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California At the Forefront

Charis Anderson

April 2006 was a big month for climate change policy in California. In the third article of a series about climate change policy in the United States, the Ecosystem Marketplace checks in to find out what went on in the Golden State.

April 2006 was a big month for climate change policy in California. In the third article of a series about climate change policy in the United States, the Ecosystem Marketplace checks in to find out what went on in the Golden State. "With this report and with actions our administration has already taken, California is a world leader in curbing greenhouse gas emissions," announced Governor Schwarzenegger in his opening speech at California's first Climate Action Summit in April 2006. "Everyone must do his or her part to pitch in and to make sacrifices, to give our environment the type of strong and committed protection that all Californians demand." California has the 6th largest economy in the world and is the 12th largest emitter of GHG globally –judging by the numbers, California is essentially a small nation. "We have been told by politicians, and by people in the business community, and also by environmentalists, that we have to choose between the environment and the economy," Schwarzenegger said at the Summit, "I reject this choice because it is a false choice." In fact, the state has been quietly making gains on global warming for some time now and has recently pushed the issue to the forefront of state politics. The Summit was but one of three big climate change policy events in California last month. In addition, the California Climate Action Registry hosted its annual meeting and the California Action Team released its final report on policy options for meeting emissions targets for 2010 and 2020.

The Fast Lane

California was first catapulted into the climate change fast lane when Schwarzenegger announced a set of greenhouse gas (GHG) emissions reduction targets for the state in June 2005. Concurrently, he established the Climate Action Team (CAT) and tasked them with developing a plan to help California meet the first and second targets by 2010 and 2020, respectively. In December 2005, CAT came through with a draft report that hinged on four key recommendations: Mandatory climate change emissions reporting Mandatory reporting would build on the voluntary reporting already underway through the California Climate Action Registry. With mandatory emissions reporting, California would build an emissions inventory that will set a baseline against which reductions can be measured. Ultimately, this baseline could be used to set an emissions cap. "We've tried to structure the reporting protocols to be rigorous enough for a regulatory program," says Diane Wittenberg, President of the Climate Action Registry. (For more on recent developments at the registry, click here) A public goods charge for transportation The second prong of the draft plan was a public goods charge for transportation that would parallel the public goods charge already in place for other California energy sources. CAT recommended adding a public goods charge to petroleum that would amount to $0.0257 per gallon at the wholesale level. There is reason to believe a public goods charge on petroleum would be successful. The public goods charge on electricity, for instance, suggests that the strategy works when it comes to influencing consumer behavior. Californians currently use 30% less electricity than the average U.S. citizen, and the various energy efficiency programs funded through the public good charges on electricity and natural gas result in ~$1000 net savings per California household on an annual basis. That said, the recent uproar over rising gas prices in the United States may make such a charge politically untenable. A coordinated investment strategy for the state funding programs CAT also recommended modifying various funding systems—e.g., the public-pension system and the Public Interest Energy Research Fund—using an investment strategy that would reward innovation in emission reduction technologies. The benefits of this new investment strategy would be two-fold: it would demonstrate continued commitment to GHG emission reduction, and it would position California at the forefront of the new "green" economy. Provisions for early action credits to California businesses Last but not least, CAT recommended providing some measure of recognition for those companies who have been (and continue to be) proactive in reducing GHG emissions. This, say observers, is important given the voluntary nature of many of the State's climate change policies. These four core recommendations were designed as a package and, according to the report, were "intended to encourage investment in technologies that reduce emissions, create jobs, and encourage economic growth." In addition to these key recommendations, the report detailed additional strategies for GHG reductions, some of which are already underway and some of which have yet to be implemented. While the draft report did not go so far as to recommend that California proceed with immediate implementation of a cap and trade program, it was included as an option worthy of further exploration. Some people, however, question whether California really needs to develop a more comprehensive emissions inventory before imposing an enforceable cap. "We already know what our emissions are, we have an inventory of California emissions that the Climate Action Team has relied on in part in doing this assessment. We can set a cap based on what we know today," says Devra Wang of the Natural Resources Defense Council (NRDC).

Everyone's Got Two Cents

Many people and organizations—from the Sierra Club and The Nature Conservancy to private individuals—submitted comments on the draft report. Although the comments varied as broadly as the groups submitting them, a few themes emerged. "The draft report was very good. It's very comprehensive and that's what struck me the most. It wasn't just a verbatim copy of other emissions trading schemes," says Alex Rau of Climate Wedge, a voluntary carbon offset fund.) Wang concurs, "I think it is definitely headed in the right direction, but as you know, the governor set targets back in June, and the CAT put this report together in a relatively short period of time. It was comprehensive given the timeframe they were working with." Most people agree that the report also demonstrates the feasibility of the GHG reduction targets set out by Governor Schwarzenegger. As recommended in the report, the reductions—to 2000 levels by 2010, to 1990 levels by 2020, to 80% below 1990 levels by 2050—will come from a mix of programmatic strategies. "The targets are feasible, but they definitely require some work. Half to two-thirds of the reductions involve programs that are already in place or that should be able to be accomplished," says V. John White, Executive Director of the Center for Energy Efficiency and Renewable Technologies (CEERT), a non-profit that advocates for renewable energy resources and energy efficiency measures. Wang agrees, "I think what the CAT report shows us is that the targets are achievable using a number of programmatic strategies." After a period of public comment and revision, CAT released the final version of their report on April 3, 2006. While the final report carries over many elements from the draft report, there are changes and additions as well. The final report doubled the number of overarching recommendations from four to eight:

