We hear plenty of CARB critics from libertarian and conservative circles. Here’s what a sharp liberal critic of CARB sounds like:

Now, say a utility in a carbon market wants to reduce its carbon emissions. It could build renewable energy generation, or launch efficiency or demand-response programs, but gosh, that stuff is expensive and difficult. Isn’t there something easier and cheaper? Why yes! Here’s two other things it could do.

One, it could sell its ownership stake in a coal plant and buy a stake in a natural gas plant. Voilà! The net emissions of its power portfolio has declined.

Or two, it could shuffle power contracts away from coal plants to unspecified sources, which are treated as natural gas. (More sinister yet, it could help a coal plant obscure the source of its power, rendering it unspecified.) Again: voilà! For bookkeeping purposes, its emissions have fallen.

See what’s wrong here? In both cases, the utility reduced the emissions for which it is responsible, but real-world emissions did not decline at all. The same amount of dirty energy is still feeding into the western grid. The emissions just got “shuffled” off the California utility’s books.

For obvious reasons, resource shuffling is bad news for carbon markets. It makes carbon emissions into a meaningless shell game, exactly the sort of shenanigans cap-and-trade critics are always warning about.

CA regulators saw problem coming

Liberal lawmakers have long downplayed this potential problem. But Roberts says CARB was aware of it and wrote AB 32 to avoid it — at least in theory:

AB32 contains strong language on leakage, saying that regulations must “minimize leakage” and that emission reductions achieved under the program must be “real, permanent, quantifiable, verifiable, and enforceable by the state board.”

And the initial guidance document written by regulators (which details the mechanics of how AB32 is to be implemented) stated clearly that “resource shuffling is prohibited and is a violation of this article.” In fact, the initial guidance contained a provision that would have forced utility executives to testify under oath that their emission reductions were real and not merely shuffled. Powerful and unambiguous stuff!

UC Berkeley research fellow Danny Cullenward tells the story of what happened next:

“[Banning resource shuffling outright] proved controversial. In the months leading up to the beginning of the market’s first compliance period, several stakeholders objected to the resource shuffling rules and began agitating for reforms. The first public proposal came from California’s investor-owned utilities, which in September 2012 advocated a series of exemptions to the prohibition on resource shuffling. The following month, [the California Air Resources Board] directed its staff to develop modifications to the resource shuffling regulations, providing 13 fully developed ‘safe harbor’ exemptions to the definition of resource shuffling directly comparable to, if not more permissive than, the Joint Utilities Group proposal. A few weeks later, CARB staff released a new regulatory guidance document that incorporated these safe harbors, almost word for word.”

So the new AB32 regulations now say that resource shuffling is prohibited … except “when the substitution occurs pursuant to the conditions listed in section 95852(b)(2)(A).” Just a little tweak, right? Except 95852(b)(2)(A) contains loopholes wide enough to sneak a coal plant through. (To see for yourself, check out the current regulations, pp. 106-108.)

In other words: California regulators caved.

CARB’s self-reverence may not be deserved

One person’s view of what constitutes caving might well be another person’s reasonable compromise. But it’s still interesting to see a liberal, deeply informed out-of-state journalist — Roberts lives in Seattle — investigate the air board and conclude that the agency’s high opinion of itself isn’t warranted.

David Roberts will find lots of libertarian and conservative Californians probably agree with him on this, starting with Cal Watchdog contributor … Dave Roberts.

Katy Grimes: The word ‘leakage’ is the new politically correct term used by legislators, the Governor, bureaucrats and the California Air Resources Board to describe what happens when California businesses leave the state because of tax increases and stupendous regulations… as if any of them know what it means for a business to make the difficult decision to close a location, terminate hundreds of employees, and move a business.

As The Dude in the Big Lebowski said, “That’s a bummer man.”

Apparently California is ‘leaking’ businesses… as if businesses and middle class families are dribbling away, or just accidentally seeping into other states.

Tell that to the 700 employees of Campbell’s Soup here in Sacramento who are soon going to find themselves unemployed. They may have to leak, drain, seep or dribble their way to new jobs in neighboring states.

“The world’s largest soup maker said Thursday that it will close a plant in Sacramento, Calif., that has about 700 full-time workers,” the Washington Post reported. “The plant, which makes soups, sauces and beverages, was built in 1947 and is the company’s oldest in the country.”

The Sacramento plant is also the most expensive plant to operate of the remaining Campbell’s Soup plants. This is a business decision.

I happened to catch a radio interview Thursday about the Sacramento plant closure, done by a KFBK radio reporter with Senate President  pro Tem Darrell Steinberg, D-Sacramento. When the reporter asked Steinberg about the closure, the lawmaker replied that people just aren’t eating as much soup as they used to. Steinberg then suggested that the 700 employees would go out and get better union jobs in the Sacramento area.

Campbell’s Soup reports that it costs the company far more money to produce a case of soup in Sacramento, than in any of their other plants.

“The company expects the closings to result in about $115 million in pre-tax costs,” the Post reported. “Its actions will also require about $27 million in capital spending. Annual savings are predicted to be about $30 million starting in fiscal 2016.”

Now that’s a bummer.

Ironically, Campbell’s Soup is located in the City Council district Steinberg used to represent as a member of the Sacramento City Council.

More businesses leaking from California

Earlier this week, Comcast announced that it was closing four call centers in the Sacramento area, leaving 1,000 Sacramento area employees out of work.

Vision Service Plan is threatening to leave the state because thus far, the Legislature has refused to include vision plans in the state’s new Obamacare health exchange. That’s another 2,100 employees who will lose jobs.

Waste Connections, which has 5,000 total employees, announced earlier in the year that the large company will leave California for Texas, because of the unfriendly business climate, high taxes, and the hefty regulatory burden on the private sector.

The company had 200 local employees.

California lawmakers are “shoving businesses out,” Waste Connections CEO Ron Mittelstaedt said, and that California is “the worst state in the country to do business in,” the Sacramento Bee reported. “There doesn’t seem be any improvement on the horizon.”

New jobs

“Steinberg points to the 16,100 jobs created in the Sacramento region over the past year,” CBS Channel 13 in Sacramento reported.

The information about the 16,100 jobs was provided by the Center for Strategic Economic Research.

The CSER, a Sacramento firm, explains on it’s website, “Originally, the organization was structured as a research institute affiliated with California State University, Sacramento, known as the Real Estate and Land Use Institute (RELUI), and later as the Sacramento Regional Research Institute (SRRI) in conjunction with the Sacramento Area Commerce and Trade Organization (SACTO). CSER is currently structured as an independent nationally-scoped research center affiliated SACTO, one of only 29 Accredited Economic Development Organizations by the International Economic Development Council (IEDC).

The graph CSER provided explains jobs growth:

Major Sector Annual Job Gains and Losses

Major Sector Annual Job Gains and Losses (Image by: CSER)

The breakdowns are interesting – I’m not sure how education is classified as ‘private sector.” And upon closer scrutiny, much of the job growth is union jobs. And notice the California manufacturing job losses… not good.

Steinberg’s comments about soup being less popular, and Campbell’s Soup employees getting better union jobs elsewhere is telling… and smarmy, and condescending.

“Campbell’s and Comcast are two examples that have nothing to do with the so-called regulatory environment or how California and its government interacts with business,”Steinberg said, Capitol Public Radio reported. “I think these were independent decisions. They’ve said that.  The evidence is very clear the call centers are happily locating and expanding in California.”