Crazifornia: Why the Golden State may have just doomed cap and trade

Laer Pearce Author, Crazifornia
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Mary Nichols, one of the most dangerous women in America, looked out into the packed California Air Resources Board (CARB) hearing room late Thursday after an eight-hour hearing and declared, “We’ve done something important.”

Nichols is the chair of CARB and therefore the person most responsible for implementing the California Global Warming Solutions Act, AB 32, the state’s crusade to save the planet from the scourge of greenhouse gases. A former assistant administrator of EPA under President Clinton, Nichols now controls multiple programs designed to penalize conventional energy sources to the benefit of not-yet-competitive alternative sources. She has already forced the toughest diesel engine standards in the country onto California — standards that will cost the state’s battered trucking industry $12 billion — and Thursday she trumped that by ushering in the biggest playing field-leveler yet, the nation’s first state-run carbon cap-and-trade program.

California, in going where no other state or the federal government has dared to tread, certainly has done something important, but just what “important” means is a question for the historians. Nichols’s focused direction of the herculean effort to get the 262-page mega-regulation approved indicates she may have little faith in her own promises about the resilient, robust green economy it is supposed to spawn. The tide is turning against high-cost, low-return green energy subsidy programs and the politicians that promote them, so Nichols may have felt a sharp sense of urgency to set California’s course before the next election could make that more difficult.

Starting just after that election, in January 2013, the cap-and-trade regulations will attempt to force a 10% cut in California’s use of fossil fuels, concrete and many industrial gases by requiring companies in those industries to purchase carbon credits if they produce more than 90 percent of their current GHG production levels. By 2015, 85 percent of the state’s “emission sources” — otherwise known as places where people work making things others want to buy — will be covered by cap and trade.

One energy producer, the High Desert Power Project, told CARB the cost of the carbon credits it would need for its electrical generating plant “could far exceed $16 million and even approach $80 million” a year, either of which would “cripple” a plant that produces about 4 million megawatts of power for California annually. And that’s just one emissions source. Multiply that impact times all the plants producing the state’s electricity, natural gas, petroleum products, cement and industrial gases and you begin to see why it’s estimated AB 32 will come to cost Californians $180 billion a year. That translates to 1.1 million lost jobs, as companies leave California for states that don’t have cap-and-trade programs — and there are 49 such states from which to choose.

Still, environmentalists are giddy about Thursday’s vote. They see it as pivotal in their efforts to underwrite the high cost of alternative energy through cap-and-trade programs in more states and, ultimately, a federal program. A spokesman for the LA-based Climate Action Reserve, North America’s largest carbon offset registry, told The Los Angeles Times, “If California gets it right, others will see it’s possible to regulate greenhouse gas emissions while protecting its [sic] economy …”

But California getting it right is a big “if.” Green jobs probably won’t materialize in projected numbers as energy and consumer costs rise. The California bureaucracy could prove as inept at managing cap and trade as it was at managing energy during the state’s disastrous 2000 energy crisis. And then there’s carbon fraud, already a well-developed con that can be expected to flourish here as cap and trade takes hold under lax to non-existent oversight. High costs, low benefits and frequent scandals may prove Nichols right — she just may have done something important Thursday. She may have set cap and trade on a course towards its ultimate rejection and collapse.

Laer Pearce, a veteran of three decades of California public affairs, is currently working on a book that shows how everything wrong with America comes from California.