Roger Sowell: Pro and Con on California's AB32 Global Warming Law

Our commenters have been on a roll lately. Yesterday we had this excellent point-counterpoint by commenter D Patterson on the Cucinelli issue. Today commenter Roger Sowell put forth the arguments on AB32 related to the Prop 23 to repeal it, to be before California voters on November.

Roger Sowell says:

October 7, 2010 at 11:00 am

Pro-AB 32 arguments:

Pro-AB 32 factions say that all its measures are worth doing because cutting CO2 emissions will stop global warming, and global warming in California causes the sea levels to rise and flood low-lying areas, the Sierra snowpack to melt or disappear, state-wide heat waves that cause deaths and illness, and many others. They also say that AB 32 will increase jobs and the economy. The way that AB 32 will increase jobs, they say, is by the net effect of all the requirements allowing each person to have an additional $5 per week for spending, or approximately $250 per year. The additional spending will go to purchases such as coffee at coffee shops, and retail sales. The increased demand for coffee shop baristas, and retail sales clerks will result in a surge in employment.

Pro-AB 32 factions say that private investors have pumped billions into California companies who will make revolutionary new products so that emissions of evil Carbon Dioxide, CO2, will no longer be necessary in beautiful California. The products will include smart-grid systems, home-generation of electrical power via solar panels, renewable power plants to supply one-third of utility grid power, advanced cars and trucks that consume about one-third less petroleum-derived fuel, and gasoline and diesel fuels that contain renewable components such as ethanol (for gasoline) and bio-diesel (for diesel, naturally).

There are many, many other aspects of AB 32, with 73 different line items in the Scoping Plan. Changes in the way people make choices are also part of the AB 32 Scoping Plan, with a significant change being scrapping the older and less-efficient home appliances for new and highly-efficient models. These include air conditioners. Proponents say that a home’s electricity usage will decline 40 percent by installing new appliances, while the price for electricity will increase only by about 13 percent. The net effect, they say, is the consumer will have more disposable cash each month. Presumably, that extra cash will be used to pay the installment payments on all the new appliances. Similarly for the advanced cars and trucks, which will use less fuel. The reduced fuel consumed (35 mpg compared to 25) will more than offset the increased fuel cost.

Proponents developed a nifty plan to allow a homeowner to be able to afford to install solar panels on the roof. The plan involves increasing the property tax bill, with the annual increase paid to a bank or other financier who puts up all the money for the solar panels and installation. If the homeowner sells the home, the new buyer takes on the payment obligation as part of his tax bill. Presumably, the payments last for 15 to 20 years. Also, proponents argue, the solar panels add to the home’s resale value.

Proponents also say that the cap and trade portion of AB 32 will not hurt businesses and industry, because they can actually make money if they just cooperate. Proponents maintain that a carbon credit will be worth $30, $50, even $100 per ton of CO2, so that if the business owners simply cut their CO2 emissions to a point below their government-mandated cap, they can sell the credits to others, thus enjoying a new revenue stream that will allow their business to grow and prosper. The idea is that one can either be a seller of these credits and prosper, or a buyer of these credits and not prosper.

There are many other pro-AB 32 arguments, such as more jobs created for solar panel installers, more construction jobs for renewable power plants, and the long-distance transmission lines to bring the power to the people, and factory jobs to fabricate solar panels and the smart grid components.

Anti-AB 32 arguments:

Implementing AB 32 will kill California by eliminating millions of jobs, causing massive bankruptcies, closing millions of small businesses and major corporations, and will do nothing to change the Earth’s climate.

As more and more scrutiny is applied to the world-wide climate scientists’ data, methods, peer-review system, and agenda, it is apparent that there is no cause for alarm over CO2 emissions, or any other so-called greenhouse gas emissions. The entire basis for CO2 causing the Earth to warm catastrophically is false. There are cities in California that show a pronounced cooling even while CO2 continues to rise – Eureka, Los Angeles, San Diego, and Sacramento. San Francisco shows a gradual increase in temperature that corresponds to population growth, but not to CO2 in the atmosphere. see this.

None of the dire predictions for California climate catastrophe have occurred since 1975, the period that climate scientists insist has shown an increase in Earth’s average temperature due to increasing CO2. In fact, sea levels are decreasing off the coast. Also, the past 40 years have seen much more rainfall than occurred in the first 40 years of the 20th century, with a state-wide average of approximately 23 inches since 1970, but only 19 inches from 1900 to 1940. Presently, the state’s lakes are full due to the recent rains and snow that is now beginning to melt. Heat waves have a long way to go to match, let alone exceed, the heat waves of the period 1920 to 1960.

On a more widespread or global basis, polar ice caps are not melting, but are growing. Sea level increases world-wide are at the same pace as far back as satellite records extend, even though CO2 continues to increase in the atmosphere. Hurricanes and tropical cyclones have not increased in intensity or frequency. In fact, ocean temperatures are decreasing, and hurricanes are decreasing too.

It is true that investors are pumping billions into California start-up companies, but as I wrote earlier, this is due to the increased price of oil. Such alternative energy, or renewable energy systems, ultimately must compete with oil. At the moment, these industries are incentivized with government subsidies, which can be removed at any time. Also, exchange traded funds (ETFs) that specialize in stocks worldwide that stand to benefit from global warming laws are under-performing the market, and by a wide margin. Investors know that global warming due to CO2 is on shaky grounds, and do not see any advantage in putting their money into such companies. see this and this.

The idea that the average homeowner in California will decrease his electric bill by 40 percent by installing new appliances and a new air conditioner is highly debatable, if not outright false. The largest consumers of electricity in a home are the refrigerator, electric stove and oven, clothes dryer, clothes washer, and automatic dishwasher. Of these, the electric stove and oven cannot be made much more efficient, if any. Homes built in the last 10 years (the 2000′s) have high-efficiency appliances due to construction laws. Homes built in the decade prior (the 1990s) likely have had their appliances wear out and either replaced already, or will be replaced soon. My estimate is that, at best, appliance replacement will decrease electric power consumption per home by 10 percent. This will be overwhelmed by the increase in electric power prices, which will be 30 to 50 percent. The reality of high-priced renewable electricity, with its required back-up power plants that burn natural gas, is a large increase in electric power prices. Where Californians currently pay approximately 14 cents per kWh for the lowest-tier of residential power, by 2020 the price will be at least 20 cents, almost a 50 percent increase.

