Next Steps in the Climate Change Policy Debate

Loren Kaye
President of the California Foundation for Commerce and Education

Yesterday saw a strategic retreat by Governor Brown and legislative leaders on climate change policy. While disappointing to leaders who want to seize the moment, this is in truth a good time to reassess mechanisms to achieve climate and energy goals.

Like most Californians, I believe our elected leaders should take sensible actions to address global warming. This is mostly a job for our national government, working with leaders of other industrialized and developing countries.

But there is also a role for state leadership. Governors Schwarzenegger and Brown sought out and won international recognition for their efforts to reduce greenhouse gas emissions from our economy. They understand that their influence has been mostly to set an example of successful public policy that can be emulated by others, not simply by how much we can reduce our already-infinitesimal contribution to global climate change.

California is responsible for about one percent of global carbon emissions. Even a complete cessation of GHGs in the state would have negligible impact on the earth’s climate.

Instead, conventional wisdom had been that California’s leadership would provide a regulatory proof of concept. This was the case made to former Assembly Speaker Fabian Núñez, lead author of the landmark 2006 legislation.

In a recent interview Mr. Núñez revealed that environmentalists convinced him to carry a tough bill because, in his words, “once California passes a law, all of these other states are going to follow suit. All of them.”

But he learned a hard lesson: “The irony of this is that once the law passed in California, no one followed suit. No one.”

California is still unique among the 50 states and the federal government in forging an economy-wide regulatory path to cut carbon emissions. Despite our best efforts, other jurisdictions have not followed our lead. As the executive officer of the Air Resources Board put it, “What’s good for California, and what others will ultimately look to, is success. The ultimate test of success is going to be: Did it work?”

Sadly, this perspective is absent in the current legislative debate on proposals to ramp up California’s climate change regulation. Even though California has implemented a groundbreaking cap-and-trade regulation for greenhouse gas emissions, along with numerous command-and-control mandates, the Legislature has evinced no curiosity about how well those regulations have worked and whether they have exacerbated or prevented emissions or economic leakage outside our borders.

The current climate change law expires in five years, plenty of time to assess its impact and pass new legislation to change or extend it.

Instead, legislators hurriedly considered two proposals that were informed not by data or research, but by the drama of setting the highest possible bar.

One bill by Senate leader Kevin de León sought to reduce petroleum consumption by half, double energy efficiency of existing buildings, and mandate half of electricity used in state be produced by renewable generation. All of these round numbers are to be accomplished in just 15 years.

This legislation would be the apotheosis of command and control, untethered to any health or greenhouse gas reduction goal, never mind any strategy that other states or nations might emulate. These mandates are uninformed by carbon pricing, market signals or consumer behavior. At best they may reduce some GHG emissions expensively and haphazardly; at worst they will cause enormous economic and social dislocation without achieving benefits for Californians.

De León announced yesterday that the petroleum mandate would be removed from the bill.

A second proposal by Sen. Fran Pavley would extend the current regulatory program, doubling the existing GHG reduction goals by 2030 and quadrupling them by 2050.

Sen. Pavley’s proposal has the benefit of specifying a GHG reduction goal without delineating command-and-control measures to achieve them. But the legislation suffers from its lack of curiosity – either retrospectively as to what succeeded or failed from the current effort, or prospectively to allow the Legislature to check in on progress over the thirty years.

In fact, a thirty-year regulatory scheme with no guidance and no off ramps is simply too long a leash to provide the Air Board when the subject of the regulation is nothing less than the entire California economy. Over the thirty-year regulatory scheme, there are no mandatory checkpoints to determine if the approach is working, and especially to determine how California’s regulations fit into the global drive to reduce carbon emissions. The bill creates California as a regulatory island, without regard to the actions or inactions of the rest of the world.

Finally, the bill misses two opportunities to limit the economic impacts of future climate change policy. First, the bill ignores the benefits that flow from a well-designed market-based system, such as cap-and-trade, on the efficiency of regulatory compliance and encouraging innovation. Transparent prices will signal to the carbon market the most cost-effective solutions for reducing GHG emissions.

Second, the measure will create an enormous cloud over new development, essentially requiring every new project otherwise subject to the California Environmental Quality Act to prove how it will meet or mitigate to an 80% GHG reduction by 2050 standard. The measure will engender lawsuits on individual projects as courts hammer out appropriate levels of GHG mitigation on a project-by-project basis. How do we know this? Because the comparatively modest existing 20 percent reduction standard has been interpreted just this way by California courts.

Climate change is a transcendent issue that will be solved by global leadership, but which can benefit from creative state actions. California officials should note wisely how best to influence world leaders – by adopting data-driven successes attuned to the global regulatory context. After all it isn’t leadership if nobody else will follow.

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.