The latest battle over the environment in California will be fought this November 2.  Proposition 23 proposes to suspend implementation of the California Global Warming Solutions Act of 2006 until the state unemployment rate drops to 5.5% or lower for one year.[1] As of July 2010, the unemployment rate in California was 12.8%.[2] In these tough economic times, proponents of Proposition 23 say it is more important to protect jobs than to protect the environment.  Is this a false dichotomy?  The tough answer is: No one knows for sure.  As a result, opponents of emissions reduction legislation view the economic crisis as an opportunity to debate the potential benefits of a greener state all over again.

Revisiting Assembly Bill 32

The California Global Warming Solutions Act of 2006 (originally, Assembly Bill 32 and now California Health and Safety Code Section 38500 et seq.) requires that the California Air Resources Board (CARB) adopt rules and regulations to reduce the state’s emissions of greenhouse gases by 2020 to 1990 levels.[3] The Climate Change Scoping Plan released by CARB in December 2008 describes a variety of methods to implement AB 32 and other environmental laws that require reduced emissions, require electric utilities to obtain a greater portion of their electricity from renewable energy sources, and authorize energy efficiency programs.[4]

California’s nonpartisan fiscal and policy advisor, the Legislative Analyst’s Office, diligently points out that there are three main reasons why economists, environmentalists, and policy makers cannot agree about the impacts to the California economy upon implementing the Climate Change Scoping Plan.[5] First, the economic effect will depend heavily on how the new measures are integrated into the public regulatory process, and the Plan is not fully developed (it does not need to be adopted until January 1, 2011).  Second, financial consequences of some measures will be delayed for several years because a number of the Plan measures are phased in over time.  Third, the net economic result will be complicated as some sectors, businesses, and individuals will experience financial benefits while others will encounter financial losses because of the Plan.

The Impact of Proposition 23

Much of the debate related to Proposition 23 seems to center around this third uncertainty regarding winners and losers in the economy.  If Proposition 23 does not pass, and CARB implements AB 32, utilities will need to invest in new technologies and the labor force to deploy them.  This will increase the cost of producing or delivering electricity, likely causing utilities to drive up energy prices for energy consumers.  On the other hand, investments in clean technology research and development, and job creation in the energy efficiency and clean energy fields will result in more economic activity in these emerging sectors.  Overall air quality improvements would have public health benefits which convert into economic benefits, such as increased worker productivity and reduced health care costs for government and business.  In weighing these costs and benefits, the Legislative Analyst’s Office finds that if Proposition 23 passes, the suspension of AB 32 will result in “moderately higher” economic activity in California.[6]

The Green Economy

As is often the case in debates about the benefits of environmentally sound practices, it is easy to measure the initial costs of compliance, but difficult to calculate the long-term return on investment.  It is possible that the short-term increase in energy prices resulting from clean energy investments and compliance costs may be balanced by the long-term creation of new energy resources, energy delivery methods, and the jobs that come with them.[7]According to the Legislative Analyst’s Office’s findings, this is a long shot.  Nevertheless, the willingness to take a calculated risk is a key feature of California’s particular brand of the American dream.  Any visitor to Silicon Valley would agree.  On November 2, voters will have the opportunity to declare that, despite the latest financial challenges, the future of the California economy is still green.

[1] Full text of initiative statute submitted to California Secretary of State, available athttp://ag.ca.gov/cms_attachments/initiatives/pdfs/i902_initiative_09-0104.pdf.

[2] U.S. Bureau of Labor Statistics, available athttp://www.bls.gov/bls/unemployment.htm.

[3] California Global Warming Solutions Act of 2006, available athttp://www.arb.ca.gov/cc/ab32/ab32.htm and http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=hsc&codebody=&hits=20

[4] California Air Resources Board Climate Change Scoping Plan dated December 2008, available athttp://www.arb.ca.gov/cc/scopingplan/document/adopted_scoping_plan.pdf.

[5] California Legislative Analyst’s Office Ballot Proposition 23 Summary, available at http://www.lao.ca.gov/ballot/2010/23_11_2010.aspx.

[6] Id.

[7] See, e.g., National Venture Capital Association Press Release, April 9, 2010, available at http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=575&Itemid=93; Going Backwards: Prop 23′s Threat to California Jobs, Investment, and a Clean Energy Future, issued by the Clean Economy Network, available athttp://cleaneconomynetwork.org/sites/default/files/Prop_23_GoingBackwards.pdf

About Legal Corner: Legal Corner is a new feature offered by the Green Chamber of Commerce in partnership with Hanson Bridgett LLP.  Hanson Bridgett LLP is a leading provider of legal services to organizations engaged in sustainable business.  Legal Corner will address legal questions and issues relevant to Green Chamber of Commerce members.  Do you have a legal question about green business? Comments on this article?  Please send them to: LegalCorner@hansonbridgett.com