Similarly, the idea that the consumer will save money at the gas pump by purchasing a high-efficiency car just does not make sense. The additional cost for a hybrid car is approximately $3,000, or if one wants to buy a VW Jetta with the high-mileage diesel engine, the cost is more than $10,000 additional. Meanwhile, all drivers in California must pay the increased price of gasoline, but not all drivers will purchase a new car. Those drivers who never purchase a new car, but must by economic necessity buy a used car, must not only wait years before a more-efficient car hits the used car lots, but must pay the higher price of gasoline while they wait. They will not have more spending cash in their pocket.

The idea of putting solar panels on homes in California to reduce grid demand has been around for decades. The economics have never been favorable until recently, with the three-tiered pricing for domestic electricity use in California. As to having the solar panels financed 100 percent by a bank, but having the home’s value increased, I’m not quite sure about that. It appears a homeowner could apply for the loan, have the bank pay for installing the solar panels, then sell the home at its enhanced value and walk away with an additional $20,000 or even $50,000 in his pocket, depending on the size of the solar panel system. The buyer would be obligated to pay the annual payments via his increased property tax bill. Hmmm….maybe I’ll go into the home-flipping business – but only if I purchase a home without solar panels.

Also, it appears that only the wasteful are in a position to benefit from solar panels on their home. Many of my friends, and my own modest lifestyle, do not have utility bills that soar into the higher echelons of pricing due to excessive use (as determined solely by the price-setting entity, the PUC). Thus, we and similarly situated people will not likely ever install a solar PV system – it just makes zero sense when power price is at 13 cents per kWh. On the other hand, maybe we can simply install the system using the bank’s money, then flip the house to a new owner.

The idea that Californians will be the ones manufacturing solar panels is highly suspect, given the manifold advantages of manufacturing overseas. Why would solar panels be manufactured here, when so many other products are made overseas where labor costs, and regulatory costs, are much lower? What is true is that solar panels will be installed using local labor. But after they are installed, what will those installers do? These are not sustainable jobs for the long run.

Cap and trade will dramatically increase the cost of doing business in California, to the detriment of in-state businesses. Arizona has already withdrawn from the regional cap and trade system, thus inviting California businesses to relocate to Arizona, hire people in Arizona, then ship their goods to California. The same is true of many, many other states where business conditions are much more favorable than are California’s. We have already seen every automobile assembly plant close in California, due to burdensome regulations, high taxes, high labor costs, high power prices, and now AB 32 wants to impose additional burdens on remaining businesses. It will not take much for businesses, say for example oil refineries, to shut down their refining processes and simply import gasoline, jet fuel, and diesel from other states or from overseas. Most California refineries are on the coast, except for the handful around Bakersfield. A shutdown refinery does not employ as many people, as it takes only a few to run the tank farm. Out of work refinery employees will have a follow-on impact on local businesses, especially those who provided parts and services to the refineries. The same is true for other industries, especially cement manufacturers, and other heavy industry.

The choice seems abundantly clear: vote to keep AB 32 in place and hope that the government knows what they are doing and will keep their word (and has that ever been the case in the USA, and especially California?), and that each person will indeed get that precious $5 extra in their pocket every week, and electric power prices will only increase 13 percent, and every homeowner will rush out to replace all the appliances and install solar panels, and every driver will immediately purchase a new car that achieves 35 miles per gallon, and every business will find some way to reduce their CO2 emissions below their cap level and sell carbon credits.

Or, recognize what business schools around the world (including the prestigious Harvard Business School) have taught for years (because it is a fundamental truth), that reducing one’s costs of doing business is the way to grow and prosper a business. Increasing the cost of utilities, and transportation for goods received and for goods shipped, when one’s competitors are not burdened with similar costs, is not the way to grow and prosper. Instead, it is a recipe for bankruptcy. Recognize that few homeowners have the ready cash, or credit, to purchase new appliances, and then recognize that many residences in California are rentals such as apartments. Rental apartments will not usually allow the renter to install new appliances, indeed, the only appliance the renter can replace is his own refrigerator. Not the washer, the dryer, the dishwasher, and certainly not the stove or oven. If the landlord replaces these, then rents will go up to pay for them. That will certainly wipe out that $5 per week that California promises will appear in every person’s pocket.


63 thoughts on “Roger Sowell: Pro and Con on California's AB32 Global Warming Law

  1. Roger Sowell says:

    What is true is that solar panels will be installed using local labor. But after they are installed, what will those installers do? These are not sustainable jobs for the long run.

    Actually, I suspect that the labor will be provided by illegal immigrants …

  2. Roger Sowell says in the prior post:
    October 7, 2010 at 11:00 am
    Pro-AB 32 arguments:
    Well balanced and insightful points.
    You forgot to point out, this is the new Nonlinear Derivative Financial Scheme that will ultimately Bankrupt the World for the “benefit of the few” while the kids play video games.
    Haven’t “we” had enough of financial Bubbles created from Nonlinear Derivative Schemes; 1980-present?

  3. As a California resident, I took great pleasure today in filling out and mailing my absentee ballot for the upcoming election and voting for the Proposition which will delay (and hopefully kill) the cap and trade/global warming edict for CA. Felt pretty good to vote against public teat sucker Jerry Brown and Barbara Boxer too.

  4. “The net effect, they say, is the consumer will have more disposable cash each month.”
    I thoroughly doubt this as the higher cost of everything will more than swallow any savings. Remember, most of these companies would not exist except for subsidies and regulations forcing their existence. Much of this is make work, as are most green jobs, and the products are almost always more expensive to buy, raising the real question of whether the user will ever realize the extra cost as savings, before the user or the product dies.
    There is also the real question of doing things for a false reason. In the end there will be many unintended consequences. Wind and solar power are far from “green” and definitely not environmentally friendly. From the materials and expense to their unreliable energy production to their maintenance and longevity, these are not good alternative energy sources.
    AND, the elephant in the room is cap and trade, a bad idea open to huge opportunities to game the system. It is totally stupid to create a trading scheme on a false economy because everybody will know up front that it is technically worthless. This is a get-rich-quick scheme which, as a false economy and a profit bubble, will eventually burst. We can see this one coming, particularly when the investors realize that the science behind the unfounded claim that CO2 has anything to do with our climate is false and realize that they have been had.
    In that respect, the coming cold decades should be relatively convincing.
    “Bend over and say ‘Ah.’ ” It won’t hurt, if you only cooperate and smile through the pain.

