(June 26, 2006) California Chamber of Commerce-opposed legislation that will arbitrarily cap California’s carbon emissions is before the Senate Environmental Quality Committee today.
AB 32 (Núñez; D-Los Angeles) is a “job killer” bill that increases costs for California businesses, makes them less competitive, and discourages economic growth with little or no proven environmental benefit by adopting an arbitrary California-only cap on carbon emissions. Further, AB 32 makes California unattractive to business by setting up a costly, state-only mandatory reporting system.
Capping Economic Growth
California is already one of the most heavily regulated states in the nation. This bill would make it virtually impossible for California industries to remain competitive in the marketplace.
AB 32 will interfere with California’s much-needed infrastructure projects by adding higher costs to vital operations, such as cement production, and will discourage much-needed investment to improve or expand existing cement production facilities in the state.
Ultimately, this added expense for in-state production would lead to the closure of existing cement facilities in exchange for future growth and investment in facilities not subject to a cap program outside of California. The increase in price of production in-state or the expense to transport the cement in from out-of-state will be felt across the board, providing a disincentive for further infrastructure growth and investment in California.
Leakage
Passage of AB 32 will make California the only state to have a cap on carbon emissions, creating an incentive for businesses to relocate to neighboring states to avoid the cap, thus causing carbon leakage. This problem not only will affect California’s economy, but will have an adverse effect on the environment. When manufacturers and businesses move their operations to less-regulated regions, they also will contribute to increasing emissions in those regions.
Those companies that decide to move to far more carbon-intensive countries, such as China and India, will contribute even more to greenhouse gas emissions because those countries are far less efficient in energy savings in comparison to California. Policymakers and strategists still have not found an answer to the problem of leakage and, by implementing a carbon-emissions cap in California, therefore will have a hand in increasing global emissions.
Another Energy Crisis
During peak hours, California is hanging by threads to meet its energy demands. AB 32 would exacerbate this problem further by forcing significant energy resources out of the market. According to data provided by the California Department of Finance, the state’s population is predicted to reach 43.9 million by 2020, further increasing the demand on limited energy production sources/contributing to even greater emissions.
According to an analysis prepared by Dr. Margo Thorning, senior vice president and chief economist of the American Council for Capital Formation, “sharp cutbacks in California’s energy use would be necessary to close the 41 percent gap in 2020 between projected emissions and AB 32 target.” In enacting this bill, policymakers and stakeholders should be prepared to answer how exactly to close this gap before committing California to another energy crisis.
Starving the Economy
At the heart of greenhouse gas emissions reduction is a reduction in the use of carbon fuels, which literally fuel virtually all economic activity. California currently lacks the necessary supplements to maintain a healthy and robust economy. For instance, there is insufficient production and distribution of alternative fuels, such as ethanol, biodiesel or liquefied natural gas (LNG), to replace the loss of the carbon fuels necessary for the basic functions of the state' s economic activity.
According to the California Energy Commission, the demand for gasoline in California will increase to approximately 18.2 billion gallons per year by 2025. The proposals in AB 32 will force producers and refiners to eliminate 17 percent of petroleum supplies from the California market. There are no viable alternative sources of fuels available to replace this loss. None of the most promising alternative fuels have commercially viable levels of production or distribution, and none will for at least 10 years.
Climate Change Is Global Issue
AB 32 strives to combat global warming through a California-only approach, disregarding the carbon dioxide emissions contributed by the developing world. Greenhouse gas emissions released by developing countries such as China and India will continue to increase with those nations’ economic growth.
Both countries also have admitted they are reluctant to reduce their emissions through any binding contract or cap that could jeopardize their economies. The impacts of these two countries’ emissions have a global effect. To focus on California, which already is engaged in maximizing energy efficiency, sets the state up for failure and economic devastation.
SEE California
The Chamber-led coalition Sustainable Environment and Economy for California (SEE California) is seeking new business members to join its effort to stop AB 32. For more information on joining SEE California, visit, www.seeca.org
Chamber Position
The Chamber is concerned about climate change; however, it is important that all strategies used to address greenhouse gas emissions ensure that California has the infrastructure needed for advancing cleaner technologies, an adequate energy supply over the long-term, a strong manufacturing sector, and a thriving economy.
For many years, the California business community has been involved in successful, voluntary actions to reduce greenhouse gas emissions from their operations and facilities. A number of businesses already provide the innovation and technology that can help the state find solutions to reach its greenhouse gas reduction goals. Moreover, many of these industries voluntarily register their emissions with the California Climate Action Registry.
Therefore, although the Chamber is committed to the goal of greenhouse gas emissions reduction, it has major concerns that AB 32 will do more harm than benefit and lead California on the wrong path.
Action Needed
The Chamber strongly urges members to oppose AB 32 by either writing the Senate Environmental Quality Committee or calling the committee members’ offices.
Staff Contact: Amisha Patel