Climate policies are under political attack, both in California and nationally. The common argument is that these policies hurt the economy and destroy jobs, particularly in disadvantaged communities.
To assess those claims, the Center for Law, Energy and the Environment (CLEE) at UC Berkeley Law and UC Berkeley’s Donald Vial Center on Employment in the Green Economy, working with the nonpartisan nonprofit Next 10, released today the first comprehensive cost/benefit study of climate policies in the San Joaquin Valley, one of California and the nation’s most economically and environmentally vulnerable regions.
The Economic Impacts of California’s Major Climate Programs On The San Joaquin Valley specifically looked at the impact of cap-and-trade, renewable energy, and energy efficiency programs in the eight-county region.
Why the Valley? Simply put, if climate policies can work in this region, they can work anywhere. In addition, the region’s elected leaders have asked questions about the impact of climate policies on their constituents, raising their concerns both in the state legislature and now nationally in the congress.
After examining the data and using advanced modeling software, we found that these three programs (among the most important in California’s suite of climate policies) brought over $13 billion in economic benefits to the Valley, mostly in renewable energy, and created over 31,000 jobs just in the renewable energy sector alone.
With the relatively new cap-and-trade program, we found that despite the compliance costs in the heavily industrial Valley, the benefits from state spending of the allowance auction proceeds outweighed those costs, particularly due to construction of high speed rail, which is funded in part with these funds. Furthermore, once the state disburses proceeds already collected from the auction, those benefits will increase greatly.
The overall benefits to the Valley are likely to continue and grow through 2030, as the state strives to meet its newly legislated climate goals for that year, via last year’s SB 32 (Pavley) and SB 350 (De Leon, 2015). Those efforts will require at least 50% renewables by 2030, a doubling of energy efficiency in existing buildings, and a more robust cap-and-trade program.
However, the benefits of cap-and-trade may cease if litigation over the auction mechanism (described by Ann Carlson at UCLA Law) is successful, as that mechanism allows the state to spend the proceeds that provide the benefits. Furthermore, federal action to undercut renewables and energy efficiency could also slow the gains.
Ultimately though, California is committed to its path and these programs through bipartisan legislation and regulations. Given the economic data we see in this study, its a path that the state should continue — and it can hopefully now inform federal debates about environmental policy and the need for job-producing programs.
One of the keys to passing SB 32 (Pavley), the landmark 2030 climate change legislation the legislature approved this year, is that the California economy has thrived since AB 32 (Nunez) passed in 2006. As many climate advocates have noted, despite lowering emissions on a per capita and aggregate level for over a decade, California’s economy is growing at one of the fastest clips in the nation.
All of this economic activity happened despite numerous regulatory and statutory programs to rein in carbon emissions, including cap-and-trade, renewable energy mandates, energy efficiency standards, and the low-carbon fuel standard. And the state is on pace to meet the AB 32 2020 goals, which requires a return to 1990 levels of emissions (about a 15% reduction from business as usual).
In short, this progress has deflated the typical conservative objections to environmental regulations, that they will be economy crushers and job killers. Here’s a summary of the good news, as Debra Kahn reports in ClimateWire (pay-walled):
Meanwhile, California’s economy since 2006 has jumped from the eighth- to the sixth-largest in the world. Yet the amount of greenhouse gas emissions it produces per person, as well as per dollar of gross domestic product, have fallen. Since 2001, state agencies have reported, its carbon emissions per unit of GDP have fallen 28 percent. Last year, the state was home to 68 percent of all clean technology investment nationwide and led in clean-tech patent registrations, as well, according to environmental advocacy group Next 10. And from 2007 to 2015, California outstripped the United States as a whole in job growth and personal income, according to an analysis released in June by Chapman University.
But the celebration shouldn’t get too loud, at least not yet. It’s clear that the state has benefited from some unusual trends that has made it both easier to meet the emissions goals and to grow the economy in a carbon-lite way. First, the economic recession in 2009 put a significant damper on emissions with a slower economy:
“California had a pretty soft economy for many years after its goal was set,” said Severin Borenstein, an economics professor at UC Berkeley and a member of a committee that the California Air Resources Board (ARB) set up in 2012-13 to advise it on the design of its cap-and-trade market. “Although it’s heating up now, we will easily make the 2020 goal, and that will in large part be due to the weak economy for many years.”