  5. Mr Sowell must have his tongue very firmly in his cheek!
    Most who have experience in the world of business regard the ‘pretigious’ business schools, Havard included, as fountains of nonsense which have done immense damage to the world of small business and small businesses that employ less than six employees are the major employers in most Western economies.
    And I have a squadron of large whites fuelled and ready for take-off for when governments do what they say they will in the long term!

  6. I say that before allowing solar panel installations to qualify for any subsidy or power purchase premiums, that a through analysis of the energy benefit of that installation be required.
    The energy cost of producing solar panels, their associated hardware, electronics, and wiring is massive. Unless an installation is precisely planned, solar oriented, cleaned, and maintained, it will never, ever produce as much energy as it took to construct it.
    At least in Southern California, there is ample sunlight, in the North and on the Coast, not so much.
    Any installation which fails to reach energy breakeven within the rational lifetime of the (constantly degrading) solar array should not only be devoid of subsidy, it should be prevented from being installed, as it will be a net CO2 producer.

  7. “Proponents also say that the cap and trade portion of AB 32 will not hurt businesses and industry, because they can actually make money if they just cooperate. Proponents maintain that a carbon credit will be worth $30, $50, even $100 per ton of CO2, so that if the business owners simply cut their CO2 emissions to a point below their government-mandated cap, they can sell the credits to others, thus enjoying a new revenue stream that will allow their business to grow and prosper.”
    They forget the fact that in a carbon trading scheme, for every seller, there must be a buyer. So half the businesses will make lots of money and the other half will lose lots of money.

  8. there is no reasonable justification for supporting ab32, even if you bought the CAGW hype.
    prop23 gives a reason for californios to go to the polls and actually accomplish something… a rare thing in an american election.
    and i would point out for any single issue voters out there, whitman strongly opposes firearm ownership while jerry brown has been a life long supporter of the second amendment. as CA AG brown has allowed a panoply of loopholes allowing us citizens of the PDRK to stock up on items otherwise by law forbidden.
    unfortunately, brown sides strongly with CAGW alarmists.
    as usual, it is only a choice of which freedoms you wish to loose this election.

  9. I notice the Pro argument is basically “we say this will happen” with no supporting numbers or empirical evidence to supporty their assertion, just theories, many of which have proven wrong in Spain and Germany … basically they are the “free lunch” crowd …

  10. Good article and I agree with the points made. But you don’t need to go into that minutia of detail to state an obvious economic truth. If you make energy more expensive, society as a whole becomes poorer.
    This bit made me smile: “The way that AB 32 will increase jobs, they say, is by the net effect of all the requirements allowing each person to have an additional $5 per week for spending, or approximately $250 per year. ”
    Where do they imagine that $250 will come from? Money itself is no more than a claim on the goods and services in the economy. You can’t make money out of thin air because you can’t make additional goods and servies out of thin air. In fact, the very action of making energy more expensive will reduce the amount of goods and services in aggregate.
    The idea that you can create more jobs by wasting resources in generating inefficient and costly energy, is just another version of the ubiquitous ‘broken window’ fallacy. The reality is, yes you can create these jobs, but the net wealth of society will be lowered as a result, because these jobs will be unproductive jobs (since these jobs will be based on generating inefficient and expensive electricity, they must by definition be unproductive).
    There is a famous anecdote of when Kissinger (I think), went to China and visited one of those vast earth moving projects that were part of some 5 year plan. Noticing that the workers were digging by hand he asked why they didn’t use bulldozers, explaining that one bulldozer could do the work of 50 men. “Ah,” replied the wise Chinese bureaucrat, “think of all the jobs we’re creating this way.”
    Somehow, I think the proponents of AB32 are closer to that Chinese bureaucrat than they are to American capitalism.

  11. Higher taxes and cap and trade are very bad choices and will displace more people with homes under water or nearing such extremes.
    Biofuels are a joke as they are still composed of hydrocarbons. They are expensiver to make and only reduce a negligent amount of C02 emissions. Hybrids are high priced too and still emit plenty of GHG’s.
    The jobs are not sustainable either for citizens. Wind mills (which are actually more propellors than turbines) are highly inefficient. Sea level rise it turns out cannot be shown to be the result of thermal expansion due to land masses rising higher above the water when ice melts.

  12. If I may continue the conversation from this morning’s earlier post on AB32…
    I observed that we are being inundated with TV ads opposing the ballot proposition, with hardly a peep from the supporters. My conjecture is that this reflects the amount of special interest money going into the two sides of the campaign. And I would like to know what the real numbers are. Eric Anderson and John from CA responded with leads, one of which gave specific figure of $7.8 million for the pro-23, but no figure for the 23 opponents. So I here repeat my request to anyone who knows: How much are the AB32 special interest groups spending?

  13. Europe has been down this road (renewable energy such as wind turbines, photovoltaic cells, etc.) with their governments providing financial incentives. So far most of these efforts has netted a fat zero economically. Most of these European governments are broke and the countries have suffered higher unemployment and accumulating huge deficits. Down with Proposition 35. It will kill the Californian economy. Has anyone checked the Chicago Carbon Trading Exchange lately??? The value of the stocks are practically worthless.

  14. This AB 32 is magnificent, well considered and realistic plan, and I have pixies at the bottom of my garden.

  15. AB32 must have been written by retired Soviet Kommissars. It is nothing but a “rob the middle class blind” plan that will benefit only politicians and bureaucrats while it destroys what remains of American society in California. There is so much evil in AB32 that it is difficult to think about it. I guess I hope that AB32 is implemented. The destruction that will follow in its wake will reveal the death wish for California that it embodies. Then, maybe, the remainder of the US can protect itself from that death wish and its authors.

