Oiling Down California's Global Warming Law

Big Oil v. Big Green

Ken Silverstein | Oct 21, 2010

Call it the case of Texas v. California. Or call it the case of Big Oil v Big Green. One or the other is going to win come election day, in California.

At this point, it looks like the greenies are going to stand their ground against the backers of a movement to toss out the state's trend-setting global warming law -- one that requires that the state reduce its greenhouse gas emission to 1990 levels by 2020. The proposition, funded by two Texas-based oil refineries, aims to put that requirement on hold until California is able to gets its unemployment down to 5.5 percent for one year.

While the oil companies are motivated to reduce their costs from such laws and thereby maintain their profits, their argument is that businesses are suffering and need to heal before they are hit up any further. Proponents of Proposition 23, which would delay a California law on the books, say that utilities that rely on fossil fuels would be especially hurt, given that they would have to buy new equipment and raise rates on consumers. That would drive out large employers at the worst possible time.

The rationale for continuing the laws enacted in 2006 that are to take effect next year is that the venture capitalists have supported cleantech and as such have funded hundreds of thousands of new energy economy jobs in California. Green groups acknowledge the state's 12 percent unemployment rate is hamstringing overall growth but quickly add that it would be worse if not for current and planned clean energy investments.

At the same time they point out that reducing the current unemployment levels to a sustained 5.5 percent is something that has only occurred three times in about 30 years. Therefore, the oil companies' motive is to permanently sideline the law. Recent polls show that the state's citizenry gets it and is skeptical of out-of-state energy companies dating back to when some of them hoodwinked "Aunt Millie" in the early 2000s.

"If passed, Prop 23 will threaten the environment and California green job creation, and it's a prime example of how cleantech leaders need to come together across sectors - from grassroots organizations, to national non-profits, to businesses," says Lynn Jurich, president of SunRun.

Valero Energy Corp and Tesoro Corp. have spent about $5.5 million bankrolling the movement to effectively toss out the law, all of which has been supplemented by other oil enterprises. But those efforts are being countered by a consortium of business and labor interests that have raised about $20 million to defeat Proposition 23.

Proponents of California's global warming laws are touting figures like green energy-related employment has grown at 10-times the rate of the other economic sectors since 2005. Altogether, about 500,000 people in California have jobs tied to the clean technology, says the California Employment Development Department. Billions, meanwhile, are pouring in from venture capitalists.

Economic Impact

California is the first state to set a statewide cap on greenhouse gas emissions. The law, which took effect in 2007, requires utilities and refineries to quantify their levels of greenhouse gases. By 2011, the California Air Resources Board must write the rules for industry to live by: By 2020, greenhouse gases would be cut by about 25 percent. By 2050, the state's goal is to cut such releases by 80 percent.

Perhaps the most objective source to review the current law and its permanent delay is the California Legislative Analyst Office. It says that the imposition of new costs so as to reduce greenhouse gas emissions would have a somewhat adverse affect on the state's economy while also raising energy prices there.

But it also says that any suspension of the current codes would postpone investments in clean technologies that might encourage energy efficiencies and thereby save businesses money. If such capital is not forthcoming, then that too would have a negative impact on job creation within the green energy communities. And finally, any derailment of the global warming laws would hurt public health and diminish worker productivity.

"Considering both the potential positive and negative economic impacts of the proposition, we conclude that, on balance, economic activity in the state would likely be modestly higher if this proposition were enacted," says the legislative office.

That fairly weak endorsement for passage of the proposition has been bucked, however, by one of the state's three biggest incumbent utilities: Pacific Gas & Electric. It says that it is working closely with state policymakers to achieve their environmental goals at the lowest possible cost to consumers and the state's economy.

The utility is one of several businesses leading the charge to beat back the ballot initiative, arguing that it would hurt capital formation in the vibrant cleantech sector that it services. It also says that if the law is repealed, agriculture and tourism would suffer and possibly to the tune of "billions of dollars a year."

"We at PG&E are committed to helping California make progress on both its environmental and economic goals, moving us toward a low-carbon economy while minimizing the impact on customers as we make this necessary transition," says Peter Darbee, chief executive of PG&E Corporation."

The greens have formed some crucial partnerships to grow California's new energy economy. Together, they are likely to trump the oil interests and continue on the trend to growing clean energy jobs in the state. If successful, other regions are likely to follow its lead, helping to firmly establish the clean technology movement.

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