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Proposition 23 on California’s November 2 ballot would effectively kill the state’s law to reduce greenhouse gas emissions and damage the U.S. market for less polluting energy sources.
Some of the more excitable tea partiers have adopted Proposition 23 as a pet cause. Should Prop. 23 prevail at the polls though, those tea partiers might want to invite Hu Jintao to their celebration tea party and pour him the first cup. Green tea would be appropriate to symbolize the market advantage they will have just handed to China.
The argument for passing Prop. 23, so we’re told, is saving jobs. If that thing is passed, it will save jobs all right – jobs in energy technology plants that are likely to end up in China.
California is widely regarded as an economic basket case, and in many ways it is, but in clean energy investments – renewables, battery storage, smart grid, efficiency products and services, and non-petroleum fuels – California is golden.
Venture capitalists are pouring money into the state to finance those kinds of businesses. In the second quarter of 2010, for example, nearly half of the $2 billion in global clean energy investment surged into California.
In 2009, California attracted $2.1 billion in clean energy investments. That’s according to George Shultz, whom people of a certain age might remember was President Reagan’s secretary of state.
Shultz, now with the Hoover Institution, is co-chairing the campaign to defeat Proposition 23.
One reason that clean-tech moneymen have eyes for California is that the state law in question, Assembly Bill 32 – AB 32 for short – gives investors the certainty that there will be a growing market for the products they’re financing. AB 32 does that by signaling to the energy market that emitting carbon pollution in California will no longer be free.
By pulling the wings off AB 32, passing Proposition 23 would tell such investors that California doesn’t want their money. Few stay where they’re not wanted. If China wants their money – and China does – China will get it if California takes the Exit 23 off-ramp.
Venture capitalist Vinod Khosla explained: “AB 32 created markets. Prop. 23 will kill the market and the single largest source of job growth in California in the last two years.”
AB 32 is Arnold Schwarzenegger’s baby. The Terminator has been less kind about Proposition 23 and its backers: “Does anyone really believe that these (oil) companies, out of their black-oil hearts, are really spending millions and millions of dollars to protect jobs? It’s not about jobs at all. It’s about their ability to pollute and thus protect their profits,” he thundered at a Silicon Valley appearance last month.
Proposition 23 backers argue that AB 32′s requirements would leave what’s left of California’s economy a smoking ruin.
George Shultz has been around long enough to know that whenever tighter environmental standards are proposed, we hear those sorts of turgid predictions; and every time, they have fallen well short of the mark.
As Shultz wrote in a Sacramento Bee op-ed: “Every time we challenge American industries with higher standards, they meet them earlier, for less money and invent new products for export along the way.” As they did when Reagan got the Montreal Protocol ratified and chemical companies found less problematic substitutes for ozone-depleting substances.
There is no reason to think that businesses won’t rise to AB 32′s challenge. In a world where investment capital can flit across oceans, America’s competitive advantage remains its technology smarts and entrepreneurial culture.
Proposition 23 is one long meme that America can’t compete and shouldn’t try. Shultz’s counter-attack: “We do not need this defeatist initiative with its sense of pessimism and its can’t-do attitude.”
No, Mr. Secretary, we don’t need it and we shouldn’t sell out for it. Not for all the tea in China.
What are electricity costs in California? How much higher than elsewhere in America are they because of heavy “green” regulations? Does California really want to force every other industry in the state to sacrifice jobs, growth, and profits in order to benefit a fashionable, politically connected expensive “green power” industry? Will that produce net more jobs?
Furthermore, Schwarzenegger thunders against the oil industry. But oil is essentially irrelevant in the electric power game. Half our electricity comes from coal, 20% each from nuclear and natural gas, 5% from hydro-electric dams, and 2% from all “green” sources combined (solar, wind, biomass, geo-thermal, tidal, etc.). Aside from a handful of locations, such as Hawaii, flipping on the lights doesn’t burn oil.