  16. @ Alexander K:
    “Mr Sowell must have his tongue very firmly in his cheek!
    Most who have experience in the world of business regard the ‘pretigious’ business schools, Havard included, as fountains of nonsense which have done immense damage to the world of small business and small businesses that employ less than six employees are the major employers in most Western economies.”

    No, I wrote that with serious intent. Harvard, Wharton, MIT’s Sloan School of Management, and many other advanced business and finance schools have some pretty good ideas, although it is true that not all have worked out in practice. My point above is that one of the most fundamental tenets of business, whether a large or small one, is that increasing the operating costs of the business is detrimental, when one’s competitors are not required to do the same.
    (as an aside, I am fully aware that increased costs can sometimes be advantageous, but usually when more product is produced, or a higher quality product is produced that commands a higher price. The above argument is based on constant production and constant product quality, yet costs increase.)
    Electric power costs no doubt will increase under AB 32 – the only question is “how much?” Costs will also increase for delivery of all raw materials and supplies that arrive on diesel-powered trucks. Costs will also increase when a business is required to purchase a new diesel-powered truck. When the cap-and-trade regulations kick in, costs for burning natural gas will escalate dramatically. AB 32 proponents like to point out that the cap-and-trade regulations exempt small businesses – yet they are silent on the fact that large businesses must pass on their higher costs to their small business customers. This is their only choice: maintain prices and absorb the higher costs due to cap-and-trade, or increase prices and pass along some or all of the higher costs. It is not likely, in my view, that prices will stay the same, instead, they will increase. However, competitors in other states, and countries, will not have similar cost increases.
    The watch-word for any business with a slim profit margin is “keep a close eye on your costs.”

  17. This could be where the wave finally breaks and begins to draw back. Go, Californians, go!
    And do not think I do not know you are a wasteful bunch of profligates anyway, who should certainly rein in your consumer madness. That is not important right now.
    However, I believe if this proposition succeeds it will be the start of revolutionary change.
    It should shake politicians everywhere.

  18. The arguments for AB32 are a variation of economist Frederic Bastiat’s Broken Window Fallacy, which assumes that harmful actions like wars, earthquakes and vandalism grow the economy due to the increased work opportunities.
    But as the link shows, that is a fallacy. Otherwise we could get rich by destroying things. AB32 will destroy businesses, even though it was promoted as being good for the state. It is not. It will result in higher unemployment, and more businesses vacating California for more business-friendly states. If AB32 is implemented many businesses will simply relocate to other countries, which appreciate the wealth and increased employment they generate.

  19. In Australia, the blowouts and scandals from enviro initiatives have been spectacular. Solar with smart meters was a promising way of transferring tax dollars to the better off, who could afford the upfront costs, until the meters proved not just smart but downright tricky. Bewildered green energy customers found themselves paying much more for power. Peter was robbed to pay Paul, then Paul got robbed to pay Paul. Australians are now very conscious of keeping their old meters…opening up a whole new field of conservation.
    Dinky wind turbines in a huge country with fabulous coal and uranium deposits are a bigger embarrassment than the solar initiatives, but our most prominent scandal concerned the nationwide installation of ceiling insulation, a scheme which was to have the double benefit of cooling the planet and warming the economy. Here, our green overlords actually had an idea with merit, but through a strange contradiction of nature, the green folk are incapable of doing anything with other people’s money without wasting it. Every time. Have you noticed?
    Businesses appeared overnight, many of their employees were not the kind of people you’d have in your house, let alone your ceiling. House fires, deaths through incineration and electrocution, inferior Chinese materials, corruption. My area of Oz had the most notorious of short-lived insulation companies. Disintegrating batt-fragments blew about the streets like tumbleweeds in a Western. Better than in your ceiling, I guess! You get the picture.
    Let’s hope California, which is such a trendsetter, ditches AB 32…and then promptly ditches the Girlie Governor.

  20. As a Texas resident, I have mixed feelings. Of course AB32 is horrible, destructive policy – but if it’s repealed, some of the California businesses may stay put. On the other hand, if it stays in place the state’s economic collapse will be complete and Texas will profit massively from the migration of jobs and businesses that will be the result of that collapse.
    But I suppose the country is better off overall if California pulls back from self destruction, so I guess they better repeal it.

  21. juanslayton says:
    “So I here repeat my request to anyone who knows: How much are the AB32 special interest groups spending?”
    I mean, really, who cares? It’s clear that there will winners and losers in this deal so they have that right to spend money to support it or defeat it. Why in the world would anybody in a business support this? If you haven’t had a chance to read the “Scoping Plan” plan do so. It full of half truths spouted by half wits with the backing of half science. Using their logic, why don’t we require every Californian to live in a home that is not more than 20 years old? Think of all the construction jobs it would bring into the state. This bill isn’t about saving energy or producing cleaner energy because all you’d need to do that is tax all forms of carbon energy and that would be that, it would take care of itself. This is a pipe dream of our current resident of the White House, that somehow “green jobs” are going to rescue the economy for the next generation and balance budgets. A solar panel on every roof, a hybrid in every garage.

  22. How can anyone support the current AB 32?
    Its poorly conceived and misses the mark for Stewardship and any meaningful change. Its nothing but environmental red tape that will destroy business, undermine Rights, and cost us a fortune while achieving nothing.
    70% of Americans Oppose Cap and Trade yet here it is in AB 32.
    excerpt from the approved 2008 California
    Climate Change Scoping Plan
    Key elements of California’s recommendations for reducing its greenhouse gas emissions to 1990 levels by 2020 include:
    • Expanding and strengthening existing energy efficiency programs as well as building and appliance standards;
    • Achieving a statewide renewables energy mix of 33 percent;
    • Developing a California cap-and-trade program that links with other Western Climate Initiative partner programs to create a regional market system;
    • Establishing targets for transportation-related greenhouse gas emissions for regions throughout California, and pursuing policies and incentives to achieve those targets;
    • Adopting and implementing measures pursuant to existing State laws and policies, including California’s clean car standards, goods movement measures, and the Low Carbon Fuel Standard;
    • Creating targeted fees, including a public goods charge on water use, fees on high global warming potential gases, and a fee to fund the administrative costs of the State’s long term commitment to AB 32 implementation.
    Note: after seeing the fees portion I’m tempted to vote YES on Proposition 26 but my gut says it would only help to support the minority position and would thus promote corruption and impede meaningful legislation.

