A Commanding Approach to Climate Change

Loren Kaye
President of the California Foundation for Commerce and Education

One cheer for Senator Kevin De León.

The leader of the State Senate introduced legislation yesterday adding comprehensive new regulations to control California greenhouse gas emissions.

No, I’m not endorsing the substance of his legislation. More on that below. But the Senator deserves credit, along with other Senate and Assembly leaders, for insisting the Legislature play a leading role in what the state’s new policy should be after the expiration of AB 32 in 2020.

After all, the California Global Warming Solutions Act of 2006 comprised less than a dozen pages of statute – less than half of what it would take to regulate interior decorators. AB 32 was long on legislative intent and aspiration, but brief on specific direction and policy. It left all the dirty work and most of the controversy to the Air Resources Board, which over the course of two administrations has developed a  regulatory scheme that touches every corner of the California economy.

The mandates of AB 32 extend only through 2020. The good news is that Senator De León, following separate efforts by Senator Fran Pavley and Assemblyman Henry Perea, has staked a claim that the Legislature should play a key role in developing California’s climate change policy for the decades after 2020.

There is little question that California will adopt just such a policy. In his inaugural address last month, Gov. Brown touted the state’s “most far-reaching environmental laws of any state and the most integrated policy to deal with climate change of any political jurisdiction in the Western Hemisphere.” The Governor went on to state the case for even further GHG emission reductions, reiterating that “reducing carbon is compatible with an abundant economy and human well-being.”

Just how to incentivize or engineer these reductions will be the central battleground of the post-2020 debate. The Governor gave some examples of how California might meet a 2030 benchmark, but stated them as “ambitious goals,” not policy prescriptions.

Sen. De León takes a different approach – turning the Governor’s aspirations into policy prescriptions.

Without so much as a wink toward market mechanisms, the Pro Tem’s approach is determinedly command-and-control:

  • Increase the mandate on electric utilities to purchase half of their power generation from renewable sources by 2030 – the current purchase mandate is one-third. The supporting materials claim that “renewable power generation costs in 2014 were either as cheap or cheaper than coal, oil, and gas–fired power plants – even without financial support and despite drops in oil prices.” Unless I’m missing something, if renewable power generation is in fact price–competitive with traditional generation, a more aggressive mandate may not be necessary.
  • Reduce the use of petroleum-based fuels by 50 percent by 2030. The Senator’s materials correctly identify the transportation sector as the largest single source of California’s GHG emissions, as well as the major remaining source of criteria air pollutants like ozone and particulates. Advances in fuel and automotive technologies have cut ozone levels by half since 1980, and are a small fraction of the levels in the 1960s. These reductions were driven by tailpipe standards – not product or driving quotas. As for GHG emissions, Senator De León’s proposal ignores the promise that an economy-wide market mechanism, such as a cap-and-trade system, can reduce carbon emissions more efficiently that selecting a specific product or behavior for hyper regulation.
  • Achieve 50% greater efficiency in buildings by 2030. California has led the nation in energy efficient building standards since Gov. Brown’s first administration. While new buildings can always be made more efficient, today’s tight requirements means additional future mandates will be subject to diminishing returns. The best opportunity for cost-effective energy efficiency would be retrofitting older homes, but this requires either generous incentives or potentially punitive mandates on homeowners and small businesses.

This proposal by the Senate leadership is an important milestone in the 2015 climate change policy debate. Along with the plan to be rolled out by the Brown Administration, and additional regulatory or market approaches surfaced by others, the Legislature should have a full range of options to consider.

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