Breaking Down California's AB32 Global Warming Act

Assembly Bill 32, signed into law by California Governor Schwarzenegger in late 2006, took a big step closer to implementation last week with the release of the much anticipated “Climate Change Draft Scoping Plan.”

Sturnella neglecta.

Two key pages in the 77 page document are pages 11 (table 2) and page 17 (table 4). The table on page 11 “Recommended Greenhouse Gas Reduction Measures,” has targeted emissions reductions by sector, expressed in “MMTCO2E” – million metric tons co2 emissions. In this table, it only appears that 2 of the 160 million ton goal are going to be accomplished through land use regulations. This may be misleading however, since they are leaving another 35.2 MMT under a general category “Additional Emissions Reduction from Capped Sectors.”

On page 17, table 4 “Sector Responsibilities Under Cap-and-Trade Program,” shows what total emissions are projected to be via (1) “business as usual,” (2) “after implementation of other recommended measures” (CARB-speak for fees and mandatory caps via state auctions of emission allowances), and (3) “under cap and trade program.” Basically the table shows CARB claiming they can pretty much accomplish the emissions reduction goal either 100% via fees and auctions, OR via cap and trade. It is important to emphasize that auctions – the sale to industry of allowances to emit CO2 with the proceeds collected by the state – can happen under either of these schemes.

More detail on all the sections of the scoping plan will come later this month in the form of detailed appendices to each proposed measure, and more economic analysis will come in late July or early August. Regarding land use (one of our favorite topics), there is not much in the scoping plan. The land use section begins on page 31 and is very general. On page 38 the plan states a goal of enacting “Indirect source rules for new development,” where “research shows that low-density development located distant from employment centers and other destinations has a high transportation carbon footprint,” and “adoption of regional indirect source rules could provide reductions in greenhouse gases through better project design and mitigation of emission impacts.” That’s about as specific as they get.

Based on what we have so far, it is way too soon to predict how AB32 will handle the land use question. Mandatory concentric development, new classes of protected land and species, tying transportation funds to concentric growth, and other measures called for in SB 375 – which is making its way through California’s legislature currently – are not in the AB 32 scoping plan.

Based on the potential of offset sales, carbon fees, and sales of emissions allowances, one may dismiss claims that AB32 will cost California’s government more than it will bring in revenues. AB32 will potentially cause tens of billions of dollars of net cash per year to flow into California’s public sector. Qualifying municipalities that enforce high density may earn carbon offset fees from polluters, based on how many vehicle miles they can calculate they eliminated through high density zoning. AB 2596 sets the stage for this. Redefining public sector jobs to address global warming mitigation may encompass a huge percentage of the public sector workforce, including construction, infrastructure, education, as well as explicitly environmentally focused agencies. Already California’s 400+ cities, 58 counties, and 32 air quality management districts are imposing new global warming related fees. Since global warming mitigation is a specific program – no vote is required to assess these fees. Auctions of emissions allowances to industry could pour additional hundreds of millions, if not billions, into the public sector each year.

There is no “smoking gun” – yet – that indicates public sector agencies are salivating over cash flow potential associated with AB32. But why wouldn’t they? Nearly every public entity in California – and elsewhere in the USA – is at risk of bankruptcy, primarily because of grossly over-generous employee compensation, benefits and pensions. Other than carbon-related offset payments, fees and auctions – or massive tax increases – there is no new source of revenue even remotely capable of restoring solvency to public entities. Avoiding public sector reform in general, and avoiding public employee pension reform in particular, is the hidden issue that informs global warming alarm in the public sector.

And butterflies still fly the slopes of Kilimanjaro.
(Vanessa cardui)

The opportunity cost of not reforming public sector pensions and using the resulting surpluses to instead build infrastructure could literally be the most significant economic burden of AB32 – and that’s saying a lot. To the extent we phase out public employee pensions, we can increase public sector hiring and infrastructure investments – helping the economy – we can help balance public entity budgets, and help relieve public entity balance sheets of crippling pension liabilities. If we eventually abolished public employee pensions, then all American voters would finally have the same formula govern their retirement entitlements – creating the voter momentum to finally reform and restore social security and medicare.

Our position on AB32 has been consistent – notwithstanding how it addresses environmental issues, something worthy of far more debate than has been allowed – this bill has the potential to raise tens of billions of dollars per year to fund otherwise unsustainable compensation and benefits for California’s roughly 3.7 million state, county and city employees, which in-turn will delay pension reform and diminish infrastructure investments. The fungible connection between AB32 implementation and the undemocratic political influence of insufficiently regulated public sector unions who have created two classes of Californians – government workers and ultra-rich people versus the rest of us in the globalized private sector who work, pay taxes, and will depend on social security when we’re old – has not been sufficiently explored.

One Response to “Breaking Down California's AB32 Global Warming Act”
  1. Charlie Peters says:

    Clean Air Performance Professionals

    Friday, January 29, 2010

    Governor Arnold Schwarzenegger
    State Capitol Building
    Sacramento, CA 95814
    Phone: 916-445-2841
    Fax: 916-558-3160 ( new number )

    C/o Lisa

    RE: Sierra Research Report SR 2007-04-01

    Dear Mr. Governor

    California Air Resources Board (CARB) and The Department of Consumer Affairs/ Bureau of Automotive Repair DCA/BAR have contracted with Sierra Research for a Report of Smog Check performance.

    Sierra has informed me the report was final in March 2009 and released to CARB.

    CARB, BAR, IMRC, and the California Legislature are using the Report for public policy but refusing to release the publicly funded Report.

    Mr. Governor, I’m confused, can you refer me to someone who might help?

    Cc to interested parties

    From: Charlie Peters

    Clean Air Performance Professionals

    (510) 537-1796 – fax: (510) 537-9675


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