California Construction Trucking Association (CCTA)

By George Cunningham

The move to delay California's tough climate control regulation has resulted in a backlash of opposition from those who favor proposed state regulation to reduce emissions of greenhouse gases. Because of the passion and hyperbole surrounding the debate over Proposition 23 - which would delay implementation of the state's Global Warming Solutions Act (also known as AB 32) until unemployment comes down to 5.5 percent for a full year - the actual facts of what the proposition means for the future tend to be lost in the war of words.

The nation's supply chain relies on petroleum products to move freight. And, whatever side of the issue people come down on, they acknowledge that the state's Global Warming effort would have a huge effect on the transportation industry, including ships, trucks, trains, and freight-moving equipment.

So far, Proposition 23 seems to be headed for defeat. The latest polls show about 37 percent of voters in favor of the measure, 48 percent opposed, and 15 percent undecided. Although the proponents of the measure are planning a last-minute blitz to garner support, they have a lot of minds to change by the Nov. 2 election date.

The measure was put together and financially backed by two oil refining companies - Valero and Tesoro - which dubbed it the Jobs Initiative. Their argument is that implementing the extensive and costly Global Warming Solutions initiative in a state that has 12 percent unemployment would cost even more jobs. Valero contributed $2 million toward the campaign; Tesoro contributed $1.5 million; and Flint Hills Resources, a subsidiary of Koch Industries, contributed $1 million.

A cross-section of lesser contributors include Marathon Oil, the Adam Smith Foundation, Occidental Petroleum, the Howard Jarvis Taxpayer Associations, and the California Trucking Association.

Together, supporters of the bill have raised about $9.9 million.

The oil companies say that the proposition will cost the state 1.1 million jobs, $3.7 billion a year in higher fuel costs, up to a 60 percent increase in electricity and natural gas costs, and add as much as $50,000 to the cost of a new home.

Some Proposition 23 proponents question the validity of the theory that greenhouse gases are causing rising temperatures around the world. Others concede that the theory may be valid, but argue that AB 32 will destroy California's already-teetering economy without solving the problem.

One thing that most folks on both sides agree on is that even if California meets its AB 32 greenhouse gas goals, it will have almost no measurable effect on global warming.

In 2005, California produced only about 1.5 percent of the worldwide greenhouse gas emissions, while emissions from developing nations such as China - the largest emitter of greenhouse gases with 22.3 percent of the total - continue to rise, despite ambitious plans to bring them under control. Even if California totally eliminated all greenhouse gas emissions, it would do little to slow global warming.

The other thing that most agree on is that AB 32 will hurt the oil industry and almost certainly result in the loss of profits by petroleum product businesses and other industry-intensive industries and the loss of jobs among workers employed in those industries. Whether those jobs in fact will be replaced by new green jobs is hotly debated.

Although Proposition 23 only calls for suspension of the state's Global Warming Solutions Act, opponents argue that passage would all but eliminate the state's climate control efforts.

But like everything else about Proposition 23, the facts and how they are presented is a selective process.

The state legislative analyst's office points out that California's unemployment rate has been down to 5.5 percent for four consecutive quarters only three times in the past 40 years and that the current rate is more than 12 percent.

What he doesn't say is that all three of those times were in the last 22 years and two of them were in the last decade, and the last time was only four years ago - about the same time the Global Warming Act was being passed.

Opponents of the measure have jumped right in with their own brand of misinformation with emotional TV ads that say voting for Proposition 23 would roll back environmental gains made over past years. In fact, Proposition 23 has nothing to do with unhealthy pollution; it only addresses the state's efforts to limit greenhouse gases - the main one being carbon dioxide - the stuff we exhale and that plants absorb.

While it may be true that if Global Warming regulation limits the use of internal combustion engines by doing things such as encouraging people to drive less or to drive smaller cars, it will also reduce pollution, Proposition 23 does not call for any rollback ofcurrent pollution laws. It only address the Global Warming Act and greenhouse gases.

Perhaps the main thrust of the argument against Proposition 23 is that it was initiated and backed by oil companies, and if oil companies are for it, than everybody else should be against it.

In fact, the oil industry is pushing Proposition 23. But much of the anti-Proposition 23 funding is coming from people who stand to profit from the state's efforts to penalize big oil and encourage green industries by setting up a carbon credit trading market. These folks include such people as financiers, venture capitalists, green entrepreneurs, and attorneys who will profit from setting up the cap-and-trade system. The remainder ranges from large environmental groups to ordinary citizens who are concerned over global warming.

In total, the anti-Proposition 23 folks have raised about $23.1 million - more than twice the amount raised by industry in favor of Prop 23.

Big contributors against Proposition 23 include Farallon Capital Hedge Fund founder John Steyer, who kicked in $5 million; National Wildlife Federation, $3 million; Natural Resources Defense Council, $1.5 million; venture capitalist Vinod Khosla, $1 million, homemaker Ann Doerr (wife of venture capitalist John Doerr), $1 million; Environmental Defense Action Fund, $1 million; retired Intel co-founder Gordon Moore, $1 million; movie director James Cameron, $1 million; and former Gap Chairman Robert Fisher, $1 million.

A cross-section of lesser contributors include Google CEO Erik Schmidt's wife Wendy Schmidt, Google Technology President Sergy Brin, the Green Tech Action Fund, actor Benjamin Bratt, TV producer Dayna Bochco, Tishman Construction CEO Daniel Tishman, Moveon.org, and Long Beach Business Journal publisher George Economides.

State government and the political establishment also have weighed in heavily in opposition to Proposition 23.

