gnnone size-full wp-image-51681″ alt=”AB-32″ src=”http://calwatchdog.com/wp-content/uploads/2013/10/AB-32.jpg” width=”300″ height=”167″ align=”right” hspace=”20″ />California's headlong rush to force a broad switch to cleaner-but-costlier energy has long been depicted as something that's either neutral or beneficial for the state's economy, with little or no downside. AB 32 and other state laws mandating use of renewable energy are rarely looked at with anything resembling critical objectivity.

Maybe all the reports about what AB 32-type policies are doing to Europe will change that. Here's a fresh example from Forbes.com:

“The stability of Europe’s electricity generation is at risk from the warped market structure caused by skyrocketing renewable energy subsidies that have swarmed across the continent over the last decade.

“This sentiment was echoed a week ago by the CEOs of Europe’s largest energy companies, who produce almost half of Europe’s electricity. This group joined voices calling for an end to subsidies for wind and solar power, saying the subsidies have led to unacceptably high utility bills for residences and businesses, and even risk causing continent-wide blackouts.

“The group includes Germany’s E.ON AG, France’s GDF Suez SA and Italy’s Eni SpA, and they unanimously pointed the finger at European governments’ poorly thought-out decision at the turn of the millennium to promote renewable energy by any means.

“The plan seemed like a good one in the late 1990s as a way to reverse Europe’s reliance on imported fossil fuels, particularly from Russia and the Middle East. But it seems the execution hasn’t matched the good intentions, and the authors of the legislations didn’t understand the markets.

“'The importance of renewables has become a threat to the continent’s supply safety,' warned senior global energy analyst, Colette Lewiner …”

Didn't even help reduce greenhouse gases

What's striking about Europe's energy policy is that it didn't even achieve its fundamental goal.

“'We’ve failed on all accounts: Europe is threatened by a blackout like in New York a few years ago, prices are shooting up higher, and our carbon emissions keep increasing,' said GDF Suez CEO Gérard Mestrallet … '”

In the U.S., meanwhile, carbon dioxide emissions are plunging. Not because of AB 32-type policies. Primarily because of fracking — which greens hate but which has yielded access to natural gas reserves and spurred a shift away from much-dirtier coal.

An argument can be made that Europe's approach is fundamentally more flawed than California's because of its heavy subsidies. But in general, any time government issues sweeping mandates that affect large parts of the economy instead of letting the free market sort things out, costly inefficiencies will result.

By Chris Reed

One of the most befuddling things about being a public-policy watcher in California in recent years has been the durability of the argument that the higher energy costs forced by 2006’s passage of AB 32 won’t be a drag on the state economy. Instead, the claim goes, the innovation triggered by the mandate that California use cleaner-but-costlier types of energy will at the least make up for jobs lost because energy is much cheaper in rival states and nations.

Now I understand why religious greens would believe this. But allegedly rational, neutral journalists? Incredibly, it wasn’t until this March that The Los Angeles Times had a news story that operated from the straightforward premise that AB 32 carried huge risks for the state economy.

‘Rising energy prices a threat to competitiveness’: Duh

In Europe, however, the learning curve is a little farther along. This is from a Financial Times article headlined “High energy prices for industry occupy officials at EU summit”:

“[There is] a growing fear in Europe that rising energy prices now pose a threat to the industrial competitiveness of a region mired in recession. It has been driven home by a steady stream of announcements from European manufacturers about plans to build new production facilities in the US.”

And where are those European manufacturers planning to build new factories? Not in California. In states with access to cheap natural gas made available by fracking, such as Louisiana, Texas and Pennsylvania.

But then the California media have a little problem with reporting on fracking, too. They can never even bring themselves to admit the Obama administration supports it. Even when Obama’s secretary of the interior says it loudly and clearly.

A dead heat in the Reverse Pulitzers competition

This creates a dilemma for those on the Reverse Pulitzer jury. Who deserves the 2013 award?

1) The legions of California journos who idiotically argued that high energy prices will be good for or won’t hurt the economy, or …

2) The legions of California journos who dishonestly depict fracking as new and evil while never mentioning that the Obama administration backs fracking as just another heavy industry.

On the other hand, it’s no dilemma at all when you think about it. Everyone in Group 1 is in Group 2, and vice versa.

Reverse Pulitzers for the lot! My congratulations! Y’all are doing a hell of a job!

By John Seiler

Gov. Jerry Brown’s cheery announcements of the state’s budget health are guiding budget spending priorities. As he said in his State of the State address, “The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget. And, by God, we will persevere and keep it that way for years to come.”

He praised the Legislature for cutting spending and continued, “Then, the citizens of California, using their inherent political power under the Constitution, finished the task. They embraced the new taxes of Proposition 30 by a healthy margin of 55 percent to 44 percent.”

But what if the modest economic recovery in California and the rest of the United States turns sour? What if the tax increases themselves hurt the economy? Not just Proposition 30 and Proposition 39 (taxing out-of-state businesses), but the Obamacare, payroll tax and other federal tax increases?

We won’t have good numbers on these things for another month or so. But until then, there are warning signs that the second part of a “double-dip” recession may be flying overhead like that meteor that just hit Russia.

Internal emails from Wal-Mart executives described February sales as “a total disaster.” Reported Bloomberg:

“Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“Wal-Mart and discounters such as Family Dollar Stores Inc. are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.”

So, as we have repeatedly warned on CalWatchDog.com, the higher taxes are taking a toll not just on the rich, but on everybody. Lower sales will mean lower sales taxes collected by the California government.

Global problems

According to new estimates, Europe’s economy shrank by 0.6 percent in the fourth quarter of 2012. And U.S. News & World Report wrote, “Japan’s economy shrank in the last three months of 2012, its third straight quarter of contraction… The 0.4 percent contraction in annualized terms in October-December was worse than expected.”

Those two reports come after the U.S. Commerce Department calculated that the U.S. economy shrank by 0.1 percent in the same period.

Manufacturing, the mainstay of an industrial economy, is stagnant. Reported the Financial Times:

“US industrial production shrank in January after the biggest back-to-back gain in three decades, while factory activity in the New York region unexpectedly expanded in February, in a mixed picture of the country’s manufacturing sector.

“Output at factories, mines and utilities fell 0.1 per cent last month after a 0.4 per cent gain in December, figures from the Federal Reserve showed on Friday. While economists had expected a 0.3 per cent rise in January, revised data for November and December showed the biggest two-month gain since 1984.”

One seeming bright spot is that China’s economy grew 7.9 percent in the fourth quarter of 2012. But that still was below the tepid pace of 10.4 percent in 2010 and 9.3 percent in 2011. And China’s growth rate for 2012 was its slowest since 1999, during the Asian financial crisis.

For California governments at all levels the message is: Be more frugal then ever. The rosy scenario celebrated by Brown fades away once the rose-tinted glasses are removed.

If the double-dip recession hits, then the budget cutting has not ended, but is going to be deeper than ever. And businesses will flee even faster California’s high-tax climate for the refuge of low-tax states.

By Katy Grimes

Rick Santelli, my favorite vociferous and opinionated financial news guru, today said that with the federal government’s release of the latest report finally showing that the economy actually shrunk in the fourth quarter last year, “We are now Europe.”

“When you act like Europe, you get growth rates like Europe. We have become Europe!”