Prop 23 – Suspend AB32 (the Global Warming Solutions Act)

(Image from nairabrain.com)

 

Proposition 23 – Suspends implementation of air pollution control law (AB32) requiring major sources of emissions to report and reduce greenhouse gas emissions that cause global warming, until unemployment drops to 5.5 percent of less for full year. Initiative statute.

Measure Details:

  • This proposition, if passed, would suspend AB32, the Global Warming Solutions Act of 2006. AB32 requires California to reduce statewide greenhouse gas (GHG) emissions to 1990 levels by 2020.
  • AB32 would remain suspended until unemployment in California dropped below 5.5% for a full year.

Arguments For:

  • The limits imposed by AB32 will lead to companies (and jobs) fleeing the state to avoid having to comply.
  • In the midst of this recession, we should focus on the economy first and the environment later, when the economy has recovered.
  • Prop 23 will not eliminate AB32, but rather suspend it until the unemployment level comes down and California is better able to implement it.

Arguments Against:

  • California has always been ahead of the rest of the nation in terms of environmental regulations, and AB32 is just another example of that. Where California goes, the rest of the nation often follows.
  • The idea of “suspension” is a red herring. This proposition will be a de facto repeal of Prop 23 AB32.

My Take:

First off, I should note that I work for Energy and Environmental Economics, an environmental consulting firm in California that has done work for the state on climate issues, and specifically has done work for the California Air Resources Board (CARB) on AB32 implementation. So while I am knowledgable about this topic, I also bring a little bit of bias.

I am firmly against Prop 23. I spent most of my college career focusing on environmental economics, so I would consider myself fairly well versed in the science surrounding climate change and the economics of environmental policy. Yes, AB32 is likely to result in some increased costs to the citizens of California. Electricity prices will likely go up under AB32, though the California legislature may pass a 33% renewable portfolio standard [RPS] if Prop 23 passes, to replace the CARB rulemaking that does the same thing, so they’d go up anyway. And yes, companies may choose to leave the state if AB32 remains in effect and no federal climate legislation is passed.

But the fact of the matter is, global warming is a big deal. It’s an especially big deal because we don’t know how big a deal it could be. This is different from almost any other political issue because the potential downside is not just reduced GDP, or a temporary uptick in unemployment. We really have no idea what will happen with substantial changes in temperature, and while it’s possible changes will be less severe than we think, it’s also possible that they could fundamentally alter the climate as we know it.

California has a tradition of being at the forefront of climate and energy policy, and AB32 is no exception. While other states usually follow the EPA’s lead on emissions regulation, California has retained the right to preempt federal standards with stricter standards of their own, at which point states in the rest of the US can choose whether to implement California’s standard or their own standard. This has proven to be an effective tool in strengthening national climate legislation, because companies often prefer a single strict federal standard to a mix between lax federal standards and strict standards in California and other states.

So while California may lose jobs to other states with more relaxed standards in the short run, this will hopefully lead to stricter nationwide standards in the long run, in which case leakage across state lines will no longer be an issue. And nationwide climate legislation in America would be a big step toward a global agreement on climate, which is vital if we are to have any success at all in reducing the concentration of CO2 in the atmosphere and reducing the chance of damages resulting from that increased concentration.

Framing this as a “suspension” is also potentially misleading, because AB32 calls for emission cuts by 2020. The CA Legislative Analyst Office made this graph for the California voter guide:

 

(Image from the California Legislative Analyst’s Office, included in the CA Voter Information Guide)

The grey areas are the periods when unemployment has been at or below 5.5% for four consecutive quarters, i.e. the times when the conditions for the reinstatement of AB32 would be met. While it is true that there have been two instances of this in the last 10 years, the LAO notes that economic projections for California have the unemployment rate remaining above 8% for the next five years. Even if unemployment fell to 5.5% immediately after that, and stayed there for four quarters, AB32 would be put back into effect around the beginning of 2017. The proposition contains no text specifying any changes in the timeline for AB32, so we would be forced to either drastically reduce emissions over a short timeline to achieve the 2020 goal, or abandon the goal altogether. The latter seems much more likely.

It would be great if the economy were strong and we could tackle this problem without imposing hardships on the state. But in my mind, these hardships are not enough to outweigh the scope of the climate problem that we are facing.

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