the parallel between Perea’s double-talk and Vox’s? The liberal website likens concern about higher costs of energy to playing “politics” with the issue. Perea suggests the public won’t mind paying more for energy — so long as it’s “prepared” for the pain.

Somehow, I don’t think the Fresno pol actually believes that.

National and international actions are necessary to fully address the issue of global warming. However, action taken by California to reduce emissions of greenhouse gases will have far-reaching effects by encouraging other states, the federal government, and other countries to act.”

That seemed to be happening in 2012, when Australia imposed a carbon tax on its industries.

But the Aussies just used Crocodile Dundee’s knife to cut away that tax. AP reported:

The undoing of that perspective will likely be complete after a new Senate is sworn in Monday. It’s expected to give Prime Minister Tony Abbott the votes he needs to repeal a 2-year-old tax charged to around 350 of Australia’s biggest carbon polluters. Three top political leaders lost their jobs over the issue as support for climate-change measures plummeted.

A global recession, political miscalculations and failed negotiations only partially explain the dramatic change.

Opponents of the carbon tax implemented in 2012 had the media largely on their side. Electricity prices soared — not mainly because of the tax, but because power companies were spending billions on infrastructure. Most electricity users were compensated for the added cost of the tax, but many of them didn’t know that. And rising gas prices fed the fury — even though the tax didn’t apply to gasoline.

Australia’s experience illustrates how easy it is to scuttle complicated environmental laws, and serves as a warning to President Barack Obama, whose recent proposal to force a 30 percent cut in power plants’ carbon emissions is drawing anger from both sides of politics.

Australia’s economy today is about half California’s, with a strong emphasis on commodities shipped to Asia’s burgeoning industries. Which means China, Japan, South Korea, India, etc. weren’t inspired by AB 32, either. They’re still going to turn Aussie commodities into iPhones and Kias.

Meanwhile, the new state budget includes Gov. Jerry Brown’s program to use about a quarter of the state’s $1 billion yearly cap-and-trade tax to build the high-speed rail white elephant.

But new Australian Prime Minister Tony Abbott, in an interview with the Washington Post, blew the lid off such schemes:

During your campaign you called for a repeal of the carbon tax imposed by the Labor Party. Why are you against this tax?

The carbon tax is bad for the economy and it doesn’t do any good for the environment. Despite a carbon tax of $37 a ton by 2020, Australia’s domestic emissions were going up, not down. The carbon tax was basically socialism masquerading as environmentalism, and that’s why it’s going to get abolished.

It will be abolished this year?

As soon as possible. If the Labor Party wants to give the people of Australia a Christmas present, they will vote to abolish the carbon tax. It was damaging the economy without helping the environment. It was a stupid tax. A misconceived tax.

That’s right: “socialism masquerading as environmentalism.” Unfortunately, in California it’s likely to be around a lot longer than Down Under.

You said in your victory speech that Australia is once again open for business. Does that mean you believe that the previous government was unfriendly to businesses?

I said Australia is under new management and is once again open for business. The previous government would often say the right thing but it would invariably do the wrong thing when it came to business. There was an explosion in red tape and green tape. There was a whole thicket of new restrictions in the labor market. There were big new taxes. It was a government which thought that there was no problem that more public servants, higher taxes and further regulation couldn’t fix.

So you’re reversing that?

We will do our damnedest to shrink the public service and have a bonfire of red tape and unnecessary taxes.

So how will you get needed revenue?

If you get taxes and regulations down, you will get creativity up and ultimately that means more growth and more revenues. The best way to get growth is to have a smaller, more effective government. We are doing our best to get government spending down.

Likewise, that’s the opposite of what California is doing. Here we have higher taxes, and much more red tape and green tape. But here, there’s no alternative. Our Labor Party, the Democratic Party, is so dominant it is unlikely ever to be removed from office in the coming decades. There’s no California Tony Abbott.

At least Bud Abbott is ours.