Second, the state’s economy has grown in emission-lite industries:
Since 2009, California has lost 1 percent of its manufacturing jobs, compared to 3.7 percent growth in the United States as a whole. During the same period, California’s information services sector grew 10.9 percent, compared to a 1.4 percent decline nationwide, according to Chapman’s June analysis.
We’ve essentially pushed many energy-intensive industries out of state, while benefiting from a boom in services industry like tech, which has made it much easier to meet these carbon-reduction goals.
To be sure, I would also credit the thoughtful, measured approach of many of California’s climate programs and regulations. And of course we have to credit the innovation in the private sector, bringing down the costs of solar PV and batteries and scaling up electric vehicles and low-carbon biofuels, among others.
But as we head into a post-SB 32 world of 40 percent reductions by 2030, the state may not be so lucky with these larger economic trends going forward. It doesn’t mean we should change the approach, but it means we should be honest about what it takes to decarbonize an entire economy and do everything we can to continue bringing down the costs of the technologies that will help us achieve those goals.
Part of the point of AB 32 was to begin the process of “bending the curve” on emissions and clean tech costs. We’re seeing that happen. But to continue on this path through 2030 without costing the economy significantly (and thereby undermining public support), we’ll need further price declines and massive gains in energy efficiency. It’s all doable, but it still remains an open question as to how much and how soon.
Until then, we may need to inject some notes of caution into an otherwise positive picture, so far.
California committed itself last week to the most aggressive greenhouse gas reduction goals in the country. Governor Brown signed SB 32 (Pavley) and AB 197 (Garcia) in Los Angeles on Thursday, placing the state on a pace to reduce emissions 40 percent below 1990 levels by 2030.
The Real News Network interviewed me on Friday to discuss the implications, in a piece airing today:
As I noted earlier today, there was a bit of added drama to the passing of SB 32 yesterday in the California Assembly, as the passage was dependent on the state enacting AB 197. The Assembly debated AB 197 this morning, and it passed out of the natural resources committee with six votes in favor and one opposed. It then headed to the assembly floor where it just passed 44 votes in favor, 28 opposed. The governor has vowed to sign it.
The irony is that the oil and gas industry fought attempts in the legislature to save cap-and-trade with a two-thirds vote. Cap-and-trade is a more palatable market-based alternative for the industry, compared to direct regulation, which AB 197 now prioritizes. So the industry is stuck with a majority-vote command-and-control approach. Perhaps then it’s no surprise that industry representatives argued against AB 197 in committee this morning by saying it would undermine cap-and-trade.
So given the political momentum, my guess is that diverse parties now have an incentive to save cap-and-trade. But in the meantime, California has affirmed its international-leading commitment to stay the course on greenhouse gas reductions through 2030, pending final senate approval of an amended SB 32.
As I blogged yesterday, the California Assembly took a giant step in approving SB 32 (Pavley), with one vote to spare for a majority. But the bill is tied to AB 197, which is up for debate today. That bill restricts some of the California Air Resources Board’s independence to implement the 2030 law by giving the legislature more oversight. It also adds in a requirement that all regulations under SB 32 must include a “social cost” accounting that could make command-and-control regulations more palatable than market-based solutions like cap-and-trade. My colleague Ann Carlson at UCLA Law has more analysis at Legal Planet.
The oil and gas industry has apparently targeted AB 197 as a way to bring down SB 32, plus the state senate will need to reconsider SB 32 given that the assembly amended it after it passed the senate first. So it could be another nail-biter.
But assuming these bills are approved in their current form, the implications for California’s post-2020 plans will become much more clear. First, most of the major climate regulations in place now will be able to continue through 2030, without the uncertainty of relying just on an executive order. The big exception is cap-and-trade. However, with command-and-control regulatory authority in place from SB 32, the oil and gas industry will have an incentive to try to re-authorize cap-and-trade as a more palatable alternative to direct regulation. That could make 2017 a big year for that program in the legislature.
