California Law “Global Warming Solutions Act”—Is It A Black Hole?

The California environmentalists got Governor Schwarzenegger and the legislators to pass the “Global Warming Solutions Act” in 2006.   The law called “AB 32” is sweeping in its authority to regulate fossil fuels.  The stated objective of AB 32 is to implement a “transformative” standard that will reduce carbon emissions to 1990 levels by 2020.  In 2013, electric power and major industrial emitters of about 160million metric tons of carbon dioxide equivalent (MTCO2e) will be compelled to begin reductions. This will require fuel-switching, new lower-emitting plants and contracting for lower-carbon generated power form out of state. The program is essentially Cap and Trade.  In 2015, transportation, natural gas, smaller emitters, etc accounting for about 230MTCO2e will be required to begin reductions.   How this sector is to accomplish this is not clear and what ever it is, is expected to be expensive.   Off-sets seem to be one way but these are limited and further, no emitter can use more than 8% offsets to comply with the law.

AB32 has not gone unchallenged.  For one challenge, the Renewable Fuel Association (RFA), mainly representing ethanol producers say they will be ruled out of the California market.  The law is based on the study of total emission from “seed to wheel” and California Air Resources Board (CARB) sets a standard that the ethanol producers say makes compliance too expensive.  The RFA  got an injunction to stop implementation saying that the law was  unconstitutional because it violates the commerce clause which was intended to stop states from introducing laws that would discriminate against businesses located in other states.  But the US Court of Appeal (9th District) has now lifted the injunction.  The ruling on AB 32’s constitutionality is expected soon and the lifting of the injunction probably indicates they will say it is constitutional.

AB 32 was the product of Western Climate Initiative (WCI) that was formed in 2007.  The partners in the WCI were California, Arizona, New Mexico, Oregon and Washington and later expanded by the addition of Montana and Utah plus the Canadian Provinces of British Columbia, Manitoba, Ontario and Quebec 2008. Each State or Province would not bound by AB32; they would have to pass similar bills in their respective legislative bodies.

All the US states dropped out when AB 32 was passed obviously not on-board with the size and scope of the act and that it was unlikely to get passed in their respective states.  The four Canadian Provinces have remained and have issued AB 32 as guidelines.   It would seem that the tar sands oil in Canada would be negatively affected by these guidelines if they become law in the four Provinces.

The trend for California to get their electrical power from out of state will be affected by this law as well.  CARB wants to limit “leakage” where emissions drop only because the generation source is out of the state.  So any emissions that occur in the process of generating the imported electricity are to be accounted for.

So why the comment about a black hole?  The size of the California market is huge. In the years past,  if California made an environmental change, the nation often followed. The Federal Clean Air Act was pretty much a product of California. Before retirement I pushed a program to amend the Clean Air Act to permit the use of up to 5% methanol mixed with ethanol in gasoline.  It was necessary to work with CARB if you wanted to do business in California. At that time they wanted to use methanol but not as a low level blend but as the primary fuel.  I think CARB and California have become too zealous.  The fact that all the states dropped out of the WCI is pretty telling.   When the price of electricity, gasoline, and other fossil fuel associated products get way out of step with rest of the nation and more industries flee the cost burden to more friendly states, I hope California residents get the message.

Next posting will look at the Californian’s wanting more solar power.  I don’t believe they know how costly this will be.


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