What’s wrong with California: Part II

Continuing the discussion of what’s broken in California, a July 7th Wall Street Journal editorial called out just how expensive AB 32—the anti-global warming law that passed the Legislature in 2006 and was signed by Gov. Schwarzenegger, will be.
Voters had a chance to overturn it in 2010, but hewed the environmental line and left it intact. The law requires municipalities to design plans to reduce carbon emissions with an overall goal limiting emissions to 1990 levels.
The Journal editorial points out that a study by the California Manufacturers and Technology Association (representing employers of 1.2 million Californians) estimate the cost of three regulations: cap-and-trade taxes on carbon, a “low carbon fuel standard,” and the requirement that 33 percent of electricity come from renewable resources—substantially raise energy prices and will reduce the state GDP by between 3.5 percent and 8.9 percent by 2020.
Using the most optimistic scenario, that amounts to $447 billion loss in economic activity over eight years and a loss in income to the average family of $2,500.
A second study by the Boston Consulting Group for the Western States Petroleum Association focused on the low carbon fuel standard that mandates a 10 percent reduction in carbon for California fuels. This only can be achieved with biofuels, not corn ethanol which is too carbon intensive to say nothing of simply rotten public policy.
With fuel from plant matter cellulose still unproven, the Journal wrote that the only source is ethanol produced from Brazilian sugar cane. The price of gasoline for Californians, who already pay the among the highest prices in the country because of environmental regulations, would go up between 50 cents and $2.70 per gallon after 2015.
That’s moving quickly toward the $10 a gallon price that Energy Secretary Stephen Chu said he’d prefer.
Incidentally, when it comes to carbon emissions, the high-speed rail, because it requires massive amounts of electricity should it ever operate, does not have a positive effect.
Somehow, also missing in the discussion, was the study released last year that said the only way the state can reach the 2050 goal is to have a vehicle fleet that runs entirely on electricity. To develop the power for that many vehicles would require building a nuclear power plant every two years—see any under construction?
In his time in Sacramento, the Governator pushed hydrogen as a clean fuel, which would require an entirely new fueling infrastructure. He missed the much better alternative—using natural gas, which thanks to the fracking techniques now is so abundant in the United States that prices have dropped significantly. It also would require a new infrastructure.
With demonstrated reserves, the abundant natural gas becomes an economic engine—both the industry itself as well as in manufacturing that becomes much more practical with a cheap domestic power source.
The AB 32 mandates were passed—as is typical—with minimal if any concern about economic impacts. The state applies such a huge regulatory burden—in some cases for questionable benefit—that AB 32 is just one more reason for businesses that do not need to be here to find an alternative location.
So, please remember keep in mind what your elected and appointed leaders are doing to an economy that is suffering statewide with unemployment still over 11 percent and a budget chronically out-of-balance that desperately needs economic growth to bring in additional revenue.
California’s budget bets on a tax increase after it books the windfall from the Facebook initial public offering.