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:
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.
Roger Sowell says:
Actually, I suspect that the labor will be provided by illegal immigrants …
It’s too late. We’ve past the tipping point.
The Sierra snowpack melts off every year.
Roger Sowell says in the prior post:
October 7, 2010 at 11:00 am
Pro-AB 32 arguments:
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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?
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.
“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.
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!
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.
“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.
Working for Starbucks for minimum wage is a real job?
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.
Yes on Prop 23 and down with AB32! From a Californian.
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 …
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.
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.
And even if “Cap-tive Trade” never happens, the EPA is claiming they can dictate all points of the carbon cycle… Yikes.
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?
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.
Time to run off guys!
This AB 32 is magnificent, well considered and realistic plan, and I have pixies at the bottom of my garden.
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.
OT. Long due Don Mario Vargas Llosa Nobel Price. A move in the right direction.
@ur momisugly 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.”
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.
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.
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.