  • A multi-sector market-based system that uses economic incentives to lower costs, protect economic growth, and promote innovation.
  • Mandatory emissions reporting that builds on the California Climate Action Registry, and provision for early action credit for companies.
  • A multi-generational public education campaign to ensure that the public is informed about the issue of climate change and what they can do to reduce emissions and adapt to adverse consequences.
  • An aggressive biofuels program.
  • All load-serving entities in the State must comply with the policy that all long-term new electricity generated for use in the state must come from sources with climate change emissions equivalent to or less than a new combined cycle natural gas power plant.
  • All utilities should meet the energy efficiency goal and the Renewable Portfolio Standard required of investor-owned utilities.
  • The California Climate Action Registry should develop emission reporting protocols for local government.
  • Provide funding for the report's strategies through a combination of a coordinated investment strategy, a public goods charge for transportation, and other sources (e.g., targeted dedication of other state funds, or philanthropic and corporate investment).

Additionally, CAT recommended that the macroeconomic analysis be updated to reflect new and incoming data. While all the key components of the original draft plan made it into this final list of recommendations, there are some key differences. The public goods charge on transportation—regarded as one of the most crucial elements of the draft plan—is buried in a broader recommendation on funding. In part because of the success of the public good charges on electricity, the public goods charge for transportation was regarded as one of the most pivotal recommendations in the draft report. "I think the backbone of the report is the public goods charge. The other three are much more general in nature and frankly, don't really push the envelope. So if the public goods charge isn't part of the final package, the report, in essence, doesn't go far enough," says R. Brooke Coleman of REAP Coalition, a national coalition that advocates for renewable energy use. CAT does talk about the charge in some detail in the Implementation Options section of the report as a tactic that "cut[s] across options and can be used to ensure success." However, Governor Schwarzenegger is clearly opposed to the charge. In response to a question on the public goods charge at a press conference on April 4, 2006, he said, "We are going to look at all of the things that are in the report. But my opinion is that you never solve things by raising taxes on anything." Another key difference was the inclusion of a multi-sector market-based system as a key recommendation. Aspects of this recommendation were in the draft report, but in the final version, CAT went a step further and clearly states that the state should "proceed with the development of a multi-sector market-based program which considers trading, emissions credit auction and offsets." A final recommendation on the structure of the program – with the 2020 GHG emission target serving as the basis of the emissions cap – is due to the governor on January 1, 2008. "We might end up with some version of cap-and-trade … Whether we will develop a European-style as a single state, it's not clear that we'll need to. We can take the time necessary to evaluate it," says White of CEERT. While most people are behind the report and think it is heading in the right direction, there are some exceptions. Sustainable Economy and Environment for California (SEE California), a non-profit organization that advocates balancing climate change actions and California's economy and environment, has been among the most vocal critics. Although the organization voices support for reducing GHG emissions, it has strongly questioned the accuracy of the economic analysis used by CAT. "When considering recommendations made to reach Governor Schwarzenegger's laudable goal of reducing greenhouse gas emissions, we must ensure that California's ability to create and retain jobs is not compromised through this process," says California Chamber of Commerce President Allan Zaremberg for SEE California.

As California Goes…

Despite the pockets of criticism, however, California is definitely pushing the envelope on climate change. In addition to the events surround the Climate Action Summit and CAT report, Assembly Speaker Fabian Níºnez (D) and Assemblywoman Fran Pavley (D) recently sponsored a bill – the "Global Warming Solutions Acts of 2006" – that would set a limit on greenhouse gas emissions and require the California Air Resources Board to implement a mandatory emissions reporting and tracking system. If the bill becomes law, California will become the first state in the union to set an enforceable cap on emissions. "Californians want our government to create tough, enforceable standards on global warming that are meaningful," Pavley said in a recent press release on the pending legislation, "And as California goes, so goes the rest of the world. As California leads and innovates, we believe that Congress and other states will also implement economy-wide clean energy standards." Another California innovation—the California Climate Action Registry—held its annual conference in southern California on April 20th and 21st. This annual conference brought together over 200 leaders on climate change to focus on current and emerging climate change policies, programs, and trends. The conference offers participants a chance to learn about new and innovative methods to reduce GHG emissions, discuss climate change issues from a variety of viewpoints – international, regional, technical – as well as network with other climate leaders (click here for more on the California Climate Action Registry). With so many balls in the air—new legislation, a pending cap-and-trade system, the on-going efforts of the Climate Action Registry—the question becomes, what will happen next? Currently, the two main things determining the answer to this question are the pending "Global Warming Solutions Acts" legislation and CAT's final report. If it passes, the legislation introduced by Níºnez and Pavley will set a GHG emissions cap and will put real teeth into the market-based reduction system discussed in CAT's report. Ultimately, the report holds the key to California's success or failure in the fight against climate change. Currently, however, CAT's report is just words on a page. It is the words that make it off the page and into reality that ultimately will count. Charis Anderson is a San Francisco-based freelance journalist. First published: May 9, 2006 Please see our Reprint Guidelines for details on republishing our articles.

Please see our Reprint Guidelines for details on republishing our articles.