Gold and green

Originally appearing in The Economist IN LOS ANGELES, California’s largest city, the natural world is both far away and close. You spend your days stalled in traffic, cursing your fellow motorists as your car spews out the noxious fumes that, trapped in the Los Angeles basin, blanket the city in smog. When you do get moving, you may find yourself driving through miles of low-rise urban sprawl. Yet, depending on which one of the metropolitan area’s 4,850 square miles (12,600 square kilometres) you are in, you might be half an hour from a clean beach, an hour from a ski run and 90 minutes from empty desert. Both features of Californian life helped forge the state’s fondness for environmental rule-making. In 1947, four years after a series of smog attacks in Los Angeles, Governor Earl Warren signed America’s first statewide air-protection law. Two decades later a catastrophic oil spill off the Santa Barbara coast helped give birth to the modern environmental movement, leading, among other things, to the California Environmental Quality Act (CEQA), approved by Governor Ronald Reagan in 1970. Over the decades California’s green rules have inspired other states, and even the federal government, to follow. That urge to blaze trails remains strong. In 2006 Arnold Schwarzenegger, whose passion for climate policy was matched only by his love of Hummers, signed AB32, which required a cut in greenhouse-gas emissions to 1990 levels by 2020. He fought hard for similar federal action. His successor, Jerry Brown, recently urged a meeting of his fellow governors to follow California’s lead. AB32 has several elements. The most prominent is a cap-and-trade scheme, the world’s second-largest after the EU’s, for substantial emitters of greenhouse gases (mainly large industrial producers). The system, which began on January 1st, will progress through three phases, gradually expanding its reach, lowering the carbon cap and auctioning (not giving away) a growing proportion of emissions permits. The two auctions so far have gone well. More “non-compliance entities” (financial institutions and the like) are buying allowances, which should lead to a robust secondary market. The California Air Resources Board (CARB), which oversees AB32, has seen off one lawsuit, from the left, which challenged the right of polluters to buy carbon offsets. (A second, from the right, elements of which think all the allowances should be given away, not auctioned, still looms.) From the beginning CARB has presented its scheme as a model for others. Quebec will join later this year, and there are hopes for other western states. Prospects for federal action look dimmer. A cap-and-trade bill (co-authored by a Californian congressman) died in the Senate in 2009. In February Barack Obama urged Congress to try again. But, as he knows well, a Republican House will not back major new climate laws. For the next two years at least, Mr Obama will have to pursue his aspirations through the Environmental Protection Agency. Still, Mary Nichols, the head of CARB, thinks EPA regulation could make California-style carbon pricing start to look attractive to other states. Cap-and-trade grabs headlines, but making cars cleaner is perhaps where California’s influence is strongest. In 2002 California passed a law requiring carmakers to slash vehicle emissions. Thirteen states said they would follow suit. Worried about the emerging patchwork of rules, in 2009 manufacturers agreed to higher national fuel-efficiency standards. Using such “bottom-up” tactics to motivate industry, says Daniel Sperling, of the University of California, Davis, has been a deliberate strategy of environmentalists. If so, they have some work to do on another component of AB32. The low-carbon fuel standard (another Californian first), which says that the “carbon intensity” of transport fuels must fall by 10% by 2020, has the oil industry fuming: Chevron calls it “unworkable”. Yet Oregon and British Columbia have passed similar rules, and Washington state and several north-eastern states may follow. The final big piece of the jigsaw is renewable energy, which under AB32 must provide one-third of California’s electricity by 2020. On March 13th, announcing plans for two large federal solar projects in the Californian desert, Ken Salazar, the interior secretary, called this “the most robust renewable-energy programme probably in the history of the world” and called for a similar national standard. California’s high taxes and endless regulations have long earned it a reputation for business-unfriendliness. But today you hear few voices raised against the state’s environmental approach. This may be because residents are particularly concerned about climate change (see chart); since a proposal to suspend AB32 got thumped at the ballot box in 2010, few publicly question the law itself. Another factor is California’s high-tech sector, which leans green. Such worries as there are focus on implementation or details. Some clean-energy executives, for example, worry that environmental rules change too often and may clash. By far the fiercest debate, however, is over CEQA. For years business groups and some politicians have grumbled that the law makes it far too easy for development projects to be held up by NIMBYs or, worse, business rivals. Horror stories abound; a favourite example of campaigners is the petrol-station owner in San Jose whose expansion plans were stymied when a nearby competitor filed a CEQA lawsuit citing his traffic concerns. Reformers insist they want to “modernise” CEQA, not ditch it. On March 12th their opponents—unions and NGOs, mainly—rallied in Sacramento, the state capital, to defend the law. The debate is coming to a crunch. Darrell Steinberg, president pro tem of the state Senate, recently issued a proposal for CEQA reform that had the curious feature of apparently upsetting nobody. That will change as the details are filled in; and with the support of Mr Brown, who has described CEQA reform as “the Lord’s work”, campaigners are optimistic they will find satisfaction this year. CEQA is a law of conservation, designed to protect sensitive habitats from the incursions of modern industrial living. Newer rules, such as AB32, require a different approach: investment, new technologies and development projects. (Some green projects have even fallen victim to CEQA lawsuits.) It is this way of thinking that now thrives in California, and that the state wants to impress upon the world.

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Gold and green

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