Referendum on California’s carbon-limit law qualifies for November ballot

And the political establishment isn’t happy about it, either.  Governor Arnold Schwarzenegger says he will fight the referendum to suspend AB 32 with everything he can muster.  The enviro lobby will get 300 green-tech companies to contribute to the effort, and have already painted the proponents as evil out-of-state oil companies looking to destroy alternative energy production.  However, that vastly overstates the positive impact of AB32:

California headed for a high-stakes battle over global warming Tuesday, as an oil industry-backed measure to suspend the state’s aggressive climate-change law qualified for the November ballot.

The fight will pit the state’s powerful environmental organizations and clean-tech businesses against the oil and manufacturing industries. It also arrays many conservative political leaders, including the GOP nominee for governor, Meg Whitman, against Gov. Arnold Schwarzenegger, a fellow Republican who regards the global warming law as a key part of his legacy. …

Under California’s law, known as AB 32, the state is setting limits on greenhouse gas emissions from automobiles, oil refineries and other industries, and will probably require that a third of the state’s electricity come from renewable sources by 2020, up from about 15% today. New rules under the law would encourage sales of more fuel-efficient cars.

Supporters of the law say it has spurred a large market for solar, wind and other clean energy sources.

But backers of the ballot effort, who are calling their measure “the California Jobs Initiative paint the climate law as “an energy tax.” Their initiative would halt enforcement of the law until unemployment in the state, now over 12%, sinks to 5.5% for at least a year.

Schwarzenegger and the backers of AB32 call the referendum an attempt to “cripple California’s fastest-growing economic sector,” but that’s hardly the case.  California’s state auditor commissioned a study of AB32 to determine its economic impact, which made clear that the best case scenario would be a wash:

California, that former land of opportunity, was one of the first states to pass its own version of “cap and trade” to reduce greenhouse gas emissions. In 2007 when Governor Arnold Schwarzenegger signed the law, called AB-32, he said it would propel California into an economy-expanding, green job future. Well, a new study by the state’s own auditing agency—its version of the Congressional Budget Office—has burst that green bubble.

The study released May 13 concludes that “California’s economy at large will likely be adversely affected in the near term by implementing climate-related policies that are not adopted elsewhere.” While the long-term economic costs are “unknown,” the study finds that AB-32 will raise energy prices, “causing the prices of goods and services to rise; lowering business profits; and reducing production, income and jobs.”

The economic reality here is what the Legislative Analyst’s Office calls “economic leakage.” That’s jargon for businesses and jobs that will “locate or relocate outside the state of California where regulatory-related costs are lower.” The study says the negative impact on most California industries will be “modest,” but energy-intensive industries—specifically, aluminum, chemicals, forest products, oil and gas and steel—”may significantly reduce their business activity in California.”

Yes, some new “green jobs” will be created. But the “net economywide impact,” it says, “will in all likelihood be negative.”

The only way that green energy will provide massive economic growth will be if it can produce the same amount of energy as our existing sources at the same price or better.  Not only do those processes not produce energy less expensively, they can’t produce anywhere near enough to meet demand that carbon-based energy can.  Until that happens, the only way that green energy can overtake other energy sources in the marketplace is to have government intervene heavily by raising the price of current energy sources artificially to make it more expensive than green energy.

That’s misguided for a couple of reasons.  First, as we’ve discussed many times before, it will raise costs, eat into consumer buying power (especially for low-income workers), and stunt economic growth.  But it’s also counterproductive for innovation in green energy.  Heavily-subsidized or protected industries have little reason to innovate and compete.  Look at the explosion of innovation that resulted from the initially unpopular busting of the Bell monopoly on telephone service in the early 1980s, for example.  If government gives green energy a soft ride, they will have less incentive to make it efficient and mass producible.

We will have a green energy economy when green energy becomes economically viable.  Government can’t just decree that it’s viable when it clearly won’t meet the demand necessary for the American economy to keep pace, let alone grow.  Instead we will hobble ourselves with massive costs and taxes when we need cheap energy to rebound from one of the worst recessions in decades — a recession caused by government intervention in the housing market for another form of social engineering.

The people of California know this better than their political masters.  Hiking taxes while unemployment skyrockets and businesses head for the borders is sheer insanity, especially when it’s clearly known that the taxes won’t do anything to help.  As long as that unemployment rate continues to rise, expect the voters in California to tell the social engineers in Sacramento to get lost.

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