In the end, cap-and-trade is just one means to achieving our state’s climate goals, and there are other ways to get there. Command-and-control may be more effective at guaranteeing actual emissions reductions. The downside is that this approach could entail greater costs for industry than a market-based program. And for environmentalists, these site-specific regulations don’t generate auction proceeds like cap-and-trade, which the state is now relying on to fund a host of programs, from high speed rail to low-income housing near transit.
But all of this speculation is premature, as we wait to see what the legislature does with AB 197. I’ll provide updates as the process moves forward.
It was a rough year in 2015 for SB 32 (Pavley), California’s major climate bill to extend the state’s greenhouse gas reduction efforts to 2030. The bill went down without a vote on the Assembly floor, due to opposition from “moderate” Democrats.
But today, the Assembly passed the bill with 42 votes in favor, 29 opposed:
This majority vote won’t inoculate certain programs under AB 32, like cap-and-trade, from court challenges alleging that they constitute a tax requiring a super-majority vote. But the bill gives the California Air Resources Board authority to implement command-and-control regulations, if market-based alternatives are challenged.
With the senate already passing SB 32, the governor will sign soon, and California’s position as an international leader in reducing greenhouse gas emissions will continue.
As the Sacramento legislature debates SB 32 to formally extend the state’s greenhouse gas reduction targets to 2030, a big piece of the political puzzle is the cap-and-trade program. Namely, will the Air Resources Board have authority to continue the program beyond 2020?
There are a number of scenarios at play:
- The ideal situation, for boosters of the program, is that the legislature approves SB 32 with a two-thirds majority, which inoculates the program from any court challenges that it’s a “tax” or “fee” that requires a two-thirds vote under voter-approved amendments to the state’s constitution.
- Barring that (which seems unlikely this year but could happen next year if an anti-Trump “wave” sweeps away some of the legislators friendly to the oil and gas industry), the next option is to pass the 2030 goals with cap-and-trade via a majority vote. Arguably, the program is neither a tax or fee and therefore only requires a majority vote to enact. But a court would have to decide that outcome. So more uncertainty would result regardless.
- The third option is to simply carry on as usual under AB 32 authority, which the Air Resources Board is currently doing. As my colleague Cara Horowitz at UCLA Law has described, there is a pretty solid argument that AB 32 provides all the authority that the Air Resources Board needs to continue the program beyond 2020, particularly with Governor Brown’s executive order to that effect. But that approach too will almost certainly require a court to sanction, leading to more uncertainty in the coming years.
The final alternative, from a political standpoint, is to pass SB 32 on a majority vote, giving the Air Resources Board authority to issue command-and-control regulations to limit emissions from the oil and gas sectors. Presumably, the industry would much prefer a market-based approach to command-and-control, which would bring them back to the table with their legislative allies to re-authorize cap-and-trade beyond 2020. But who knows. And there’s also the wild card of the governor placing a 2018 ballot measure before the voters on the issue.
One thing for sure: if the legislature does not resolve the situation soon, it will likely fall to the courts to decide.
Since I did the look-back on 2015 yesterday, now’s the time to offer the three big things to watch in 2016 on the fight to reduce greenhouse gas emissions:
3. Presidential Election: This is huge, as the current leading Republican candidate would say. The November election will determine whether the US sticks with the Paris agreement, continues support for renewable technologies and corresponding lack of support for coal, and fights for the EPA Clean Power Plan. The EPA finally released this plan in 2015, as required by a 2007 Supreme Court decision, and the plan underlies the US commitment to greenhouse gas reduction enshrined in the Paris agreement. While the final legal outcome won’t happen for a few more years (it will assuredly go to the Supreme Court), a Republican administration will try to gut the proposed rule from within.
2. Electric Vehicle Progress: As I mentioned yesterday, electric vehicle sales were down in 2015. But with the new Chevy Volt coming out, a slightly improved LEAF, and the much-hyped Tesla Model X all hitting the road, it will be important to see progress on the sales front this year. As a related honorable mention, we’ll need to see continued decreases in battery prices, not just for vehicles but for energy storage more generally.
