JUICE: Carbon Waxing and Waning

By Published On: November 19, 2010

Harrison Ford walks down a hallway with fierce determination. He unbuttons his shirt, stares into the camera and warns us about the release of “tons of carbon into the air we breathe” from deforestation around the world. He strips off his shirt, sits in a chair, and allows a young woman in a white coat to brush the center of his chest with a thick substance. “Every bit of rainforest that gets ripped out over there,” says Ford, as he watches her press a cloth strip on his chest and quickly yank off the wax and hairs, “really hurts over here.” The short film clip starring the action film star ended with an image of the red welt on his chest, putting a black humor spin on the dangers of climate change at the governor’s annual climate change confab this week at the University of California, Davis. The current governor nearly had his hair ripped out by Proposition 23, which would have halted the state climate protection law he signed. Governor Arnold Schwarzenegger, who is promoting carbon lite power projects with renewed vigor before his term ends, was spared a scalping, though, when voters rejected the Nov. 2 ballot measure. But the economic downturn has done considerable damage. In response, the outgoing state chief insists the balm for the sputtering economy and global warming is job creation from more and sustained investments in renewable technology that reduces carbon emissions in and outside California. “We are beginning one of history’s great transitions, the transition to a new economic foundation for the 21st century and beyond, free of fossil fuels,” Schwarzenegger said Nov. 15. Michigan Governor Jennifer Granholm, whose state has suffered massive job losses, added during this week’s conference that a green energy economy is “just the way” to create jobs for middle class Americans. California’s governor, agency heads, officials from other states and countries, as well those from investment and other business firms, urged that California forge ahead on expanding alternative energy development, in spite of the rise of climate skeptic politicians in Washington, D.C., and the failure of last year’s United Nation’s climate accord in Copenhagen. Implementing California’s carbon reduction law--particularly the pending cap-and-trade program--is being viewed as a test case, with strong interest at the federal level in how it plays out. “California is once again the climate trendsetter,” Ford said in person after noting his chest hair had grown back. But how that trend plays out is not in the lame duck’s hands, but in the governor-elect’s. Jerry Brown, who advocates increasing the state’s climate protection work, better watch his chest hairs. He inherits a stalled economy, a huge state budget deficit, a demoralized state workforce and significant opposition to making alternative energy strides. Brown’s been capitalizing on the job creation potential of both the state’s climate protection law, AB 32, and developing renewable energy resources. He also should bring in new and revised thinking about the best way to implement carbon reduction strategies. Potential big red welts for Brown are AB 32’s costs and its allocation. A cap-and-trade program, which the Air Board plans to adopt mid-December, ultimately could rip more dollars out of ratepayer pockets if the greenhouse gas credits are given away for free to utilities and others, as currently proposed. The Air Board’s AB 32 Market Advisory Committee drove that point home. “There should be no free allocation to firms under the cap that are able to pass most of their costs on to consumers.” That’s because as attractive as free allocation may seem because it would cut costs initially, it would fail to send a strong signal to the power industry to cut emissions. Consequently, it likely would encourage utilities to cover emissions with credits purchased on the open market on a short-term basis instead of ensuring real greenhouse gas reductions as soon as feasible. All those interim open market credit purchases could actually cost ratepayers more in the long run. That’s because as the emissions cap declines the cost of credits likely will rise dramatically. Companies in the end would have to invest in pollution controls anyway. The European Union carbon market faltered after it launched because of the give away of the emission credits, as well as setting the cap too high. It also created hundreds of millions of dollars in windfall profits for the electric sector. California could well suffer the same fate. In addition, selling the credits, instead of giving them away, would generate income for the state. The proceeds could be used to offset consumers’ higher energy costs arising from developing an alternative energy system. Brown has many tools to shape the state’s carbon future. That includes picking agency board members and the chairs, including at the California Air Resources Board, which is in charge of AB 32 and the launch of a carbon market. Current Air Board chair Mary Nichols, former air board chair under Brown in the late 1970s, is likely to hold on to her post. She is more politically aligned with Brown, who likely will push harder for cleaner sources of power given his long support of solar and other renewable resources. The Air Board’s AB 32 work under a Brown administration also will avoid many of the struggles between Schwarzenegger and the Democratic leadership in Sacramento over who calls the shots on AB 32’s implementation. Brown’s political interests and agenda will conflict less with lawmakers from his own party. Brown also will appoint replacements for expired and unconfirmed members of the California Public Utilities Commission and Energy Commission, as well as the grid operator board, all of whom play a role in defining clean energy policy and practices. If the Air Board adopts a cap-and-trade before Brown comes into office he should assess the long-term impacts to consumers. A trading regime involves a lot of middle men and women who reap profits from trading but do little to advance cost-effective carbon reductions. As the new state chief, Brown, at a minimum, should insist on a carbon tax on sectors not covered by the trading regime at its launch in 2012. Brown should highlight that the consumers, not corporations, pick up the tab for higher energy costs--both in terms of the pollution generated from fossil fuel combustion and the cost of a carbon trading market or tax. A tax would eliminate skimming and speculation by carbon traders, potentially holding down the cost for consumers. It also does away with the complexities of measuring, verifying and enforcing tradable greenhouse gas credits. After implementation, Brown should compare the costs and emission reductions of a trading market and tax. He needs to ensure that carbon reductions are thoughtfully executed, equitable, and cost-effective. While it may sting like a European wax job, it also will produce the desired result. editorial@cacurrent.com

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