Attorney General Jerry Brown - now a candidate for Governor - wrote the ballot language in a way that made it seem that Proposition 23 would roll back existing pollution laws and referred to the people who would be regulated as "major polluters." The ballot also stated that the initiative would force the state to abandon implementation of its global warming initiative.

A judge later ruled that Brown's ballot language was misleading and prejudicial. He ordered "major polluters" changed to "major sources of emissions," changed "abandon" to "suspend," and changed the title, which said Proposition 23 "suspends air pollution control laws" to it "suspends implementation of air pollution control law (AB 32)."

Both Brown and Meg Whitman, his rival in the race of governor, have said they oppose Proposition 23, although Whitman says she favors a one-year moratorium on state implementation of the Global Warming Act.

California Gov. Arnold Schwarzenegger has also launched his own offensive against the measure, calling it a cynical conspiracy by the oil industry inspired by "self-serving greed, and asking, "does anyone think in their black oil company hearts that they want to create jobs?"

And California Treasurer Bill Lockyer issued a statement this month calling for the California Public Employees' Retirement System, better known as CalPERS, and the California State Teachers' Retirement System, better known as CalSTRS, to divest themselves of any Valero or Tesoro stock in retaliation for Proposition 23.

In his statement, Lockyer says Valero and Tesoro don't care about California or doing the right thing.

"They care about one thing: protecting the rich profits they rake in from California drivers who pay the highest gasoline prices in the country. That's why they're pouring millions of dollars into the campaign to pass proposition 23."

Lockyer is an ex-officio member of the CalPERS board.

Folks in the petroleum business say gasoline prices are higher in California because the state requires a special boutique blend of gasoline that burns cleaner than the gasoline sold in other parts of the country.

In the end, whether you favor Prop 23 or not, depends in large part on who you believe.

The state legislative analyst's report on AB 32 notes that there are many uncertainties involved in trying to predict accurately what the economic consequences of the state's Global Warming Solutions Act would be. But it would probably be negative in the short term as traditional oil industry jobs are lost, and uncertain in the long term, the report found. In both cases, however, the impact is expected to be modest compared to the size of the California economy.

There are others, however, who came to a different conclusion.

Two professors at California State University Sacramento - Sanjay Varshney and Dennis Tootelian - concluded that the implementation of the state's Global Warming Solution plan would devastate the state economy. Their study, commissioned by the California Small Business Roundtable, found that the program would raise the cost of living for the average California family about $3,857 a year, eliminate about 1.1 million jobs statewide, and cost the state billions in lost tax revenues.

That study was roundly criticized by those in favor of state's Global Warming program, who claimed that its methodology was flawed and its conclusions were unsound. The study, according to the legislative analyst, catalogued the costs of the program without considering the benefits.

Another study done by the industry-financed AB 32 Implementation Group found that auctioning off carbon allowances as called for by the program would cost the typical California household $2,800 a year by 2020 assuming a $60 per ton price, and it would eliminate as many as 480,000 jobs in the state.

The news is equally bad for the California ports, according to the industry group's study. At $60 per ton, a port that needs to buy 360,556 metric tons of green house gas credits to meet its carbon reduction goal, would pay $21.6 million a year. The Port of Los Angeles' total greenhouse gas emissions for 2008 was 13.1 million tons, according to a port-commissioned inventory.

California Air Resources Board Chairwoman Mary Nichols scoffed at the Implementation Group's report in a statement issued after its release.

"This study was conducted by a group dedicated to protecting oil companies and fighting environmental laws that hold them accountable for polluting our environment," she said. "It comes as no surprise that their findings support oil companies and oppose clean energy laws Californians overwhelmingly support."

An advisory committee - appointed by Nichols and California EPA Secretary Linda Adams - aided the CARB staff in writing the official state analysis of AB 32. That analysis found that although energy costs would rise, and some energy-intensive industries would suffer, overall the economic impact would be mild. Among the findings:

• The Gross State Product in 2020 would be $2.498 billion rather than $2.502 billion - down 0.2 percent.
• Personal Income in 2020 would be $2.029 billion rather than $2.027 billion - up 0.1 percent.
• Annual income per capita would be $46,090 rather than $46,060 - up 0.1 percent.
• Labor demand would be $18.42 million rather than $18.41 million - up 0.1 percent.

The CARB analysis also found that although the cost of fuel would go up, Californians would pay 4.9 percent less for fuel in 2020 because they would be driving less miles overall and in vehicles that get better mileage than current vehicles. The analysis predicted that there would be 2 million new jobs and a 2.4 percent annual growth rate for the state whether AB 32 was implemented or not.

CARB's advisory committee published its own comments on the analysis. Although the committee members largely agreed with the state analysis as far as it went, they did note that it was not complete. For instance, the analysis did not attempt to measure possible leakage - businesses moving to another state or country where they would continue to operate unrestricted.

The views expressed by the CARB advisory committee drew fire from some in the business community, after it was disclosed that the lead economist on the committee, Stanford Professor Larry Goulder, was on the board of directors for the Energy Foundation. The Energy Foundation is the funding source for the Green Tech Action Fund, one of the major contributors to the anti-Proposition 23 campaign.

When it comes to the state's Global Warming policy - a subject that remains clouded by rhetoric, confusion and uncertainty - the one thing that is crystal clear is that the debate over Proposition 23 is in fact a debate over the future of California.

Will voters pass Proposition 23 and block a program that will drive the final stake through the heart of what's left of the California economy? Or will they reject the measure and endorse a program aimed at clearing away the fossil-fuel legacy and debris that may have served us well in the past in order for a new green economy to flourish?

We will know in a week.

-- The Cunningham Report