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.
ARPA-E just might save the world. And you probably never heard of it. As I wrote back in January 2015 (okay, I’ll just quote myself here):
Why is ARPA-E so important? Because this Department of Energy group is searching out and funding those moonshot — or sunshot — technologies that will give us the energy breakthroughs we need to fight climate change. If we’re going to find the better battery to finally wean us off oil and into electric drives, or build the cheap energy storage device to capture surplus renewables and truly decarbonize the grid, or make our solar panels even more efficient and cheap, chances are ARPA-E will be involved in making that happen.
Now the agency, on the occasion of its seventh birthday, is releasing a report detailing some of its successes. Per Utility Dive:
Since 2009, ARPA-E has provided $1.3 billion in funding to more than 475 projects. Of those, 45 have gone on to raise $1.25 billion in publicly-reported private sector funding.
…
“ARPA-E fills a critical gap in the innovation ecosystem, investing to de-risk and accelerate the development of high risk, high impact technologies that would otherwise find it difficult to secure investment,” said Jesse Jenkins, a researcher and doctoral candidate at the Massachusetts Institute of Technology.“This is an essential role for government to step into, helping bridge the ‘technological valley of death,’ a consistent dearth of private sector funding that impedes the translation of promising research into commercial technologies,” he added.
The article describes a few examples, particularly with battery systems and other energy storage technologies. These funded projects include hybrid fuel cells, zinc-air batteries, as well as flywheels and a vegetable-based flow battery developed by Harvard researchers.
This is the kind of agency that the federal government should be funding to the brim, especially with this impressive track record on deployment. It’s also one of the critical issues at stake between a Trump or Clinton victory this fall. If we want to continue on this path and fund the breakthrough clean technologies of the future, the choice is clearly for Clinton.
And in the meantime, the success to date for ARPA-E is a big credit to President Obama and the agency staff. Let’s hope they continue the momentum, as the health of the planet depends on it.
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:
California leads the nation in plug-in electric vehicle sales, with about 40% of the nationwide total happening in the Golden State. While some of that progress is related to the sheer market size here, much of it is due to state policies. And the biggest of those policies is the “zero emission vehicle” (or “ZEV”) mandate, which the California Air Resources Board first adopted by regulation in 1990 under its Clean Air Act authority.
The program has been modified over the years but essentially requires automakers to sell a certain amount of “clean” vehicles (plug-in hybrids, battery electrics, and fuel cells), based on their total sales, or else they have to purchase credits for an equivalent amount. The goal is to achieve 15 percent of new vehicle sales from these “clean” versions by 2025, up from the current 3 percent market share, where it’s been stuck 2014.
But here’s the problem: the credit system has generated a glut. As a result, many automakers now have no incentive to actually produce and sell more electric vehicles. And with recent weak demand for electric vehicles (due in part to low gas prices), they argue that they’d rather stockpile credits than make new vehicles.
It’s gotten under the skin of Tesla chief Elon Musk and his staff. Tesla benefits from the sale of credits to other automakers, and so the company suffers when the glut drives down prices and diminishes demand. Musk would like to see a higher threshold of credits needed to satisfy the requirement, which would just so happen to benefit Tesla’s bottom line.
It’s gotten personal among the automakers, per Reuters:
Earlier this month, Tesla’s Diarmuid O’Connell, vice president of business development, sparred with lobbyists for major automakers during a conference near Traverse City, Mich. He chided the industry for fielding electric cars that don’t sell because they are slow and have all the panache of household “appliances.”
John Bozzella, head of a group that represents several Asian and European auto makers, countered that most consumers don’t want electric vehicles – and pointedly wished Tesla well in its quest to achieve profitability.
The Board will be revising the program this December, so the issue has become a hot potato. NRDC released a recent study [PDF] of the current rules and progress to date, which documents that at this pace the state will fail to meet its deployment goals by 2025. They argue for tightened rules, such as a higher percentage of automaker sales that must be zero-emission through 2025, fewer credits awarded for each clean vehicle, and reduced credits that can be “banked” over time.
Clearly, changes like these need to happen with the program, because business-as-usual is not likely to get the electric vehicle market to the place it needs to be for long-term pollution reduction. To be sure, the market is making good strides, with the Tesla Model 3 and Chevy Bolt on their way. And the inevitable rise in gas prices will eventually help boost demand. But California cannot meet its long-term climate goals without widespread vehicle electrification, and a stronger ZEV program is key to making that happen.
Jill Stewart is the campaign director for the Neighborhood Integrity Initiative, a Los Angeles measure proposed for the March 2017 ballot that would essentially freeze new development in the region. It’s fundamentally a NIMBY campaign in response to the region’s haphazard planning and entitlement process.
