Friday, July 6, 2012

The bill comes due for California's climate change law: $447 billion over next 8 years

The Price of Green Virtue

The bill starts to come due for California's climate change law.

When California's economy was booming in 2006—remember that?—Governor Arnold Schwarzenegger and many Californians wanted to show their environmental virtue by becoming the first state to pass a comprehensive climate change law. And so they did, for which the bill is starting to come due.

Lawmakers and environmentalists predicted that the new law, called AB 32, would become a model for the rest of the nation. It never did. They also said the Golden State's head start in developing green technologies would create thousands of new jobs. In 2008 the California Air Resources Board even estimated that the new rules and cap-and-trade tax would increase state GDP. In short, AB 32 was sold to the voters who declined to overturn it in a 2010 referendum as a green free lunch.
Agence France-Presse/Getty Images
Arnold Schwarzenegger looks at a Renault Zoe electric car during his visit to the Geneva International Motor Show.
The second study by the Boston Consulting Group for the Western States Petroleum Association examined AB 32's low carbon fuel standard. This regulation requires a 10% reduction in the carbon intensity of California transportation fuels by 2020, which can only be achieved with biofuels (but not corn ethanol because it is too carbon intensive).
This idea was devised in 2006 when the Bush Administration fantasized that cellulosic ethanol would soon become plentiful and cheap. The White House and Congress thought that by 2011 the U.S. would be producing about 240 million gallons a year. Even with lavish federal subsidies, it produced about seven million. (See "The Cellulosic Ethanol Debacle," December 14, 2011.)
So the California government is forcing oil and gas companies to sell a fuel that barely exists. The only viable short-term compliance option is for California to import sugar-cane ethanol from Brazil. One result is that gasoline prices could rise by anywhere between 50 cents and $2.70 a gallon at the pump after 2015, says BCG. Californians could pay $6 a gallon. Maybe this is how Sacramento politicians think they can get left coasters to ride their high-speed train.
Environmentalists dismiss these studies as biased, but they echo the government's own recent studies. The only real argument is over the extent of the economic damage. Californians may believe this price is worth it, but they shouldn't pretend they aren't paying it.

1 comment:

  1. hahahahaha.... as we here in California lead the way into our glorious green future!

    (sucks to be us, even if the weather is nice. %-)