  23. Alas and alack-a-day.
    At least our cousins across the pond, in one State at least, have the opportunity to actually VOTE on this madness. Pray pity your less-fortunate brethren across the briny Atlantic. Here in the once sanity-blessed United Kingdom we have windmills imposed upon us by the diktats of unelected, unaccountable and invisible bureaucrats of the EUSSR. We benighted citizens have no say whatsoever and neither does our elected Parliament. The diktats are handed down and our craven ‘politicians’ cower and obey.
    And we spend BILLIONS of pounds Sterling building and then subsidising totally useless lumps of 16th Century technology whilst facing rolling brown-outs (and worse) in less than five years.
    Please, California, vote this nonsense out and into the dustbin of history. It just might help us in the UK to survive!

  24. Brilliant debate, well written on both sides.
    However, the fact is, the whole idea will amount to nothing more then a scheme that encourages corruption, while acomplishing little, if any of the goals it says it will acomplish.
    At the heart of the matter is the principal. The Bill effectivley “forces” companies to comply with regulation.
    This alone makes companies, and investors vary. When you force a certain scheme, idealogy, or system on the public or companies, you immediatly open it to individuals trying to circumvent, or ” cheat” , the system. ( ie. Drug Prohibition.)
    Rather then a set of dubious set of “credits”, (is anyone else seeing a paralell to the stock market?), they could encourage incentives, such as tax breaks, for companies that comply. This has been proven to work well.
    To quote Michael Crichton, ” There are many reasons to shift away from fossil fuels, and we will do so in the future. However, there did not need to be a ban on the horse-drawn carriage to usher in the automobile.
    Second, the Bill sets a series of very lofty goals, none of which are proven to work. To assume that all of them are going to be acomplished, with the prices qouted, is ludicrous. Try planning something relativley simple, such as a house construction. Things always go wrong. The contractor doesnt show up, prices go up, shortage of materials, etc.
    Finally, all this acomplishes nothing, when the very idea of ” Global Warming” is being fiercly debated, and still essentially unproven. To institute a massive overhaul of the system in the middle of a recession, based on faulty evidence, is incredibly stupid. ( Yes, this IPCC report looks worthy of basing economic policy on. It even comes with a gun to shoot ourselves in the foot with.)
    All in all, another useless bill designed to force compliance to the eco movements point of view.
    I smell Socialism at work here…

  25. Pro-AB32: “[A]dvanced cars and trucks … will use less fuel. The reduced fuel consumed (35 mpg compared to 25) will more than offset the increased fuel cost.”
    Anti-AB32: “[T]he idea that the consumer will save money at the gas pump by purchasing a high-efficiency car just does not make sense.”
    Everyone who buys a new car makes a decision, conscious or not, about the value of higher mileage. At $3 a gallon and 12,000 miles per year, 35 mpg saves about $400/year compared to 25 mpg. A car with better mileage and *all other features identical*, doesn’t require any legislative act; it sells itself. So why do people buy lower-mileage cars? They must be recognizing other benefits — perhaps increased comfort, safety, reliability, or, as the “anti” argument describes, lower initial costs. And why don’t manufacturers create a higher-mileage car? To the extent that they can easily improve mileage, they do; to the extent that improved mileage comes at a cost in some other aspect(s) which their target consumers value — comfort, initial costs, whatever — they don’t.
    The idea that a new car with identical features but 35 mpg instead of 25 mpg, will appear due to AB32 is just magical thinking. It’s certainly possible to legislate in order to effect an increase in mileage, but there will necessarily be a loss of *something*. The market is pretty good at sorting out tradeoffs; I can’t say the same about legislatures.
    The idea that consumers would save by switching to more efficient cars, in the scenario promoted by AB-32 supporters, can only be true if you make the comparison in the context of the artificially increased price of fuel. Consumers can’t possibly be better off than they currently are: In the absence of gas price changes, forcing a consumer to choose a more efficient car either hurts them (if they prefer a less efficient car because of other factors), or is neutral to them (if they would naturally select the higher-mileage car). Increasing the fuel price is definitely going to hurt the consumer. It seems a simple inequality to conclude that a consumer is not being benefited here.

  26. Well said Roger Sowell.
    Clearly the natives are getting restless. How many Californians, Americans, Aussies, Kiwis and Brits feel exactly the same but don’t have Roger’s eloquence and critical analysis to express their views?
    Kiwigate, Satellitegate and UVagate may be the beginning of the end of the AGW scam.

  27. The net effect of wind and solar power is a lower standard of living…….period. Electricity from renewable sources is of no more economic value than the electricity from non-renewable sources. In fact, it is of lower value since wind and solar are not dispatchable. You can argue that their ENVIRONMENTAL benefits outweigh their ECONOMIC costs, but to argue that their economic benefits outweigh their economic costs is economically illiterate. For evidence of this see Spain.