The Planning Report recently interviewed Stewart, in which she badly misstates urban theory (and evidence) on smart growth:
In a TPR interview in February, you said: “I have not been impressed by the new urban theory that very dense development through neighborhoods near bus stops, and so on, is going to reduce congestion. In fact, we’ve seen the opposite.” Is that assertion consistent with what you learned campaigning for NII?
Absolutely. I think most people are realizing that it is another failed urban theory put together by academics that have zero proof that it works.
The new mantra in every big city feels the same, essentially being: “We are all going to change the way we live.” I’m from Seattle, and I was there for a recent vacation. My Seattle friends and I were dreaming about a more intelligent way to go if we weren’t caught up in the urban planning religion that has gripped so many people. It’s comforting that a majority of residents are not gripped by this mantra. They do not buy into it.
When I discussed with my friends, we talked about how people are going to start working at home more. People are also starting to take Uber and Lyft more. It is a completely different world that is not built around fixed rail lines and coming into a big city center to work. The big city center is very 1980s or 1990s.
We came up with a way to resolve this: by rewarding the way people really behave. As more people work at home and stay off the roads, they should get a massive tax rebate, as long as they can prove it. Staying off the streets and not using the infrastructure should be rewarded. Often, the city of LA adds taxes to people who work from home. That’s backwards.
The urban planners are stuck in a different world. They are saying that everyone needs to move close together and cram their children into places where there is nowhere to play. The theory that people enjoy living around the noise and congestion is wrong, and we need to respond to how people really live.
Where to begin? First, I’ve yet to meet any urban planner who says that everyone “needs” to move into compact, transit-friendly neighborhoods. Rather, the argument is that we don’t have enough of these neighborhoods, at least at affordable prices, to even give people the option of living there, if they seek a lifestyle that is not car dependent. Los Angeles certainly provides plenty of options for suburban-style living, but not so much for low-crime, walkable, transit-friendly neighborhoods. And when the region does provide those options, the demand is through the roof, leading to high rents and home prices that keep out all but the wealthiest.
Second, the urban theory of smart growth has never been about “reducing congestion.” With growth comes some congestion, but growth in the right places means people have the option to drive less and therefore spend less time stuck in traffic. So the theory is really about reducing per capita driving miles.
And there’s plenty of evidence this works. Just look at any map of greenhouse gas emissions per capita, which is largely a function of vehicle miles traveled: it’s always lowest in compact urban centers near transit. People in these areas don’t need to spend much time in traffic, if at all.
But ultimately, if you’re simply anti-growth — or anti-growth anywhere near you — then none of this information really matters. But if you care about housing affordability, the environment, and creating better, more connected and convenient neighborhoods, then it’s important to get the facts straight.
With the passage of AB 197 yesterday, it’s easy to assume that the future of cap-and-trade may be gloomy beyond 2020. The program relies on legislative authorization via AB 32, which expires in 2020 (although arguably does not preclude extension beyond 2020). But AB 197 now specifically directs the California Air Resources Board to prioritize:
(a) Emission reduction rules and regulations that result in direct emission reductions at large stationary sources of greenhouse gas emissions sources and direct emission reductions from mobile sources.(b) Emission reduction rules and regulations that result in direct emission reductions from sources other than those specified in subdivision (a).
Ann Carlson at Legal Planet asks the question whether or not this spells the end of cap-and-trade. The answer may be quite complicated and will probably land the agency in court to resolve either way, as Ann discusses:
First, what does it mean to “prioritize” direct emission reductions? Does the language require ARB to impose such reductions? Or only consider them in conjunction with other considerations? What happens, for example, if direct emissions reductions are more expensive than reductions achieved through cap and trade even taking into account the social costs of emissions as required?
If the Air Resources Board leadership is committed to keeping cap-and-trade alive beyond 2020, which it appears they are, then my guess is they have enough wiggle room and deference to do so, once they undertake a proper analysis of the various options on any given issue before them.
But the new language in AB 197 will certainly provide fodder for cap-and-trade critics to take the agency to court over any decisions privileging that program over direct command-and-control approaches. So in that respect, AB 197 only adds further uncertainty to the program after 2020.
The issue does not not need to be solved right away, as cap-and-trade will continue through 2020. But the lingering doubts are apparently undermining the auctions for allowances, leading to low prices and uptake. And industry will not want to continue indefinitely with so much uncertainty in the short term. Hence their motivation to encourage a legislative fix as soon as possible.
2017 should be an interesting year for cap-and-trade.
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.
UPDATE: SB 32 is tied to the passage of AB 197, which is still up for a vote.
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.