If you want to free us from oil, focusing on the electricity sector and beating up on coal and natural gas electric plants is a waste of time and a distraction. Instead you need to be focusing on transportation, where, in a complete flip, oil is nearly totally market-dominant, with over 95% of cars on the road being ONLY able to run on gasoline or petro-diesel.
Now Schwarzenegger HAS tried to address this issue, but unfortunately has been focused on a disastrous non-solution: the Hydrogen Hoax.
http://www.thenewatlantis.com/publications/the-hydrogen-hoax
He has poured vast state resources into hydrogen stations, hydrogen cars, etc.
If only he had just insisted that all new gasoline powered cars sold in California be fully flex fueled (also able to run on alcohol fuels such as ethanol and methanol)! The engineering changes necessary to accomplish this are trivial for automakers, costing only about $130 per new car at the factory. A California standard this minor would have effectively become the nationwide standard, and since no foreign automaker would write off the US market, a worldwide standard.
And the monopoly of oil over transportation would have been broken. OPEC could no longer raise oil prices on a captive helpless market; gas stations would race each other to switch at least one pump to alcohol fuel to avoid being undercut by rivals. And because alcohol fuel burns without smoke or soot, L.A.’s famous smog problem would have gone a long way toward being solved.
I like your thinking — can’t understand why this is not being done except that they are morons.
I echo xyzzzy.
I like this especially:
“Assembly Bill 32 – AB 32 for short – gives investors the certainty that there will be a growing market for the products they’re financing.”
Some may not like that this knocks big energy around, but haven’t conservatives been screaming for market certainty so that businesses will invest capital? Protect the environment, create jobs, provide market certainty…Works for me.
2 billion may have flowed in, but how much money and jobs flowed out??? Seriously, and I think California should be a little more worried about Utah taking all its jobs than China http://www.dailybreeze.com/editorial/ci_16059463
no disagreements with anyone on this thread
good article too, well done. I lived in China and I was surprised to see solar water heaters in remote villages. And in my town in Oaxaca we have a massive wind farm at La Ventosa, and my school has added solar and energy departments, bear in mind my school is one of the feeder schools for Pemex and receives the bulk of its funding, and our English department does training for Pemex executives in Salina Cruz so when Mexico can see the writing on the wall you know it has to be damn big.
As conservatives, we should support the use of the 50 states as social laboratories for experimentation with advanced social reforms.
If California can revive its economy with “green” industries, than more power to them (pun intended). And that can be a showpiece to show the rest of the nation how it’s done.
If California can’t, then that’s a warning to the rest of the nation that “green” industry isn’t working out.
It’s the same idea I had with health care reform: MA and TN already went first, with RomneyCare and TennCare respectively. Yet the ObamaCare bill plunged ahead without any lessons learned from these first two statewide experiments. ObamaCare could have been designed to capitalize on the good points of RomneyCare and TennCare while avoiding their bad points. But it wasn’t.
Funny how all these “green initiatives” all seem to require government subsidies, mandates or punishing taxation to be viable.
http://www.auburn.edu/~johnspm/gloss/rent-seeking_behavior
by the by, here’s a fun article on biofuels:
http://www.time.com/time/magazine/article/0,9171,1725975-1,00.html
@TobyTucker
Same can be said for petroleum who gets anywhere from 15 to 35 billion on taxpayer subsidies, yet there is much less upside to that invest as opposed to green energy. If we subsidize green energy NOW we can create a long-term competitive advantage. Green energy is coming, there’s no way around it. The question is will the US pull it’s head out soon enough to get out front while it’s still possible.
TodyTucker:
“Funny how all these “green initiatives” all seem to require government subsidies, mandates or punishing taxation to be viable. ”
That ‘punishing taxation’ you mention is simply pricing the negative externalities that older technologies produce.
Toby Tucker, as misleading and half-baked as that Time hit piece on biofuels is, at least it couldn’t bring itself to make the usual ludicrous claim that sugarcane ethanol is grown in the Amazon, instead relying on an improbable domino theory.
