Ken Silverstein
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It's been more than a year. But, California's passage of the nation's first global warming law is still being defined. And, it will continue to evolve in the coming years as the state grapples with how to cut its greenhouse gas emissions.

The law there, which took effect on Jan. 1, 2007, sets out to reduce California's heat-trapping pollutants to 1990 levels by 2020. The state is off to a notable start by enacting rules to increase its renewable energy supply to 33 percent by 2020 as well as by creating new energy efficiency performance standards and cleaning up motor vehicle emissions.

But those efforts will not be enough. So, the "California Air Resources Board" is now authorized to devise methods to cut those greenhouse gases even more and to suggest ways to pay for that. It will be a five-year, public process. No group wants to be singled out, leading the law to read that all policies are to be feasible, fair and cost effective.

By Jan. 1, 2008, the air board must determine what the 1990 emissions levels were and then choose a mechanism by which companies must report current and future releases. Up first: whether to enact a cap-and-trade system whereby companies that exceed the goals can earn credits. They could either bank them or sell them to those companies that are unable. The next choice would be to either provide companies free allowances or to auction them, which the Market Advisory Committee recommended to the air board as a fairer way to distribute those credits.

The other possibility is a tax on all carbon emissions. Advocates say that such a scheme is easier to administer than a cap-and-trade system, which may unfairly give away credits to the heaviest polluters. Even conservative economists say that the implementation of public policy that increases taxes on such harmful things as pollution is a positive because it dissuades use.

"Why should an electric utility, for example, be given a valuable resource simply because it has for years polluted the environment?" asks former Bush adviser Greg Mankiw. "A new firm entering the market should not have to pay for something that an incumbent gets for free."

But the Implementation Group counters that argument, saying that any added cost to business is harmful and will be passed through to consumers. "A winning program for all Californians will encourage the state's firms to replace equipment with new innovative but often expensive technologies, with efficiency incentives that come with a cap-and-trade system," says the group's co-chair Dorothy Rothrock, who emphasizes that the association supports the state's global warming law.

New Day

Clearly, the goal in instituting a cap-and-trade program or a carbon tax is to get companies to invest in clean technologies. Along those lines, California has enacted other companion laws. Among them is one that says that the state's public utility commission is required to establish a performance standard for utilities -- one that is no less stringent than the greenhouse gases associated with a combined cycle natural gas plant that is considered among the cleanest available.

Toward that end, the commission now has the authority to regulate all long-term procurement contracts. Now, one-fifth of all California's power is imported. And some of that comes from coal-fired plants in Nevada that are not as clean as modern gas facilities. And with the run-up in natural gas prices, coal is more popular than ever and nationally there are about 160 or so plants on the drawing board. So, if suppliers want to sell into the California market, they would have to adopt the latest and greatest coal technologies.

Despite the noble objectives, a lot of businesses are skeptical. Some say that California's new laws are simply unworkable. Others say that it will drive away enterprises.

But, not all see it that way. If rules need to be reshaped to accommodate a changing economic structure, then the air board has the power to do so. The aim is not to pigeon-hole businesses; rather, it is to get them to re-think the way they do business -- to modernize their processes in an effort to become cleaner and more efficient.

It's an adjustment that can help the bottom line. In fact, a study by University of California at Berkeley says that California's initiatives will prompt the development of efficient machinery, energy saving appliances and the development of new renewable energy sources. Even if it could achieve just half of what the law requires, that would create 20,000 new jobs in California and add $60 billion a year to the state's economy.

"Other countries like India and China, Brazil and Mexico will join us when they see all the great work that we are doing," says Governor Arnold Schwarzenegger. "Also our federal government will follow us -- trust me."

It's the type of evolution that proponents say is similar to that of the original Clean Air Act of 1970. At the time, industry was dubious of the changes and balked about compliance. But, they acquiesced. And, today, the pollutants regulated under that act have been dramatically reduced while American business is still the envy of the world.

It's a new day and now global warming is the major concern. While some experts say that climate change is mostly a natural phenomenon, most scientists say it is a function of excessive fossil fuel usage. California is particularly at risk, with studies by the National Academy of Sciences saying that rising temperatures in the coming decades will shrink the Sierra snow pack -- the largest source for the state's drinking water -- by 30 percent to 90 percent. Those same studies also say that climate change will lead to rising sea levels and more wildfires.

California's policymakers are trying to make responsible decisions given the evidence before them. They are trying to be fair and reasonable. It's easy to throw darts. But they must resist the criticism and not lose sight of their overall objectives


 

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