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California Dreamin'

Left-coast lawmakers envision a greener America.

Fortnightly Magazine - January 2009

state’s energy policies. Further, the state’s emphasis on green policies—including the greenhouse gas (GHG) regulations recently approved by the California Air Resources Board (CARB)—put additional pressure on California’s economy. Already California faces a gargantuan budget deficit, projected to reach nearly $42 billion by the end of fiscal year 2010, as well as an 8 percent unemployment rate—one of the highest in the country, right behind Michigan.

“Draconian environmental measures eliminate economic growth by reducing productivity,” Tanton says. “We’re already hurting. We need to increase production, not reduce it.”

In addition, Tanton says California’s approach to energy and environmental regulation has stymied economic development rather than encouraged it—in part because it’s created an excessive government bureaucracy, which the new GHG regulations will exacerbate. “Implementation is byzantine,” Tanton says. “We’ve had an RPS [renewable portfolio standard] in place for six years, yet renewable power continues to shrink as a percentage of total generation, because there are so many agencies, regulations and policies that businesses can barely move.”

On the other hand, CARB published a report in September that said cutting GHG emissions actually will accelerate economic growth in California. CARB estimated the transition to a climate-friendly economy would create 100,000 more jobs than the state’s economy will create in the status-quo scenario, and the average California household would save $400 a year in energy costs, by virtue of driving cars that get better gas mileage and living in homes that are more energy efficient.

“By moving first in the nation, California maintains its position at the front of the line in attracting venture capital,” stated CARB Chairman Mary Nichols. “[It] positions us as a leader in the race to develop the clean technology products, patents and projects the global market demands and needs.”

Green Gold Rush

At the recent Power-Gen International conference in Orlando, a power plant executive told me he was losing sleep about deep cuts that corporate managers had just mandated. On condition of anonymity, he said the company was seeking 30-percent reductions in non-fuel O&M spending across its entire generation fleet. He added that his plant already was operating on a shoestring, and had delayed outages and equipment replacements to the point where further delays would affect plant reliability.

When companies must make such tough economic decisions about their most fundamental business—keeping the lights on—green energy goals like those of California lawmakers can seem like a pipedream. Companies and states can’t fathom investing in the future when immediate survival is at stake.

Nevertheless, one thing California consistently teaches the rest of the country is the importance of long-term, big-picture thinking. Although California’s approach to regulation might beg for improvement, its leadership on efficiency, conservation and smart-grid development serves as an instructive example for policymakers and companies to emulate. Such leadership should be particularly welcome during today’s tough economic times, when short-term cost-effectiveness trumps other considerations.

And the current economic crisis, like all cyclic events, eventually will end. When the economic cycle finally takes a turn for the better, those companies, states and nations that plan ahead will be better positioned to