1. California’s SB 32 2030 Climate Goals: The state has been an international leader fighting climate change, thanks to 2006’s AB 32, which set carbon reduction goals for 2020. But the effort to extend and ramp up the targets by 2030 failed spectacularly in the Assembly last year. It’s vital for the climate fight that the law pass this year. Otherwise, existing legal authorities to continue carbon reduction beyond 2020 are weak, and the signal a failure would send to the country and world would be detrimental. Meanwhile, the state would risk undermining the progress it has made nurturing in-state clean technology industries. While federal action on climate is important, California’s role as the guinea pig and pioneer on climate has been central to showing leaders in advanced economies how to decarbonize while growing the economy.
And with that, let’s see what the new year brings.
This legislative season in California will rank as a big disappointment for environmentalists. The last-minute failure to secure a 50% petroleum reduction by 2030 goal, followed by the defeat (actually postponing) of the bill to set 2030 and 2050 greenhouse gas reduction targets, was a major blow for environmentalists used to getting what they want out of Sacramento. Many commentators are starting to blame Governor Jerry “above the fray” Brown for not doing more to secure passage in the Assembly.
But lost in these setbacks is the major accomplishment of boosting California’s renewable energy standard to 50% by 2030, coupled with a mandate to double energy efficiency in existing buildings by that year. SB 350 (De Leon) may have been stripped of the petroleum goals, but these other targets are significant accomplishments. The energy efficiency piece set forth a process for the California Energy Commission to set long-term targets and evaluate progress on a regular basis, while the renewable energy mandate essentially just adds the 50% goal into the previous legislation requiring 33% by 2020 — in other words, no new process needs to be created for California to continue down this renewable path.
And finally, SB 350 makes it easier for California to develop a western regional market for renewables that will cover neighboring states and allow California both to import renewables from out-of-state when we need them and export our surplus renewables to other states. The legislation allows the California Independent System Operator, which essentially manages California’s grid, to change its governing rules to allow regional transmission operators to become part of the system. That will facilitate the import and export of renewables, helping California to better balance our in-state supply and ensure that dips in production don’t result in more natural gas-fired power.
So while the legislative season may have largely ended in disappointment, the accomplishments that did occur are worth celebrating for environmentalists.
In another, even bigger setback for the environmental community in California, SB 32 (Pavley), the bill to set greenhouse gas targets for 2030 and 2050, was pulled yesterday and will be tried again next year. The winners are the oil companies, who face tough regulations and competition from California’s climate efforts.
The failure is a big sting for climate advocates in the leading state on this issue. I’m not an expert on the politics, but it appears from press reports that the culprit was oil industry-funded opposition and concern from lawmakers that they won’t have much say in the implementation process. On this score, they are correct: AB 32 was a pretty amazing delegation of authority to the California Air Resources Board, with a bill that clocked in at just twelve pages, leaving the agency with wide rein to implement (compare that to the federal climate legislation back in 2009, which was over a thousand pages of legislated deal-making, rather than being a wide grant of authority to the U.S. Environmental Protection Agency to implement).
So what does the failure mean for ongoing climate efforts? Well, at the very least, we know AB 32 authority still controls, with the state on track to meet the 2020 targets. AB 32 also binds California to those continuing emissions levels beyond 2020, as Cara explained. So that means we’ll have at a minimum a flat-lining of emissions after 2020.
Beyond that authority, many (if not most) of the climate measures under AB 32 come from independent legislative acts, such as renewable energy and energy efficiency mandates (both of which may be strengthened if SB 350 passes today) and SB 375 (Steinberg) on land use, many of which have goals beyond 2020. Incentives for electric vehicles and other renewable fuel technologies will continue, along with federal efforts like the Clean Power Plan and fuel economy standards, plus tax breaks for solar and electric vehicles.
The governor has also issued an executive order that mirrors SB 32 with 2030 goals. But these orders can be changed by future governors, and they ultimately need to be based on legislated authority that may not be there beyond 2020.
Politically speaking, legislators will get one more go at this effort next year. Some say it’s tougher to pass in an election year, but the original AB 32 passed in an election year, and that was a non-presidential one when turnout was lower and presumably more conservative. Maybe SB 32 backers learned some lessons for the next effort.
There’s no denying that a failure in 2016, despite other ongoing measures to tackle climate change, could be a serious setback on reducing emissions — not just here in California but worldwide, given the state’s leadership role. But the state’s climate program will continue regardless. And as extreme weather continues and the benefits of the existing programs are felt by more residents, the politics may improve for these efforts as well.