  28. What evidence is there that a minor (though pleasant) increase in personal discretionary funds increases employment through increased purchases (increasing manufacturing) or use of services (increasing those employed in the service industry)? This simplistic economic view of trickle-down benefits strikes me as very suspicious. Self-serving ideologically, as well. Thinking as an individual, I doubt I would see the minimal $5/week – even $50/week. It would dribble away, disappearing in more expensive items from overseas rather than more items produced locally. Or go to places fully employed but, as the owners would say, “underutilized”. Not more cars to be made, but one with a better radio. Not more coffee shops but coffee shops that are busier. Those of us who have paid off our mortgages know how quickly that mortgage payment disappeared without recognizable sign. Nickle and dimes do nothing, as they make no impact within a short period of time. Chunks spent in an instant work. Not chump change.
    The improvement in employment with shifting our lifestyle to a less carbon-rich one is a false hope. Before significant increase in consumption happens, we need significant increases in discretionary income and feeling of future financial security. “Green” jobs will only increase employment if they are cottage-style with higher worker : product ratios than the non-Green jobs they replace. We are, after all, looking to change our economies, not just tack on Green bits, so there will be losses before the gains. Plus the increased ratio (if it exists) must reflect a lesser amount of automation, assembly-line methods or concentration. That means efficiency goes down. Or conversely, costs go up.
    The idea that “greening” the economy increases individual wealth is based on the idea that the rich conglomerates lose money to the small businesses. A flattening of the classes. It is a socialist or cottage industry philosophy little removed from the Luddites with their sledgehammers. Greening is about redistributing wealth, not about creating additional wealth, and should be recognized as that. Not that I disagree in some ways with the ideology, but that is what it is. However, the hidden anti-capitalist greeners don’t want to admit what they wish to happen, even to themselves. They like their BMWs, and if not those, then their Chardonnay wine and lattes. They want everyone to have a BMW, glass of Chardonnay or latte. It doesn’t work that way without taking from one to give to the other unless the gross economy swells. At the same time, the Green philosophy says we should be reducing our consumption. Be more Green, buy more things made by more people but don’t increase your consumption or energy use …. doesn’t this seem a little contradictory?
    The purported economic benefit of a greener society is a red herring and a lie. Recall the Greening of America, the Future Shock, Third Wave predictions that didn’t come true? All based on false assumptions about how our cultures and market economies work. Global warming/CAGW/Climate Disruption is just the latest mannequin on which cloud jockey idealism has been dressed.
    The Gore/WWF/Greenpeace organizations gather much money through CAGW. Has this money translated itself into jobs, or just better homes and cars for the officers of the organizations? Talking might make you feel more spiritually rich, but it doesn’t let the guy on the bus send his kid to college.
    If we want a more environmentally “friendly” world, let us have one. I’ll pay for it, at least if it is actually going to work. But don’t try to sway me with rhetoric about how I will be more comfortably off. I’m not that stupid.

  29. The following link brings up a table from the EIA that breaks down the percentage of renewable energy generated in California for 2008.
    Wind accounted for only 2.6% of the total electricity generated. With all the good bird killing sites taken it will be tough to expand this.
    Geothermal accounts for 6.2% of electric generation but Google quickly shut down an exploration program they invested in because of earthquakes caused by the first well.
    The epicenter for the California Imperial valley earthquakes earlier this year was right above the Cerro Prieto geothermal field in Mexico. It is the world’s largest.
    Solar accounts for .3%. I doubt that solar thermal plants will be of much use for more than 4 hours a day. Maybe California plans to build more dams -right.
    How on earth will California generate 33% of their power from reneables?

  30. Was AB32 based on any data provided by the Air Resources Board?
    According to various articles:
    CARB had a lot of input in this legislation. They have a history if politics interfering with science and I have no confidence that this law is based on sound findings.

  31. You say
    “Or, recognize what business schools around the world (including the prestigious Harvard Business School) have taught for years (because it is a fundamental truth), that reducing one’s costs of doing business is the way to grow and prosper a business. ”
    Not necessary so. You grow a business by increasing the spread between the cost of goods and the return from selling them. Reducing expenses that lower the quality has done in more than a few firms.

  32. Don’t forget that a large part of the cost of water is pumping cost, i.e., electricity. When electric rates go up, water will go up right along with them.

  33. Grant R. Hillemeyer:
    “…who cares?”
    The many thousands of California voters who are susceptible to ad hominem arguments care. Right now they are being told that Prop 23 is the work of evil oil companies acting out of economic self interest. They need to hear how much the Prop 23 opponents are spending and realize that these groups also have an economic interest in the outcome.

  34. juanslayton says:
    October 7, 2010 at 1:53 pm
    The Secretary of State for California has a list of pacs supporting or opposed to each proposition.
    Here is the listing for Prop 23 campaign monies .
    I didn’t add them up (Giant’s game tonight) but just giving it the ugly eyeball the ratio is running 12:1 against

  35. “How on earth will California generate 33% of their power from reneables?”
    We will have to dam every river in the state. We will have to plaster millions of acres of desert habitat with solar panels. We will have to put up so many windmills that the state will be a hazard for winged wildlife.
    That is, unless nuclear power with recycled fuel is considered “renewable”. We could build plants with two conventional reactors, a breeder reactor, and a reprocessing plant on the same site. Once fuel enters, it never leaves except for the utterly depleted waste from the reprocessing process. Yes, reprocessing results in plutonium but the plutonium never leaves the site. Every bit created is “burned” in the plant. There is no risk of loss of material from long distance transportation. Also, new “fuel” is regular natural uranium, there is no need for transport of enriched uranium around the country. In fact, “depleted uranium” can be used as fuel stock.

  36. If every single household … EVERY one … in California is converted to renewable energy, that would account for about 8% of total demand. Just moving water around in California accounts for a lot of energy consumption, more than domestic household use. In one city where I have a friend who is an engineer, their water treatment is the largest user of energy in the city. We pump it out of the ground, pump it to treatment, treat it, pump it to storage. Then it flows to the home. We then pump the waste, treat it, and we pump it someplace to dispose of it.
    I believe I read a while back that about 30% of California’s energy consumption is water related. It is something like 30% transportation, 30% industrial use (Google is a huge consumer of power in California), 30% water, and about 10% household use.

  37. Roger Sowell, I note that you are an engineer but I am not sure if you are registered under the Californian Professional Engineers Act. It seems to me that much of the data which the AB32 is based on should have been signed off by registered engineers. Has anyone considered taking some of the public servants, consultants and drafters of the legislation to court for breaches of the PE Act (being not registered and/or not being competent)? One of the things mentioned in the act is economical assessment. As you say the subsidies make no economic sense.

  38. papertiger:
    Thanks for the pointer, that’s what I was looking for. Good luck with the Giants.

  39. Allencic says:
    October 7, 2010 at 12:38 pm
    As a California resident, I took great pleasure today in filling out and mailing my absentee ballot for the upcoming election and voting for the Proposition which will delay (and hopefully kill) the cap and trade/global warming edict for CA. Felt pretty good to vote against public teat sucker Jerry Brown and Barbara Boxer too.


