Commentary: California's grand experiment in greenhouse gas regulation

The Sacramento BeeNovember 17, 2012 

It probably wasn't happenstance that California's historic – good or bad, it's historic – experiment in greenhouse gas regulation was delayed until after an election in which voters would be deciding on new taxes.

Any debate over the consumers' costs of greenhouse gas reduction could have, at least theoretically, negatively influenced voters on tax increases – and there will be costs.

The state this week begins auctioning off greenhouse gas emission credits, thereby generating billions of dollars that politicians will spend on programs supposedly connected to reducing global warming.

Those billions will, at least in the short run, be absorbed by industrial and other businesses that must buy those credits and will, to the extent possible, pass on those costs to their customers.

Thus the cost of doing business in California, already among the nation's highest, will increase.

Mary Nichols, who chairs the Air Resources Board, and other advocates of cap and trade contend that in the long run, the business costs will be mitigated by savings from greater operational efficiencies, and that an entirely new green economy base will be created to the ultimate benefit of the state.

But those are unproven theories, because California is traipsing where few have gone before. And an equally valid theory is that the state, which is already suffering from a stagnant economy and very high unemployment, will hamstring itself in the global competition for investment capital.

Nichols, et al., even have a phrase that describes the potential economic downside – "leakage." But that is a sterile word to describe what happens when human beings lose their jobs or can't find new ones.

Nor are the costs of carbon credits, whatever they are, the only impact.

California's utility costs are already among the highest in the nation. A report by BC Hydro, British Columbia's utility, that delves into power bills at all levels of usage reveals that only a very few places in North America have higher utility costs than does California.

Another aspect of California's anti-global warming program, however, requires the state's utilities to get a third of their power from "renewable" sources such as solar and wind that are markedly more expensive than traditional, fossil fuel sources.

The Public Utilities Commission staff and the utilities themselves have warned that the transition will sharply increase bills.

Californians also pay more than most other Americans for gasoline and diesel fuel, thanks to our unique refining requirements, and the Air Resources Board is pushing refiners to go even further toward "clean fuels," which will be more costly.

This is a huge experiment in altering Californians' economy and lifestyles.

Whether it pans out or not, the short-run costs will be immense.

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