Bill sends 'clear message' that state will fight global warming

BY MIKE ZAPLER
MEDIANEWS SACRAMENTO BUREAU

SACRAMENTO - Republican Gov. Arnold Schwarzenegger and Democratic leaders endorsed landmark legislation Wednesday that could serve as a national model for combating global warming and, according to Silicon Valley business leaders, spur a wave of cleaner-burning energy technologies.
"This is groundbreaking legislation," said Rafael Aguilera, a climate change expert for Oakland-based Environmental Defense. "It sends a clear message to Washington and the rest of the world that California is serious about a low-carbon future."

California and 11 other states have sued the federal government over its failure to regulate greenhouse gases, and the U.S. Supreme Court has agreed to hear the case. The agreement makes California among the first states to try to effectively regulate greenhouse emissions on its own -- a potentially daunting task.

The bill, AB 32, mandates that California reduce greenhouse gas emissions by 25 percent -- to 1990 levels -- by the year 2020. Major carbon-emitting industries will be forced to report their emissions to the state Air Resources Board, which will craft regulations to reach those goals. Those regulations would take effect in 2012.

Opinion within the business community was divided. Some business groups argued the measure could dramatically increase energy costs for companies, hurting the state's business climate and potentially causing some companies to leave California.

"Being the only state to have absolute caps on carbon emissions puts California at a competitive disadvantage," said Allan Zaremberg, president and CEO of the California Chamber of Commerce, who predicted that the legislation "will have little impact on global climate change but a severe negative impact on California's economy."

But business interests in Silicon Valley, including prominent venture capitalist John Doerr and alternative energy company executives, lobbied heavily for the bill. They said it would spur investments in energy technologies such as solar, wind, coal gasification and fuel cells, which can produce energy with low or no emissions of greenhouse gases and other pollutants.

"This is going to make California the center of innovation in the development and application of new clean energy technologies," said Rod Beckstrom, chief executive of Palo Alto-based CEO Carbon Investments. "There is already huge interest in it, but there's no question you're going to see even more money go into the sector."

PG&E, the major California utility, also issued a statement Wednesday backing the legislation.
California will not be the first state to enact greenhouse gas limits -- a coalition of New England states has tried to do so, with limited success so far. But AB 32 goes further than that effort, curbing emissions not only from power plants but from all major polluters, including oil refineries, factories and cement kilns.

Most scientists agree that carbon dioxide, produced from the burning of fossil fuels, traps heat in the atmosphere and causes the Earth to warm. The impact of global warming could be severe, they say. Among the possible effects: more forest fires and a disruption of the state's drinking water supply, caused by a substantial loss of the Sierra snowpack.

One of the main sticking points in negotiations over the legislation was the role of a so-called "cap-and-trade" program, which would create a marketplace for trading carbon emissions. It would work like this: If a company reduced its carbon emissions to levels below the mandated cap, it could sell its remaining "credits" to another business that was unable to reach the cap.Gov. Arnold Schwarzenegger insisted that such a system be a mandatory part of the state's regulations. Democrats, concerned that a "cap-and-trade" system could cause disproportionately more pollution in low-income communities, pushed for such a system to be optional. Schwarzenegger ultimately relented on that and other negotiating points, although both sides said a cap-and-trade system will likely be adopted.

As ballyhooed as the bill was, doubts linger about how effective it will be. One potential problem is "leakage" -- the possibility that utilities, in order to secure an adequate energy supply for the state and at the same time meet the emission mandates, will simply buy more power from neighboring states. That power may come from coal-burning plants, resulting in more greenhouse gas emissions overall.
The bill says only that the Air Resources Board should "minimize leakage."

Still, the agreement, cinched in the final harried days of this year's legislative session, delivers a major election-year victory to Schwarzenegger on an issue of growing importance to voters. Schwarzenegger came into office promising to be a leader on environmental issues and is courting Democrats in his re-election campaign.

A recent poll by the Public Policy Institute of California showed bipartisan concern about global warming and a belief among voters of both parties that the state should take action in the absence of a federal policy.

"Reducing greenhouse gases emissions is an issue we must show leadership on," Schwarzenegger said in a statement. His opponent, Democratic state Treasurer Phil Angelides, said he was glad that legislative leaders resisted changes to the bill suggested by Schwarzenegger that Angelides said would have "gutted" the legislation.

The bill, sponsored by Assembly Speaker Fabian Nunez, D-Los Angeles, and Assemblywoman Fran Pavley, D-Woodland Hills, is expected to sail through the Assembly and Senate despite resistance from Republican lawmakers who are at odds with the governor."The little, bitty adjustment that California is doing does nothing in terms of the whole issue of global warming," said Sen. George Runner, R-Antelope Valley. "So we're just putting at risk California businesses and jobs in an effort to try and show that we are doing something. I just think that's wrong."