  40. I have now had some time to review the political committee filings with the Secretary of State’s office. There are, as reported, 12 committees in opposition to Prop 23. If you just total their reported contributions, they add up to about nineteen and a half million. However, this is not a correct total, because they are passing money back and forth among themselves. And some of the action looks ‘funny.’
    Example: The largest group, reporting over 15 million, is “No on 23- Californians to Stop the Dirty Energy Proposition’ (committee # 1324059). One of their reported contributions is $500,000 on 3/31/2010, from a group calling itself “Green Tech Action Fund” (no committee number given in this report). But the Green Tech Action Fund (# 1329124) reports total 2010 expenditures through 30 September of only $83,552.97. At the same time, Green Tech reports total income through 30 September of $145,000 from–guess who!–No on 23 – Californians to Stop the Dirty Energy Proposition.
    Keep your eyes on the pea….

  41. Roger Sowell, thanks for replying to my comment. Your defense of the business schools really made me smile; as you say, not all of their ideas work in the practical world.
    My squadron of Large Whites is still on the runway, fuelled and ready for take-off!

  42. “Also, it appears that only the wasteful are in a position to benefit from solar panels on their home.”
    This reminds me of the the right to buy in the UK. A colleague at the time had a council house which he had looked after very well. His neighbour had let his house go to ruin. The government inspector came round and valued his house at twice the value of his neighbours – great incentive to look after government property.
    When government incentives get involved the rational person postpones doing anything the government wants them to do until they can get an incentitve for it – and the incentive is big enough. In california that would presumably mean postponing the replacement of appliances and cars – even if it would make economic sense – until the government incentives are offered. I should imagine there are an awful lot of industrial plants around the world maintaining non-cost effective machinery in the hope they can get government to pay for the upgrade on the back of cap and trade.

  43. I work with a variety of clients throughout the country (US) including Calfornia. Just complying with the paper work is a massive bureaucatic endevour. Just the energy compliance regulations (Title 24) add pages of calculations and drawings to what a licensed engineer is required to show. Few of my clients are starting new businesses in California; more are moving to less regulated states (like Texas). So if the trend continues, the bill will be irrelevant because there won’t be any industry in California.

  44. Roger, in the last 10 years California has lost over 1 million manufacturing jobs! Largely, due to State and Local regulations, especially the environmental ones. California’s working population in August, 2000 was 15.9 million versus August, 2010 of 15.6 million. Moreover, during that 10 year time frame California added another 4 million people to its population. Unless California changes its way and stops passing laws that chase businesses away, no amount of federal bailouts will help this state.

  45. I ran across an interesting comment this morning:
    Points to ponder on AB 32:
    posted by Wayne in comments on CAPITOL WEEKLY
    • Sacramento State University reports estimated cost of $3734 per year per family due strictly to this AB 32.
    • CARB has admitted that California alone cannot have an impact on reducing global warming and CO2 emissions.
    • US EPA acknowledges that US action alone will not impact the world CO2 levels;
    • US EPA (11 July 2010) said that bills in Congress will not reduce the total use of gas and oil of 20 million gallons per day for decades.
    • LAO (CA Legislative Analyst Office) stated: CA economy at large will be adversely affected by implementation of climate-related policies that are not in place elsewhere. (Letter to Dan Logue, 13 May 2010)
    • Even CARB’s own economic experts have recognized the fact that jobs will be lost because of AB 32. In fact, they recommend establishing a “Worker Transition Program” to provide assistance to people who lose their jobs because of AB 32 regulations.
    • AB 32 does nothing for local pollution, nor does Proposition 23 do anything to increase local pollution.
    • 5.5% unemployment for 4 consecutive quarters has occurred 7 times since 2005, 14 times since 1999, and 22 times since 1987.
    When the loudest objections to any candidacy or initiative are focused on vilifying its financial backers, this often indicates that its opponents’ arguments on its merits are weak.
    Vote yes on Prop 23 and suspend AB 32.

  46. Link to LAO (CA Legislative Analyst Office) related to Prop 23 which supports Wayne’s last bullet point related to “unemployment rate was 5.5 percent or less for four consecutive quarters”.
    “since 1970, the state has had three periods (each about ten quarters long) when the unemployment rate was at or below 5.5 percent for four consecutive quarters or more.”
    Looks like the news media is spinning the story to 3 instances rather then the 21-22 that actually occurred.