The world’s ag sector has enormous slack capacity. Only half our cropland is under cultivation, and relentlessly rising per-acre yields mean less is needed to meet demand, and fewer farmers to run it. We can greatly expand production for biofuel without harming the food supply.
The proof is in the pudding – even as US corn ethanol production has risen sharply, food corn production has not fallen, but rather has risen as well, as have other staples like soybeans. In fact, ethanol can help reduce food prices and help with hunger, by breaking OPEC’s monopoly on tractor and fishing boat fuel and the fuel needed to get food to market, and by giving subsistence farmers hard currency via cash crops.
Anti agriculture extremists and Malthusians would have opposed our Great Plains becoming the world’s breadbasket as well. Grown-ups understand that nothing can be done with zero impact, so focusing without context on only one activity is misleading. The relevant question is, which is the better option? The answer there is clear. Oil is an environmental, economic, and geostrategic disaster of near-apocalyptic proportions. 40,000 Americans (and a million Chinese) a year die of smog-induced lung cancer. We’ve had three oil-induced economic crashes (1973, 1979, 2008) , wiping out trillions in wealth and millions of jobs. Oil-funded regimes are a rogue’s gallery of the world’s worst, perpetuate and export ignorant fanatical extremism, and fund armed movements dedicated to slaughtering our civilians here at home.
Biofuels are a crucial part of the answer. Ethanol is one of them. Another is methanol, which can be made from any biomass at all, including crop residues, weed plants that need clearing anyway (kudzu, water hyacinths), trash, even sewage. Nor is methanol necessarily a biofuel – it can be made cheaply from natural gas or coal.
Alcohol fuel burns much cleaner, dissolves in water to be broken down by naturally occurring bacteria, cannot have its market “cornered” by any entity (let alone a gang of tyrannies), and doesn’t fund terrorism.
@TobyTucker Then why not complain about the tax breaks and loopholes created to give oil companies a ‘break’? They take huge tax breaks for oil exploration expenses. But isn’t exploring for oil part of the job?
Cut all the tax breaks to coal and oil and maybe we can talk.
Carney:
2008 wasn’t an oil induced crash. Yes speculation caused an oil spike but that isn’t what created the recession.
Incorrect, Rabiner.
“Speculators” didn’t cause the oil price spike. The price of oil, aside from short term changes, is what OPEC decides it will be. OPEC turns the taps on and off, or up and down, as it likes, with the express purpose of maximizing its revenue.
Carney:
You really don’t understand commodity futures trading which can effect the price of oil. OPEC has never wanted oil to go to $130 a barrel and would never want it to so governments like ours don’t decide to invest in alternative energy sources.
http://www.econbrowser.com/archives/2008/06/oil_spike.html
It wasn’t actual supply that changed, it was speculator and trader driven with some help from worries that future supply may shift due to geopolitical incidents (Iran).
Carney:
You really don’t understand commodity futures trading which can effect the price of oil. OPEC has never wanted oil to go to $130 a barrel and would never want it to so governments like ours don’t decide to invest in alternative energy sources.
It wasn’t actual supply that changed, it was speculator and trader driven with some help from worries that future supply may shift due to geopolitical incidents (Iran).
http://www.econbrowser.com/archives/2008/06/oil_spike.html
Rabiner, my post above allowed for short term up and downs – obviously the price of oil would bump up if Iran publicly threatened to mine the Gulf or something – but the fundamental driver of the price of oil is supply and demand. Demand constantly rises in an organic way as the world population and economy grows, but supply is arbitrarily set by the OPEC cartel. This can be seen by tracking OPEC and non-OPEC production. The latter has doubled in the last 30 years, neatly matching the doubling of the world’s population and economy. But OPEC production in 2007 was no higher than in 1977 – and it has the deepest reserves and the lowest extraction costs. Over time, OPEC production has varied wildly according to the arbitrary decisions of the cartel’s leaders, to turn the taps off to drive the price up, then back on again to cash in.
It’s time to get off the roller coaster.
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