  47. My father fled California for the South in the mid-1970’s and I am forever grateful. Consider the following:
    I currently live in Tennessee, a state with no income tax, low sales taxes, and modest property taxes. If I want green power, I have the option of buying it. If I don’t then don’t have to pay for it. No one from the State of Tennessee is looking over my shoulders telling me or my kids how to live, managing my land use, or telling me if I’m using too much electrical energy, fuel, or water. Anyone looking to put a smart meter on my home is likely to have a shotgun shoved up his nose. My neighbors feel likewise. Big brother is neither wanted nor appreciated.
    Three years ago, I paid a mere $165,000 for a fine 2,100 square feet of home an acre of land in an upper middle class neighborhood with outstanding schools and 30 minutes from work in downtown Chattanooga. My home is not underwater. Serious crime is almost non-existent. My daughter attends UAH for less than $16,000 per year (ex lives in Alabama). I pay for her college expense in cash – with money I earned that year. My son is likely to attend Tennessee Tech for not much more. Except for a modest home mortgage, I have no debt and substantial savings.
    Next year, when my daughter graduates with her electrical engineering degree she will have the opportunity to work in the nations latest and most advanced auto assembly plant in the United States. Built by Volkswagen…in Chattanooga. I have zero concerns about her being able find a job and make a good living.
    In comparison, the relatives I left behind in California are living in hell. One cousin has a 100-year mortgage, three kids, and absolutely no way to pay for his home in his life time. He makes as much as I do and has no savings. California income and property taxes take away most of his “surplus” income. My guess is he’ll have to rely on government handouts to get his kids through college – if they get the chance because daddy “makes too much”. He’s lucky to take his family on any outings. Can he afford to pay for gear to enjoy the outdoors? Saving for college or a good retirement? Forget it.
    So, do I believe the tripe about any cost “savings” from loony California bureaucrats? You have got to be kidding. The states bankrupt both financially and intellectually.
    Going to depend on 30% renewables? If you want to rely on wind “power” with an abysmal 30% capacity factor and equipment that self destructs in 6-8 years – well be my guest. Or solar, yea great idea – with typical availability of 6 hours out of 24 – if you’re lucky. Oh and after you paid a fortune for the solar cells…well get ready for the bill for all the batteries/conversion equipment needed to convert all that “free” power you collected into something useful.
    So…the State is going to pay for those solar cells by “increasing” your property taxes? The state’s bankrupt, good luck getting those taxes lowered. Oh… and of course we all believe the bank that made the loan will be paid with the hard cash you paid the state… or will they? Maybe the state pays them with IOUs? …State bonds? Or maybe the state merely declares bankruptcy and the bank doesn’t get paid at all? Yep that’s a formula for creating confidence during fiscal crises.
    Going to hope PG&E can convert their fleet of natural gas electric generating units with carbon sequestration technology? Well…better take a hard look at the cost of post-combustion carbon capture on a natural gas based integrated combined cycle. Big hint, it pales in comparison to placing the same controls on a coal unit on a per $/ton CO2 or $/kw basis. Dilute CO2 concentrations after the turbine make CO2 hard to capture.
    Only a 30-50% price increase in electrical cost? Only if you’re very very lucky. One only has to look at the rapid increase in construction cost over the last couple of years – particularly the price of steel for carbon capture equipment. I’d say your bureaucrats are in for some serious sticker shock.
    Oh but not to worry, there will be a 40% decrease in electrical demand. But…wait what about stranded investment in electrical projection? Oh but the bureaucrats assure us this will be no problem! Maybe because PG&E will be covering its stranded cost with fewer assets and employees – meaning more money for very little effort? What a great deal for PG&E!!!
    Going to save on your auto fuel cost? Let’s see, after paying a premium for an “all” electric car that has a range of roughly 25 miles or a steep premium for a hybrid. You’ll have the joy of 1) knowing your “saving” fuel cost on that car you can’t drive anywhere (much less get home); or 2) of knowing you could go a long ways…if you could just afford the fuel.
    So…the State says your auto fuel cost are going to go down be because they have mandated fuel mileage is to go from 25 mpg to 35 mpg? Not so fast. The capital, variable, and fixed cost of the refinery didn’t drop. Reality is that the last marginal cost refinery dies and the few remaining have control of the market. Simply means the few refineries left get to charge 30% more to make up the difference.
    Going to sell all that “renewable” technology/power to States not buying into the AGW view? Well…not so fast. Better take a good look at who has the lowest manufacturing cost in the United States. Blades for those wind mills? Ahem…well might want to take a peek in back yards of manufacturing facilities in the South. Pretty good chance the blades have been constructed by a major French-owned firm whose manufacturing facilities happen to be located in ah… well… Chattanooga, Tennessee. Solar cells? Ah well Tennessee again. Of course these are cash only contracts – not going to trade our hard labor for California bonds. And, of course, when the California bubble burst we’ll simply shift production to more profitable ventures. Course if quality is not an issue you can always contract with… China.
    But, hey your bureaucrats say your industry will be competitive with other states. Let’s see… electrical costs are a major component of manufacturing cost aren’t they? You’re going to be paying 20 cents/Kwh compared to Tennessee’s 6 cents/Kwh – just for residential power. Yeh…boy that’s a competitive edge. Gee why didn’t we see that one coming? Yep. Got us quaking our boots. Boy just gotta find a way to do business in California.
    Look I’m a fifth generation Californian. As a kid I lived in Long Beach, San Diego, Stockton, and Walnut Creek. Many years ago, my great uncle Roy was head of the California’s Republican Party. Another great uncle was dean of the Stanford School of Business. My grandfather was on the president’s staff at Lockeed during WWII and was on Republican steering committee until his death several years ago. And my grandmother was California’s’ “teacher of the year” several years in a row until her retirement (she died at 100). My family has made many contributions to the state. I love the state. But there is no-way on god’s green earth that I would ever move back. The loonies are in charge of the asylum.
    I hope the current citizens of California come to their senses and vote in favor of prop 23.

  48. peterhodges says:
    October 7, 2010 at 1:27 pm
    there is no reasonable justification for supporting ab32, even if you bought the CAGW hype.
    prop23 gives a reason for californios to go to the polls and actually accomplish something… a rare thing in an american election.
    and i would point out for any single issue voters out there, whitman strongly opposes firearm ownership while jerry brown has been a life long supporter of the second amendment. as CA AG brown has allowed a panoply of loopholes allowing us citizens of the PDRK to stock up on items otherwise by law forbidden.
    unfortunately, brown sides strongly with CAGW alarmists …endquote
    Good points…here is one more: We DO have the Constitution’s second amendment to safeguard firearm ownership, with or without Jerry Brown. Right now with the politicians in power we have no government protection from CAGW alamists–THEY are running the ship of state.

  49. hstad,
    “Unless California changes its way and stops passing laws that chase businesses away, no amount of federal bailouts will help this state.”
    I don’t see California’s leaders wanting businesses in this state – excepting a rare few leaders. I have heard CARB (California Air Resources Board, an un-elected state agency) employees state that they would be just fine with every car an electric car. That way they can get rid of the polluting refineries. They would also be thrilled with every kWh being produced from wind, solar, hydroelectric, nuclear, or geothermal. Then they could eliminate those polluting gas-fired power plants. They also would be thrilled with every hot water heater powered by electricity, that way then can ban gas-fired hot water heaters and eliminate all the pollution from them. Same for home furnaces that burn natural gas. They have already banned wood-burning fireplaces in new homes, and they would like to ban them in existing homes too. The same for any business that creates even a small amount of air or water pollution – dry cleaners, auto repair shops (those create oily liquids, VOCs, dirty dusty brake parts, etc). Car washes should be banned because the soapy water is a pollutant.
    Yet these same environmental regulators allow the Malibu residents (read: rich, rich, rich movie stars and producers who vote Liberal) to have septic tanks that overflow their raw sewage into the ocean on a regular basis. That same group of environmental regulators have allowed school buses to emit black billowing clouds of diesel smoke for decade after decade.

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